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House panel may launch LIBOR investigation

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WASHINGTON (7/18/12)--The House Financial Services Committee is expected to soon begin an investigation into alleged manipulation of the London interbank offered rate (LIBOR) and other interest rates.

The Los Angeles Times, The Wall Street Journal and other publications reported this week that the committee's chairman, Rep. Spencer Bachus (R-Ala.), and its ranking minority member, Rep. Barney Frank (D-Mass.), told their committee colleagues they plan to hold hearings on LIBOR distortion in the near future. Potential legislative actions will likely be discussed during those hearings, The Journal reported.

Committee members could also touch on the subject when Federal Reserve Chairman Ben Bernanke delivers his semi-annual monetary policy report today.

LIBOR is used by financial institutions to set interest rates on a variety of financial products, including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is based on information provided by 18 global financial institutions, including several U.S. banks.

British bank Barclays PLC recently admitted that some of its employees between 2005 and 2009 conspired with employees of other financial firms to manipulate LIBOR and the Euro Interbank Offered Rate to support their own financial positions. The firm has been fined by the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission, and the United Kingdom's Financial Services Authority.

Governments and authorities in several countries are investigating big banks for any role in potential interest-rate-manipulation schemes, and the relationships between financial regulators and some large firms are also being scrutinized.

The Senate Banking Committee is also investigating LIBOR manipulation, and will hold hearings on the issue this month.

The LIBOR issues will further sully the reputation of big banks, but are unlikely to have a significant impact on credit unions, Credit Union National Association Chief Economist Bill Hampel said recently. (See July 16 News Now story: LIBOR issues unlikely to affect CUs: CUNA.)

TCCUSF federal rate cap more on NCUA agenda

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ALEXANDRIA, Va. (7/18/12)--The National Credit Union Administration's (NCUA) 2012 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment will be unveiled when the agency holds its July open board meeting next Tuesday at 10 a.m. ET.

NCUA Director of Examinations and Insurance Larry Fazio last month acknowledged to the Credit Union National Association (CUNA) that the agency's 2012 TCCUSF assessment could be in the range of eight and 11 basis points (bp). Earlier this year, CUNA predicted the 2012 corporate stabilization assessment would be around nine bp of insured shares in 2012.

Access to emergency liquidity will also be discussed at the open board meeting. The NCUA in late 2011 asked for public comment on whether credit unions should be required to maintain access to emergency liquidity, and outlined a number of options that credit unions could take to ensure they maintain needed liquidity in times of financial stress.

The agency suggested credit unions could ensure liquidity by:
  • Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or through a corporate credit union;
  • Obtaining and maintaining "demonstrated access" to the Federal Reserve Discount Window; or
  • Maintaining a certain percentage of their assets in highly liquid U.S. Treasury securities.
CUNA and credit unions earlier this year said they did not support a new emergency liquidity regulation. "Credit unions should decide for themselves, based on their risks, whether an emergency liquidity source is called for and what the source or sources should be," CUNA said in a comment letter to the NCUA.

An adjustment to the agency's 2012 operating budget, and, potentially, a change to the interest rate cap for federal credit unions are also on the agenda.

The federal credit union loan interest-rate ceiling has stood at 18% for some time, and the NCUA last year voted to maintain that rate ceiling. The agency is required by the Federal Credit Union Act to set the ceiling, at least every 18 months, if the rate ceiling is to exceed the 15% maximum rate established by law.

A proposed rule addressing the agency's definition of a credit union that is in "troubled condition," and a board briefing on an interagency Truth in Lending Act proposal, are also on the schedule.

The NCUA's quarterly report on the status of the National Credit Union Share Insurance Fund (NCUSIF) and the TCCUSF will also be presented.

A closed NCUA board session will not follow the open meeting this month. Instead, the monthly closed board meeting will be held on Monday, July 23. A creditor claim appeal and a discussion of supervisory activities are on the agenda for the closed meeting, which is scheduled to begin at 2:30 p.m. ET.

For more on the July open and closed NCUA board meetings, use the resource links.

Michigan CUs discuss issues with CFPB

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WASHINGTON (7/18/12)--Credit union leaders from across Michigan joined Michigan Credit Union League CEO David Adams and league staff to urge the Consumer Financial Protection Bureau (CFPB) to consider the credit union difference in terms of structure, pricing, and membership, as it moves forward with future rulemaking.

More than a dozen credit union representatives met with CFPB Director Richard Cordray and CFPB Assistant Director Raj Date after a Monday field hearing in Detroit. The CFPB during that hearing announced plans to regulate credit reporting agencies. (See related July 17 News Now story: Credit reporting agencies to come under CFPB scrutiny)

Click to view larger image Consumer Financial Protection Bureau (CFPB) officials and other industry experts speak before a packed house at Monday's CFPB field hearing in Detroit. CFPB Director Richard Cordray met with Michigan credit unions and the Michigan Credit Union League later in the day. (MCUL photo)

A representative from Mortgage Center, a credit union service organization based in Southfield, Mich., also took part in the meeting.

Cordray and the group discussed the CFPB's recent mortgage disclosure proposal, financial elder abuse, retained income and the general regulatory climate for credit unions during the meeting. The group of credit union leaders told Cordray that they could do more to help consumers if the CFPB, in turn, helped credit unions.

Date said the CFPB wants to help credit unions by regulating irresponsible lenders that helped create the recent financial crisis. He noted that credit unions suffered twice due to the crisis: Once when irresponsible lenders pushed good lenders out of the mortgage market, and a second time when the financial markets crashed.

Adams emphasized that credit unions are also concerned about government attempts to regulate overdraft programs. "When the government tinkers with pricing, it has unintended consequences," Adams noted.

Genisys CU Vice President of Public Relations Lon Bone detailed how his credit union helps members that are about to incur overdraft fees by alerting them when the amount of funds in their account dips below a certain level. Cordray said this overdraft alert system is "an appealing practice."

Regulation CC, which governs when credit unions must make funds available that are deposited into share draft/checking accounts and what disclosure they must make about their check-hold policies, was also discussed during the meeting.

Christian Financial CU CEO Patty Campbell said financial institutions have had trouble complying with portions of the regulation that require them to provide a quick turnaround on deposited checks. The required turnaround on checks makes fraud easier, she said, adding that "if you want to deposit checks, there should be a hold on them."

Adams said the group was encouraged by how receptive Cordray was to credit union concerns.

Credit unions represented at the meeting included: Christian Financial CU, Roseville; Michigan First CU, Lathrup Village; Dort FCU, Flint; Omni Community CU, Battle Creek; Lake Trust CU, Lansing; Genisys CU. Auburn Hills; University of Michigan CU, Ann Arbor; and Co-op Services CU, Dearborn.

Inside Washington (07/17/2012)

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  • WASHINGTON (7/18/12)--Global banking giant HSBC and its U.S. affiliate exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls, a Senate Permanent Subcommittee on Investigations probe has found. The subcommittee conducted a year-long investigation into HSBC and has detailed its findings in a 330-page report released yesterday, along with more than 100 documents, including bank records and internal emails. The bank's federal bank regulator, the Office of the Comptroller of Currency, tolerated HSBC's weak AML system for years, said Sen. Carl Levin, D-Mich., the subcommittee chairman. "If an international bank won't police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money," Levin said …
  • WASHINGTON (7/18/12)--The Federal Reserve said staff will review submitted questions about potential filings, otherwise known as pre-filings, before the submission of formal filings on potential bank acquisitions. Pre-filings may include information such as business plans, presentations outlining potential proposals, or other items about which potential applicants may have questions. The process is expected to benefit community banking organizations that do not file applications frequently and also pre-filers with novel proposals, the Fed said. The review of pre-filings is expected to take about 60 days …
  • WASHINGTON (7/18/12)--U.S. Treasury Secretary Timothy Geithner today will preside over a meeting of the Financial Stability Oversight Council (FSOC), and there will be a live webcast of the open session. The FSOC was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act and is intended to provide comprehensive monitoring of the country's financial system to ensure stability. National Credit Union Administration (NCUA) Chairman Debbie Matz is one of the council's 10 voting members. There are also five non-voting members …
  • WASHINGTON (7/18/12)--The Office of the Comptroller of the Currency (OCC) announced Tuesday that Donna Deale has been named deputy comptroller for thrift supervision. Deale will lead the OCC's ongoing effort to integrate the supervision of federal savings associations into its mission while working to ensure a "balanced, consistent interpretation and application of supervisory policies to the thrift industry." Deale was with the Federal Home Loan Bank Board in 1986 and moved to the Office of Thrift Supervision (OTS) when it was established in 1989. Last year Deale transferred to the OCC's Chief National Bank Examiner's Office as a senior operations risk expert. The OCC announcement said Deale, in that role, provided critical leadership to the effort to integrate OCC and OTS supervision policies, while accommodating the regulatory and statutory differences that are unique to the thrift industry  …
  • WASHINGTON (7/18/12)--The Consumer Financial Protection Bureau has released a semiannual update of its rulemaking agenda... .