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Washington Archive

Washington

CUNA reviewing NCUA merger PandA letter

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WASHINGTON (7/23/10)—The Credit Union National Association (CUNA) is encouraged by the National Credit Union Administration’s (NCUA) attempts to clarify the credit union merger process, and its Mergers Task Force is reviewing NCUA letter No. 10-CU-11 in detail. The NCUA’s guidance, which was provided in a July 2 letter to credit unions, provides a general overview on the merger process and details how and why the NCUA selects certain partners for assisted mergers or purchase and assumption (P&A) transactions. The guidance also covers the P&A process, types of mergers, and the criteria used to evaluate those mergers and P&As. The NCUA’s guidance came in response to credit union complaints. Credit unions have repeatedly asked the NCUA to provide greater transparency. CUNA’s Mergers Task Force, which was formed early this year, will monitor NCUA’s implementation going forward. For more extensive coverage of the NCUA’s merger and P&A processes, see the July 19 issue of NewsWatch.

Matz NCUSIF operating level should not drop far below 1.2

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ALEXANDRIA, Va. (7/23/10)—National Credit Union Administration (NCUA) Chairman Debbie Matz on Thursday said that she does not support reducing the normal operating level of the National Credit Union Share Insurance Fund (NCUSIF) more than a few basis points below 1.2%. The Credit Union National Association (CUNA) does not support setting the normal operating level below 1.2% but has recommended that the NCUA set the operating level below 1.3%. Setting the operating level below 1.2% would tip the equity level too far towards 1%, CUNA has said. Reducing the amount held in the fund to below 1% of insured shares would trigger replenishment. The NCUA expects to levy an assessment to rebuild the equity level of the NCUSIF, the amount in the fund over the 1% of insured shares, later this year. CUNA Chief Economist Bill Hampel has estimated that this assessment could be somewhere between five and 10 basis points (bp), bringing the total amount assessed by the NCUA, including the 0.134% of insured shares assessed this month for the corporate credit union stabilization program, this year to between 18 and 23 bp of insured shares. Matz on Thursday said that credit union losses will be a “key factor” in determining the assessments required for the NCUSIF. “If credit union losses are lower, credit union assessments will be lower,” Matz added. For the NCUA release, use the resource link.

NCUA to discuss truth in savings operating budget at July open meeting

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ALEXANDRIA, Va. (7/23/10)— The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET next Thursday, will discuss a proposed rule on so-called golden parachutes and indemnification payments. Part 707 of NCUA's Rules and Regulations, Truth in Savings, are also on the docket. Changes to the Federal Reserve Board's Regulation DD, which implements the Truth in Savings Act, came into effect on July 6. Those changes addressed depository institutions' disclosure practices related to overdraft services, including balances disclosed to consumers through automated systems. The NCUA will also discuss interim final rules that address the definition of low income. The monthly insurance fund report, as well as the NCUA’s operating budget will also be addressed during the meeting. During the closed portion of the meeting, the NCUA will discuss supervisory activities. A separate closed meeting of the board is scheduled for the following Friday. For the full NCUA release, use the resource link.

Inside Washington (07/22/2010)

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* WASHINGTON (7/23/10)--In a farewell speech Wednesday, Comptroller of the Currency John Dugan suggested that regulators re-examine the regulatory regime of prompt corrective action (PCA). PCA proved valuable during stable economic times, but its record was “far less positive” during the past three years. “During this period, declining capital levels of banks--on which the PCA regime is fundamentally premised--lagged far behind the relatively sudden and large problems caused by troubled construction and development loans that precipitated failure,” Dugan said, noting that 45 national banks have failed since early 2008. All had capital amounts exceeding PCA requirements. But commercial real estate and other loan charge-offs that troubled the firms didn’t spike until 2009, when the institutions were closed. By then, regulatory intervention authorized under PCA was too late to avoid failures and losses, he said. Dugan, whose term ends Aug. 14, had a five-year tenure as comptroller ...