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Inside Washington (05/06/2010)

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* WASHINGTON (5/7/10)--National Credit Union Administration (NCUA) board member Michael Fryzel met with credit union CEOs during the New York State Large Credit Union CEO Roundtable in West Point, N.Y. They discussed member business lending, 12-month examinations, alternative capital, corporate credit unions, legacy assets, mergers, private insurance, NCUA audits, NCUA’s Consumer Protection Office, community charters and state budgets. Fryzel emphasized the importance of open community between the regulator and the regulated. He also said NCUA is devoting time to dealing with corporate credit unions and its plan to remove the riskiest legacy assets from ongoing corporates. The roundtable began in the mid-1990s and takes place twice per year. CEOs from credit unions with $50 million or more in assets can attend ... * WASHINGTON (5/7/10)--Regional and community banks are dealing with some challenges as the number of those institutions considered weak is still increasing, and their loan losses likely will remain elevated this year, said Federal Reserve Board Chairman Ben Bernanke in a speech to the Federal Reserve Bank of Chicago Wednesday. “The most significant areas of concern are residential mortgages and commercial real estate loans. Also, with credit demand tepid and the economy still under stress, profitable lending opportunities have been relatively scarce for many of these banks,” he said. The Fed has not attempted to stress test the banks, but has worked with them individually to evaluate their capital needs. The results vary, but prospective losses indicate the institutions may need more capital over the next few years. However, smaller banks generally have fewer alternatives that big banks have to raise capital. “Recognizing these difficulties, we will continue to work closely with smaller banks as they rebuild their financial strength,” Bernanke said. “For example, we continue to receive numerous proposals from private equity investors to take stakes in regional and community banks, and over the past two years we have approved many of these proposals, including some that bring both new capital and management to the organization and some that provide new capital through minority investments” ... * WASHINGTON (5/7/10)--Sens. Jon Tester (D-Mont.) and Mark Pryor (D-Ark.) are working on a compromise to split the Fed’s authority with other regulators. Under their measure, the Fed would still oversee the nation’s 845 state-chartered banks, but its oversight of holding companies would go to other regulators (American Banker May 6). Under the current regulatory reform bill, the Fed would oversee only holding companies that have more than $50 billion in assets. Sen. Kay Bailey Hutchison (R-Texas) also has proposed an amendment that would allow the Fed to keep its authority over state-chartered banks and holding companies. She has 11 co-sponsors for her amendment ...

FTC tweaks merger rules

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WASHINGTON (5/7/10)--The Federal Trade Commission has granted waivers from the standard merger waiting period for several financial institution mergers and acquisitions, including a credit union merger between Detroit Edison CU and NuUnion CU. Credit unions are among the financial institutions that are covered by the FTC's pre-merger filing requirement under the Hart-Scott-Rodino Act Antitrust Act of 1976. The Hart-Scott-Rodino Act's pre-merger notification provisions require “persons contemplating certain mergers or acquisitions” to provide the FTC and the Assistant Attorney General of the United States with “advance notice” of the plans and “wait designated periods before consummation” of those plans. Portions of the act allow the FTC to “terminate this waiting period prior to its expiration” in certain cases. Credit unions may recall that the FTC, in 2007, increased its Hart-Scott-Rodino Act pre-merger filing fees for businesses, including credit unions. However, that fee applies to relatively few credit union mergers in practice because businesses below certain asset thresholds are exempted from the pre-merger filing requirement and many types of credit union assets do not count towards this threshold. Larger credit unions, however, are required to file the pre-merger notice with FTC and pay the filing fee. For the full FTC release, use the resource link.

CUNA urges senators opposition to interchange amendments

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WASHINGTON (5/7/10)--Finance industry representatives on Thursday joined the Credit Union National Association in expressing their “strong opposition to any amendments to S. 3217 that seek to affect interchange rates and the rules established by payment card networks.” Sen. Richard Durbin (D-Ill.) this week filed a pair of amendments. The first of these amendments would permit merchants to set a minimum or maximum transaction amount for payment by card, offer discounts for use of cash, check, debit card or stored-value card and offer discounts to customers to use a competing card network. That amendment is co-sponsored by Sens. Patrick Leahy (D-Vt.) and Mary Landrieu (D-La.). In the letter, which was delivered to members of the Senate on Thursday, CUNA said that this proposal would leave consumers “vulnerable to surprises” when their cards are rejected “because they spent too much or not enough” and when they learn that “their preferred cards will end up costing them more than other forms of payment.” A second amendment offered by Durbin would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, to assure that they are what the proposed language terms "reasonable and proportional" to the cost incurred in processing the transaction. “Every one of the approaches proposed by merchant lobbyists” would “deliver devastating consequences to community banks and credit unions, the very financial institutions most committed to building communities and serving local consumers,” the letter added. “By striking at the very core of our local economies, these small financial institutions will be squeezed out of the marketplace by a protected class of large retailers bent on reaping more profits.” The proposed changes would also weaken small institutions ability to compete with their larger counterparts, according to the letter. While CUNA opposes any changes to the current rules governing interchange, the letter urged legislators, at a minimum, to “appropriately examine the potentially devastating consequences of any amendments of this nature before taking action that would harm our nation’s small financial institutions, their customers, and our economic recovery.” The Senate has not held a hearing on interchange or its effects on financial or consumer markets. CUNA is also working with state credit union leagues and individual credit unions to oppose interchange through direct discussions with their individual Senators. Co-op financial services, a credit union service organization, has also urged its members to contact their Senators. Legislators have also introduced amendments that would limit the amount that financial institutions could charge for a single ATM transaction to 50 cents. Amendments that remove a proposed $50 billion resolution fund for failed entities and would prevent future taxpayer-funded bailouts of financial firms were also approved on Wednesday. CUNA continues to monitor the amendment process for any additional changes to S. 3217. For the full CUNA letter, use the resource link.

NCUA works on checks to St. Paul Croatia members

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ALEXANDRIA, Va. (5/7/10)—The National Credit Union Administration (NCUA) confirmed Thursday that progress is being made sorting out “recordkeeping difficulties” at the recently liquidated St. Paul Croatia FCU, and former members can expect reimbursement checks for their deposits soon. The Eastlake, Ohio-based credit was officially closed by the NCUA on May 1, about a week after it was placed into conservatorship by the agency. St. Paul's held $238.8 million in funds from 5,400 members at the time of its closing. The NCUA said it hoped to have checks to members “perhaps in the next few days.” When it closed the credit union, the NCUA said in a release that St Paul’s was insolvent and had "no prospects for restoring viable operations."