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CUs should think globally Matz tells WOCCU conference

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GLASGOW, Scotland (7/28/11)--National Credit Union Administration (NCUA) Chairman Debbie Matz encouraged credit unions to “think globally about how to prepare for uncertainty, reach new markets, and better serve consumers” in a speech before the World Council of Credit Unions' (WOCCU) World Credit Union Conference. Matz took the opportunity to reiterate her support—before an international audience-–for easing supplemental capital standards for credit unions and allowing some credit unions to exclude zero-risk assets from their total assets, saying that these two changes “would give well-managed credit unions the flexibility to better manage capital-to-asset ratios under varying economic conditions.” Matz also discussed credit union consolidation, noting that while many "believe ‘small’ means better service, consolidation does have some virtues." Credit union consolidation “allows credit unions to better compete, broaden their geographic reach, and take advantage of economies of scale," she added. Credit unions can grow and enter new markets by applying their traditional community-finding and community-building skills to burgeoning urban communities and tapping into unbanked populations, Matz said. Market share could also be increased by educating and working with younger populations, she added. While consumers between the ages of 25 and 44 do the most borrowing from financial institutions, the average age of American credit union members is currently 47. “Ultimately this trend must be reversed if credit unions are to survive,” Matz said. Citing a Credit Union National Association (CUNA) survey that found that 69% of consumers between 18 and 24 years of age are “not at all familiar” with credit unions, Matz added that “credit unions will have to be creative in order to attract and retain the consumer base of tomorrow.” The NCUA leader said that one way to bring in new members is to give them more mobile banking options. “Younger consumers don’t just desire this service from financial institutions; they demand it,” she said, adding that “credit unions will have to embrace these technologies” going forward. For the full NCUA release, use the resource link.

FHFA seeking damages from UBS sales to GSEs

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WASHINGTON (7/28/11)--The Federal Housing Finance Agency (FHFA) has brought a suit against UBS Americas in an attempt to recover losses and damages sustained by Fannie Mae and Freddie Mac. The two government-sponsored entities invested $4.5 billion in residential private-label mortgage-backed securities that were sold by UBS. The suit was brought in the federal district court for the Southern District of New York and names UBS Americas, Inc., UBS Real Estate Securities Inc., UBS Securities, LLC, Mortgage Asset Securitization Transactions, Inc., and former UBS executives David Martin, Per Dyrvick, Hugh Corcoran, and Peter Slagowitz as defendants. In the suit, the FHFA alleges that UBS “made numerous material misstatements and omissions about the mortgage loans underlying the private-label [securities], including the creditworthiness of the borrowers and the quality of the origination and underwriting practices used to evaluate and approve such loans.” The FHFA added that UBS “failed to conduct adequate due diligence.” FHFA Acting Director Edward DeMarco said that the FHFA’s suit is “consistent” with the FHFA’s responsibilities as conservator of Fannie and Freddie. The agency indicated that additional lawsuits could follow. The National Credit Union Administration (NCUA) has brought its own securities-related suits, seeking $1.5 billion in combined damages from RBS Securities and J.P. Morgan Securities, LLC. Similar to the FHFA, the NCUA has alleged that these securities firms materially misrepresented securities that were sold to corporate credit unions U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate, and Constitution Corporate. The NCUA has said that as many as seven additional court actions could be taken. For the FHFA’s statement and more on the NCUA’s recent actions, use the resource links.

Date to take Warrens spot at CFPB

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WASHINGTON (7/28/11)--Raj Date, who currently serves as the Consumer Financial Protection Bureau’s associate director of research, markets & regulations, will take on the role of special adviser to U.S. Treasury Secretary Tim Geithner when current adviser Elizabeth Warren leaves the CFPB on Aug. 1. Date, a Harvard Law graduate who has also worked for Capital One and Deutsche Bank, and founded the financial research nonprofit Cambridge Winter Center, will lead the CFPB’s day-to-day operations in his new position. The Treasury indicated that Warren would return to her prior position at Harvard in August. Geithner in a Treasury release praised Warren for her work in “standing up” the CFPB, simplifying mortgage and credit card disclosures, and protecting military families from deceptive financial practices, among other things. Date was brought into the CFPB by Warren last year. Another Warren recommendation, Richard Cordray, was tapped by President Barack Obama to lead the CFPB last week. Warren herself was long thought to be the frontrunner for the CFPB’s top post, but a number of key Republicans opposed Warren for the CFPB position, raising doubts about the ability of her nomination to clear the US Senate. Cordray's nomination also will require Senate confirmation and is not assured. Some in Congress are calling for structural changes to the CFPB before agreeing to confirm a director. While the CFPB still lacks an official director, the agency began its work on July 21. Authority over several consumer-related regulations has been transferred to the CFPB, and the agency has begun to communicate directly with the organizations it is now overseeing. The CFPB has also begun to accept consumer credit card complaints, and is working to address other consumer-related issues. Interim rules that will cover confidentiality, how testimony of records are made available to the public, and related Privacy Act and Freedom of Information Act requirements should soon be in the offing, and other administrative and internal CFPB matters are also being handled at this time, according to the agency. For more on the CFPB’s new regulatory responsibilities, use the resource link.

NACHA seeks CU information on P2P payments

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WASHINGTON (7/28/11)--Credit unions can provide their input on the challenges and advantages presented by the many ways that person-to-person (P2P) payments may be made over automated clearing house (ACH) networks via a comment call issued by the Electronic Payments Association (NACHA). The comment call, which has also been released by the Credit Union National Association (CUNA), presents nine different options for P2P payments that can be made by smartphones, including using prepaid accounts with a given retailer, mobile check scanning, and person-to-person payments that are made online. The comment call asks credit unions to detail which P2P options they use, and to list any advantages or disadvantages to using those options. Credit unions may also suggest potential improvements to NACHA’s operating rules, or the ACH network in general, that would make P2P options easier to use. The comment call also asks if credit union members have experienced any difficulties when they attempted to sign up for mobile P2P payment options. Comments to CUNA must be sent by Aug. 5. NACHA will accept comments until Aug. 12. For the full comment call, use the resource link.

Inside Washington (07/27/2011)

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* WASHINGTON (7/28/11)—The House Financial Services Committee Wednesday announced its schedule for the first week of August. On Wednesday, Aug. 3, the panel’s subcommittee on insurance, housing and community opportunity will conduct a hearing on the single- and multi-family programs of the Federal Housing Administration (FHA) and the Rural Housing Service (RHS), and also will study legislative proposals to improve the financial condition of FHA, RHS and Ginnie Mae. On Thursday, Aug. 4, the full committee will host U.S. Securities and Exchange Commission (SEC) Chair Mary Schapiro as it examines the structure and operations of the SEC and the need for reform. On Friday, Aug. 5, the full committee will study exposure of U.S. banks to the European Union’s debt crisis; Witnesses will be announced at a later date. … * ALEXANDRIA, Va. (7/28/11)—The National Credit Union Administration (NCUA) has issued a guidance letter to corporate credit unions on annual reporting and internal controls assessments based on rules adopted earlier this year. The audit and reporting requirements are effective Jan. 1, 2012 and make the corporate credit union requirements similar to those required of banks and other U.S. corporations, as set forth in sections of the 2002 Sarbanes-Oxley Act. … * WASHINGTON (7/28/11)--Business executives, preparing contingency plans in the event of a crisis, this week urged political leaders to end the stalemate over the debt crisis. Wall Street executives sent a joint letter to President Barack Obama and congressional leaders asking them “to act with unity” in negotiating a settlement. On Tuesday, the U.S. Chamber of Commerce and financial industry trade groups such as the Securities Industry and Financial Markets Assocation and the Financial Services Roundtable called on Congress to intervene. Unlike in previous debates about healthcare and financial reform, most of the financial community has tried to step delicately and avoid picking particular partisan plans. (Los Angeles Times July 27). The likelihood that the U.S. would miss payments on on its bonds and default is remote, financial experts said. Such an outcome would be disastrous. A more likely scenario is that a temporary deal would be made to lift the debt ceiling, according to the Times. If a makeshift plan is made, the U.S. is unlikely to retain its AAA grade with bond rating companies …

NCUA addresses asset reduction via Feds EBA program

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ALEXANDRIA, Va. (7/28/11)—The National Credit Union Administration (NCUA) sent a letter to federally insured credit unions (11-CU-10), intended to educate those unions who are members of corporate credit unions, on the Federal Reserve Bank Excess Balance Account (“EBA”) Program. The NCUA letter said that as the corporates share their business plans with their member credit unions, many of these plans note a “considerable reduction in asset size (that) will dictate lower amounts of contributed capital from member credit unions” to meet regulatory capital requirements. One tool some CCUs are considering as a means to reduce asset size, the letter said, is the Fed’s EBA plan, and the letter included a fact sheet on the program. The NCUA explained that in 2009 the Fed established limited-purpose accounts at Federal Reserve Banks (FRBs) for the purpose of maintaining excess reserve balances. The EBAs are intended to allow eligible institutions, which includes member consumer credit unions, to earn interest on their excess balances in an account relationship directly with a FRB without significantly disrupting established business relationships with their correspondents credit unions. The NCUA letter also provides information on:
* How EBAs work; and * Due diligence requirements.
Use the resource link to access the NCUA letter.

CUNA monitors debt-ceiling talks for CU impact

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WASHINGTON (7/28/11)—Tensions mount on all fronts as the government continues its push-and-pull fight to work out a plan to increase the nation’s debt ceiling. The Credit Union National Association (CUNA) is closely monitoring developments as the U.S. Congress wrestles to write the formula of how deep the funding cuts and how high the revenue raisers will be in a final plan. That equation is the key element behind the partisan jabbing that is seen as delaying progress on a resolution. CUNA remains vigilant to detecting any possible development that could threaten the federal credit union tax status. To date, there has been no indication that the credit union exemption is being considered in the debt ceiling debate, reports John Magill, CUNA senior vice president of legislative affairs. “Preserving the federal credit union tax status remains a top CUNA priority and the volatility surrounding the debt ceiling negotiations makes it prudent for CUNA to remain on the alert. “However, neither the Democrat’s preferred debt package nor the Republican’s plan takes aim at credit unions at this point,” Magill says. President Obama and federal lawmakers have until early August to increase the government’s statutory borrowing authority or risk defaulting on the nation’s debt. So far, CUNA Chief Economist Bill Hampel points out, the broader financial markets are not reacting as if there is significant risk of the debt ceiling not being raised in some fashion. “The general consensus is that investors believe that by the last minute, something will be done to raise the debt ceiling. This is because the financial markets understand the catastrophic consequences of not raising the ceiling: a possible default on the debt, and/or having to balance the budget cold turkey on Aug. 3, which would require immediately cutting federal spending by about 35%. Either of these would throw the economy into another recession that could make the last one look mild,” Hampel says. He adds that even if policymakers miss the debt ceiling deadline by a few days, the upset in the financial marketplace--demonstrated by falling stock values and rising interest rates--likely would force lawmakers and the administration into agreement quickly. “The effects would—one can hope--be so short-lived that credit union members would unlikely have much time to react. However, within the context of an extended crisis savings rates could drop, loan rates could rise—and consumers could shift funds around. “The best bet for credit unions would be to stay liquid just in case,” Hampel adds.