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More RBC issues identified during final Listening Session

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ALEXANDRIA, Va. (7/18/14)--Even after three discussion sessions--each running three hours or longer--credit unions were
Click to view larger image CUNA Deputy General Counsel Mary Dunn urges the NCUA during its final Listening Session to reduce the proposed risk-based capital requirement for well-capitalized credit unions, which CUNA says is out of proportion with the level of risk that credit unions present. (CUNA Photo)
not "talked out" about their concerns regarding the National Credit Union Administration's risk-based capital proposal Thursday.  And that energy and engagement, says Credit Union National Association Deputy General Counsel Mary Dunn, is what is needed going forward to ensure revisions the NCUA is contemplating will be significant enough to bring the kind of improvements credit unions need in a final regulation.
 
At the agency's final Listening Session of the year, held here from 1-4 p.m. (ET) Thursday, credit unions of all sizes continued to underscore that the RBC plan as written is seriously flawed and unworkable.  NCUA Chair Debbie Matz continued to assure that there will be numerous changes to the proposal before a rule is made final.
 
She also stated, "The bottom line is, our goal is not to have a consensus. Our goal isn't to have everybody here think it's the best rule they've ever seen. Our goal is safety and soundness." 
 
The NCUA has pledged to add time to the proposed 18-month implementation period and to adjust risk weights, especially in the areas of mortgages, member business loans, investments, credit union service organizations, and corporates credit unions.
 
Board member Rick Metsger said the proposed rule will not replace examinations or proper supervision; it is a tool the agency will use to try to more accurately assess an institution's capital situation.
 
"The fact is, under our current requirements, there are two credit unions that are undercapitalized. I don't think there's anybody here that believes out of all the credit unions in the country, that only two are struggling with capital," Metsger said at thre Listening Session. "Obviously the current rule isn't giving us a very good picture of what the capital requirement should be."
 
CUNA Deputy General Counsel Mary Dunn urged the agency during the session to co reduce the proposed RBC requirement for well-capitalized credit unions, which CUNA says is out of proportion with the level of risk that credit unions present.  She commended positive comments from the chairman and others that the agency is considering changes to risk weights, revisiting its treatment of goodwill in a merger, reviewing the treatment of the 1% National Credit Union Share Insurance Fund deposit in the RBC calculation, how interest rate risk is addressed in the proposal and revising provisions regarding minimum additional capital.
 
Click to view larger image NCUA's Larry Fazio says examiners will not make the call on what level of capital is required under a risk-based capital rule. Credit unions at the final 2014 Listening Session Thursday highlighted concerns that there is a "disconnect" between NCUA guidance and examiners' execution of rules.  NCUA Chair Debbie Matz is seated to Fazio's left. (CUNA Photo)
For instance, to a credit union's expressed concern regarding how auditors will view the 1% NCUSIF deposit in RBC calculations, NCUA Director of Examinations and Insurance Larry Fazio responded that the agency staff continues to study options to deal with the deposit.

Also during yesterday's session, credit unions expressed many concerns about examiner subjectivity and poor communications with them. During her comments to NCUA at the meeting, Dunn urged the agency to work with the credit union system to address the disconnect between positive positions taken by the NCUA board and what is implemented by examiners. 
 
One credit union official sought an assurance by the agency that examiners will not ask for more capital than required in a new RBC rule, stating he believes examiners currently ask for more capital than necessary. NCUA's Fazio responded that individual examiners will not "make that call."
 
Another credit union officer--who heads a $3 million-asset financial cooperative--urged the NCUA to act to reduce regulatory burden and said the examiner "disconnect" just exacerbates the problem: Examiners don't always understand what regulations apply to small credit unions and which ones don't--increasing unnecessary regulatory burden.
 
Other topics that arose during the Listening Session: goodwill calculations under an RBC rule, the need for credit union access to supplemental capital, and perceived problems with a variety of the risk weights proposed by the NCUA's plan.
 
The NCUA's RBC plan, as proposed in January, would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
Under the proposed rule, an adequately capitalized credit union would need to maintain a net worth ratio of 6% and an RBC ratio of 8% of equity to risk assets, while a well-capitalized credit union would need 7% and a higher RBC ratio of 10.5%, meaning the RBC ratio for well-capitalized credit unions exceeds that for adequately capitalized credit unions. This violates the Federal Credit Union Act, the Credit Union National Association says. 
 
The agency received a record 2,052 comments by the May 28 comment deadline, and letters of concern from Capitol Hill continue to be sent to the agency.

FTC/CFPB debt collection roundtable announced

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WASHINGTON (7/18/14)--Consumer advocates, industry representatives, academics and state and federal regulators will team up for a roundtable discussion on how debt collection issues affect Latino consumers, especially those with limited proficiency in English.

The event, set for Oct. 23, will be co-hosted by the Federal Trade Commission and Consumer Financial Protection Bureau in Long Beach, Calif.

Titled "Debt Collection and the Latino Community," the event is free and open to the public, and will be streamed online. It will take place at the Pointe Conference Center on the campus of California State University, Long Beach.

Ideas and comments for the event are currently being accepted, with submission information on the event page. Additional information, including a full agenda and registration information, will be posted to the page as well.

Use the resource link below for more information.

Senate passes TRIA extension

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WASHINGTON (7/18/14)--The U.S. Senate Thursday voted to extend the Terrorism Risk Insurance program, which is currently set to expire at the end of this year.
 
The federal insurance backdrop was created by the Terrorism Risk Insurance Act, which requires property and casualty insurers to offer coverage for foreign acts of terrorism on U.S. soil.
 
The program was created in the aftermath of the Sept. 11 terrorist attacks when, after suffering steep losses, insurance companies ceased terrorism coverage as part of their commercial property policies. The program has since been reauthorized by Congress twice.
 
The Senate voted to extend the program through 2021.
 
A similar bill awaiting a House vote would execute some reforms to the TRIA program.

House passes bill with $2M for CDRLF, $230M for CDFIF

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WASHINGTON (7/18/14)--The House of Representatives passed the Financial Services and General Government Appropriations Act (H.R. 5016) for fiscal year 2015 Wednesday, by a vote of 228-195.

The bill includes an increased amount of money for the Community Development Revolving Loan Fund (CDRLF) from previous drafts, up to $2 million from $1.071 million. The National Credit Union Administration's CDRLF provides grants and loans to low-income designated credit unions for financial services and to stimulate economic activities in local communities.

The Credit Union National Association advocated for the increased CDRLF amount.

The bill contains $230 million for the Community Development Financial Institutions (CDFI) Fund, a $4 million increase from last year. The fund supports CDFIs by supporting business growth, job creation and low-income community revitalization.

The CDFI Fund breakdown is:
  • $177 million for financial and technical assistance, including up to $3,102,500 for the cost of direct loans;

  • $15 million for financial assistance, technical assistance, training and outreach programs designed to benefit Native American, Native Hawaiian and Alaskan Native communities;

  • $18 million for the Bank Enterprise Award program, which provides financial incentives to increase lending, investment and service activities within economically distressed communities; and

  • Up to $20 million for administrative expenses, which includes up to $300,000 for administration expenses of a direct loan program.
According to the U.S. Treasury Department's CDFI report for fiscal year 2013, credit unions represent 177 of 811 CDFIs active at the end of last year.

The bill also passed with an amendment introduced by Rep. Bill Posey (R-Fla.) that transfers $1 million to the Internal Revenue Service Inspector General's office for an economic study of the Foreign Account Tax Compliance Act (FATCA).

FACTA created a tax information and withholding system for certain payments made to financial institutions. CUNA, along with the World Council of Credit Unions (WOCCU), sent a letter in support of the amendment just prior to it passing Monday.

CUNA and WOCCU stated that the study was necessary due to "myriad unintended consequences of the law on U.S. financial institutions and U.S. citizens living abroad," according to the letter, which was signed by CUNA interim President/CEO Bill Hampel and WOCCU President/CEO Brian Branch.