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Senate MBL Bill Means More CU Help For Small Biz, Cheney Says

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WASHINGTON (5/17/13)--Sen. Mark Udall's (D-Colo.) Small Business Lending Enhancement Act (S. 968), introduced on Thursday, "would allow credit unions with experience in business lending to continue to lend to their small business members, without increasing the size of government," Credit Union National Association President/CEO Bill Cheney said.

Udall's bill would increase the credit union member business lending (MBL) cap to 27.5% of assets, from the current 12.25%-of-assets level. Credit unions would need to be in good standing, and have a history of making business loans, to qualify for the cap increase. They would also need approval from the National Credit Union Administration.

The legislation tells credit unions that stood with their business-owning members during the recent Great Recession to "keep lending; keep serving the bakeries, the gas stations, the florists, and the carpenters; keep helping the restaurant owners, plumbers, realtors, independent grocers and shopkeepers," Cheney noted in a Thursday letter thanking Udall.

"The bill will not endanger the small banks in your community; the bill will not alter the nature or focus of credit unions; the bill is not inconsistent with the credit union mission or the purpose of their tax status. This legislation recognizes that credit unions are working in their communities to help small businesses, and it is important to enact even though the bank lobbyists oppose it," Cheney added.

CUNA estimates the MBL cap change would help credit unions lend an additional $13 billion to small businesses in just the first year after enactment. This money, which would be made available at no expense to taxpayers, would in turn help small businesses create around 140,000 new jobs.

"Credit unions have an important role to play, lending to startups and Main Street businesses alike. My bill helps to unleash their potential to ensure that job creators in Colorado and across the country have the capital they need to start a business or to grow," Udall said in a release.

Udall's bill currently has 14 co-sponsors: Sens. Mark Begich (D-Alaska), Barbara Boxer (D-Calif.), Sherrod Brown (D-Ohio), Susan Collins (R-Maine), Kirsten Gillibrand (D-N.Y.), Martin Heinrich (D-N.M.), Angus King (I-Maine), Pat Leahy (D-Pa.), Bill Nelson (D-Fla.), Rand Paul (R-Ky.), Jack Reed (D-R.I.), Bernie Sanders (I-Vt.), Charles Schumer (D-N.Y.) and Sheldon Whitehouse (D-R.I.).

Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.) released similar legislation early this year. That bill, H.R. 688, has 94 co-sponsors.

"Credit unions have capital to lend, a history of prudent and safe small business lending, and a mission to help provide access to credit to their members--including their small business-owning members. They just need Congress to act," Cheney said.

For CUNA's letter to Udall and more on the bill, use the resource links.

CUNA: NCUA Nominee's CU Experience A Positive

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WASHINGTON (5/17/13)--National Credit Union Administration board nominee Rick Metsger's direct experience with credit unions, which came through his having served on an Oregon credit union's board, will serve him well if he is ultimately confirmed, Credit Union National Association President/CEO Bill Cheney said.

Metsger, a former Democratic state senator from Oregon, was officially nominated by the White House on Wednesday. If confirmed, he would fill the vacant seat on the three-member NCUA board. His nomination is subject to U.S. Senate confirmation.

Metsger's knowledge of the political process and banking issues is also a plus, Cheney added. "We look forward to working with the Senate as it considers the nomination and the process moves forward," he said.

NCUA Chairman Debbie Matz said Metsger, if confirmed, "will bring valuable perspectives" to the agency.

The nominee served as Oregon state senator from 1999 to 2011, and was Oregon Senate president pro-tempore from 2009 to 2011. He led an Oregon Senate committee that heard all financial institution legislation during his time in state government.

Metsger also served as a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy, and Portland Teachers CU.

CUNA Will Closely Review NCUA Derivatives Proposal

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ALEXANDRIA, Va. (5/17/13)--A proposed rule that would allow eligible credit unions to engage in interest rate swaps and to purchase interest rate caps was released for public comment by the National Credit Union Administration on Thursday.

Click to view larger imageCUNA Deputy General Counsel Mary Dunn, left, and Executive Vice President of Strategic Communications and Engagement Paul Gentile speak with NCUA Chairman Debbie Matz, right, following Thursday's NCUA open board meeting. The NCUA said there are still questions about how the proposed derivatives rule would work, and the agency has asked credit unions for their thoughts on all aspects of the proposal. (CUNA Photo)
Approved credit unions would be permitted to use these simple derivatives to hedge against interest rate risks.

"Our initial take is that NCUA took a positive step to issue the proposal for comments to assess credit unions' views--a development we have been urging for months--although the devil is always in the details," Credit Union National Association Deputy General Counsel Mary Dunn said. "We will be reviewing it very carefully."

NCUA Chairman Debbie Matz and board member Michael Fryzel both stressed that the proposal is not cast in stone, and said they will welcome comments on all aspects of the proposal. The agency also released a question and answer document to help credit unions better understand the proposal. (Use the resource link.)

"Working with credit unions to manage interest-rate risk exposure is a top priority for NCUA," Matz said in a Thursday release. "The negative impact on balance sheets when rates rise, especially if they rise rapidly, will significantly reduce the earnings and net worth of exposed credit unions. NCUA urges credit unions to prepare for this event. After careful evaluation, the NCUA Board is proposing to allow eligible credit unions, which hold nearly 80 percent of industry assets, to purchase simple types of derivatives with certain safeguards to hedge interest-rate risk."

Under the terms of the NCUA proposal, only credit unions that have assets of more than $250 million, are well-managed, and have the appropriate expertise will be eligible to apply for an agency derivatives investment program. The NCUA estimated that 75 to 150 credit unions would apply for derivatives authority within the first two years of the program. The agency said it would need to add new resources to handle application processing and supervision if the program is approved.

The proposal would apply to federal credit unions and federally insured state-chartered credit unions that are permitted under state law to engage in derivatives and that meet NCUA's criteria.

Credit unions seeking derivatives authority would be required to submit an application for one of two levels of authority:

  • Level I, which includes lower permissible transaction limits and involves a more streamlined application process with less restrictive requirements on experience, personnel and systems; and
  • Level II, which would allow higher transaction limits, but would require an onsite evaluation, higher regulatory requirements, a higher application fee, and necessary personnel and systems to be in place.
The NCUA has developed separate eligibility requirements for each of these two levels. Level I application fees would start at $25,000, and Level II application fees would range from $75,000 to $125,000, depending on the complexity of the application.

These application fees would help the agency cover the costs of the program. NCUA staff estimate that the program would require six to 12 new examiners and would cost $6 million to $11 million to initiate. "Charging these types of application and participation fees is unprecedented, and we will be scrutinizing the proposal, the fee issues and the agency's cost estimates very carefully as we analyze the proposal," Dunn added.

The NCUA will accept comment for 60 days after the proposal is published in the Federal Register. A final rule could be released in the summer or fall, with an effective date of the end of the year or early next year, Dunn said.

For more on the proposal and the NCUA board meeting, use the resource link.

First Kingdom Community FCU Placed Under NCUA Conservatorship

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ALEXANDRIA, Va. (5/17/13)--First Kingdom Community FCU, Selma, Ala., has been taken under conservatorship, the National Credit Union Administration (NCUA) announced Thursday.

The NCUA said it will work to resolve safety and soundness issues at the 76-member, $88,400 asset credit union.

First Kingdom was chartered in 2007 and serves those who live, work, worship, or attend school in Dallas County, Ala.; businesses and other legal entities located in the county; spouses of persons who died while within First Kingdom's field of membership; employees of the credit union; volunteers in the community; members' immediate family or household; and organizations of such persons.

Members will not be able to conduct business at the credit union for the time being, but the NCUA said it is working on a solution to this issue.

For the full NCUA release, use the resource link.

Technical Changes, Reg Briefing Also On NCUA Agenda

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ALEXANDRIA, Va. (5/17/13)--While a new derivatives investment proposal was the big ticket item on Thursday's National Credit Union Administration agenda, two other items were also discussed: A final rule making technical adjustments to credit union regulations, and a board briefing on a supplemental interagency proposed rule that covers appraisals for higher-priced mortgage loans.

The technical amendments to NCUA regulations reflect changes to agency organizational structure, remove duplicative language, make minor changes updating cross citations, and make minor changes that are statutorily required by the Dodd-Frank Act. The rule will take effect when it is published in the Federal Register.

The briefing item was a forthcoming interagency proposal that would amend the Truth in Lending, Regulation Z, interagency appraisals rule adopted in January. For certain mortgages, the appraisals rule requires creditors to obtain an appraisal that meets certain specified standards, provide applicants with a notification regarding the use of the appraisals and give applicants a copy of the written appraisals used.

Ahead of the January 2014 effective date of the appraisals rule, the federal financial regulatory agencies are jointly proposing exemptions from the rules for existing manufactured homes, certain refinancings and transactions of $25,000 or less.

CUNA will prepare a comment call on the interagency proposal once it is released.

For more on the NCUA board meeting, see today's News Now story, CUNA Will Closely Review NCUA Derivatives Proposal, and use the resource link.