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CUNA subcommittee meets with NCUA on RBC plan concerns

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WASHINGTON (4/22/14)--In discussions with top staff at the National Credit Union Administration, the Credit Union National Association's Examination and Supervision Subcommittee continued a thorough review of concerns on legal and economic grounds regarding the agency's proposed risk-based capital proposal.

NCUA Director of Examination and Insurance (E&I) Larry Fazio and Deputy E&I Director Tim Segerson participated in the meeting.

During the meeting, the credit union subcommittee leaders directly questioned the proposal's impact on credit unions' capital cushions above the well-capitalized level, as well the proposed authority to allow the agency, on a case-by-case basis, to impose additional capital requirements above what the rule specifically would require.

The subcommittee also expressed concerns about some of the proposal's highest risk weightings--such as those for mortgages, investments, and member business loans--and the detrimental impact those risk-weightings would have on business and agricultural lending in rural areas.

Well-capitalized credit unions have a higher leverage ratio than other financial institutions and have lower risk generally. In light of this, the subcommittee raised a number of questions regarding the need for a such a high well-capitalized risk-based capital requirement, which would be a ratio of equity to cover losses divided by risk-weighted assets as defined by NCUA and set at 10.5% under the proposal.

The RBC proposal would apply to credit unions with over $50 million in assets. Comments are due May 28.  CUNA has reiterated its request that the agency extend the comment period by 90 days.

CUNA has estimated that the RBC proposal, as written, will reduce credit unions' capital buffers by about $7.6 billion.

The meeting was chaired by Wisconsin Credit Union League President Brett Thompson, and in addition to subcommittee member, CUNA President/CEO Bill Cheney, Chief Economist Bill Hampel, General Counsel Eric Richard, Deputy General Counsel Mary Dunn, and Assistant General Counsel for Special Projects Robin Cook joined in the meeting.

Use the resource link for CUNA's Risk-Based Capital Action Center.

Fryzel looks to CUs' future, past as tenure winds down

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ALEXANDRIA, Va. (4/22/14)--As the National Credit Union Administration awaits Senate action on the nomination of J. Mark McWatters to replace Michael Fryzel on the agency board, Fryzel took the occasion of this month's The NCUA Report to reflect on the recent past and the near future of the credit union movement.

Fryzel's term ended in August, but he has agreed to serve until a replacement is confirmed by the Senate.

Fryzel, who writes a monthly column in the Report , this month urged credit unions "to accept the challenges that lie ahead."  He said they include interest rate risk, cybersecurity, competition and the continued avalanche of regulation.

Fryzel said that "how the industry's institutions meet and handle these challenges will determine who survives and can continue to serve their members' needs." He encouraged credit unions to "vigorously pursue and put in place the solutions that will enable you to overcome and successfully move forward to success in the future."

The path, he said, may be difficult at times, "but the rewards will be worth the hard work."

With a philosophy of people helping people, with slogans like "members first," and with a creed of "not for profit, but for service," the tradition of true cooperative financial services will live forever, Fryzel wrote.

The regulator also recounted some the major events that have shaped his tenure at the agency since joining the board as chairman in July 2008. Fryzel served as chairman until Aug. 24, 2009. Major experiences included:
  • Addressing failures in the corporate credit union system;
  • Forming the Office of Consumer Protection and the Office of National Examinations and Supervision;
  • Creating and putting into use a new examination manual to better ensure fair and consistent exams across all regions;
  • Helping the agency recover more than $1.75 billion from banks that created the financial crisis;
  • Drafting new corporate credit union rules;
  • Giving credit unions the authority to engage in derivatives; and
  • Seeing the increase in credit union membership, and the record earnings brought in by some credit unions.
Fryzel's term on the NCUA board officially ended Aug. 2. The Senate Banking Committee is expected to move forward with a vote on McWatters' nomination within the next couple of weeks.
 
For more of The NCUA Report , use the resource link.

In Congress: Patent, housing reforms still front burner

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WASHINGTON (4/22/14)--Congress is back in session on April 28. The Senate Judiciary Committee is expected to markup a new text of its patent reform bill early in the week, and the Senate Banking Committee still has April 29 on its calendar as the date for a markup of its housing finance reform bill.
 
The Senate Judiciary Committee's bill is the Patent Transparency and Improvements Act (S. 1720), which, in part, would aid credit unions and other businesses that have been targeted by patent "trolls," who manipulate the patent system for their own gain.
 
It has been widely reported that a committee vote on the Senate Banking Committee bill on housing finance reform could be delayed, and Credit Union National Association Senior Vice President for Legislative Affairs Ryan Donovan said Monday that delay could happen.
 
"A delay would not be a bad thing--it would just mean that the bill's sponsors are working to secure additional votes for the bill," Donovan said, adding, "The bill's passage is not in doubt.  What is in question is the number of votes it will get."
 
Donovan said CUNA submitted additional materials in support of the bill to the committee and its staff last week, and CUNA expects to see a new bill draft on April 28 or 29 in advance of the markup.

Reps. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) earlier this year released the original 425-page draft bill, which addresses how to overhaul the housing finance market, as well as what to do with government-owned Fannie Mae and Freddie Mac.
 
In meetings with White House officials and Federal Housing Finance Agency Director Mel Watt, CUNA has encouraged policymakers to be mindful of the existing regulatory burdens of credit unions and other mortgage servicers as discussions on housing finance reform proceed. Legislators and other officials must proceed judiciously and not layer additional regulatory authority on top of existing regulatory regimes that address mortgage servicing, CUNA has said.
 
CUNA has also underscored on credit unions' behalf that a new system must ensure that the housing finance market remains accessible to credit unions and other smaller institutions and that structure must be in place to prohibit domination by the country's biggest banks.