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Third strike for Phillys Borinquen FCU

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ALEXANDRIA, Va. (7/11/11)--The National Credit Union Administration (NCUA) liquidated Borinquen FCU of Philadelphia Friday. In early June, Borinquen was the subject of a regulatory cease-and-desist order due to "serious and persistent record keeping problems" and failure to perform yearly audits, according to the NCUA. Later that month, the NCUA took control of the $7 million-asset credit union so its 8,600 members could continue to have access to their credit union’s services while it worked under NCUA management to resolve issues the agency said were affecting the safety and soundness of the institution. Borinquen was chartered in 1974 as a full-service financial institution to serve a low-income community in Philadelphia. It is the eleventh federally-insured credit union liquidation in 2011. Member deposits are federally insured by the National Credit Union Share Insurance Fund up to $250,000. NCUA’s Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in the credit union within one week. Members with additional questions about their insurance coverage may contact the NCUA’s Consumer Assistance Center toll free at 800-755-1030. The center answers calls Monday – Friday between 8 a.m. and 6 p.m. (ET). Individuals may also visit the website at any time for more information about their insurance coverage.

White paper provides decision guidance for prepay plan

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WASHINGTON (7/11/11)--The Credit Union National Association has released a comprehensive white paper that will help credit unions assess whether or not they should take part in the National Credit Union Administration’s (NCUA) corporate assessment prepayment plan. The white paper notes that the prepayment plan’s financial benefits may not be broadly felt, but could prove vital for some credit unions. The NCUA’s final prepayment plan was released at a late June board meeting, and the agency has asked credit unions that wish to take part in the plan to submit a completed program agreement by July 29. Credit unions that wish to take part may pledge a minimum of $1,000, or 5 basis points of March 31, 2011 insured shares, whichever is greater. The maximum that can be contributed is 48 bp of those same shares. The agency has set the target size of the program at $500 million, and will not move forward with the plan if less than $500 million is pledged by credit unions. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the amounts that have been pledged from credit union accounts on Aug. 18. The National Credit Union Administration (NCUA) has officially announced that it will host a free webinar on its voluntary Corporate Stabilization Fund assessment prepayment plan on July 11 at 2 p.m. ET. NCUA Chairman Debbie Matz, Deputy Executive Director Larry Fazio, Examination and Insurance Director Melinda Love, Chief Economist John Worth, and staff attorney Lisa Henderson will give their own insights on the program during a 2 p.m. ET webinar. For the CUNA white paper (CUNA members only), and to register for the NCUA webinar, use the resource links.

CUNA to Fed Changes welcome but concern remains on interchange

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WASHINGTON (7/11/11)--While the Federal Reserve addressed some credit union concerns when it released its final debit interchange cap rule last month, the Credit Union National Association (CUNA) has noted that the debit interchange cap plan remains “bad law and poor public policy.” CUNA, in a letter to Fed Chairman Ben Bernanke, each Fed governor, and other regulators, added that the Fed rule’s impact on credit unions will not truly be known “until the regulation has been implemented for a number of months.” CUNA has “encouraged Congress to continue a watchful eye on the implementation process,” and “would like to work with the Board in its ongoing efforts to monitor the impact of the interchange rule,” the letter added. “Credit unions that offer debit cards to their members are anxious about the potential loss of debit interchange income as well as the impact of the routing and exclusivity provisions on their debit card programs,” Cheney said. The Fed's final interchange rule would cap large issuer debit interchange fees at 21 cents. This cap is intended to cover costs related to network connectivity, hardware, software and labor, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. Under a separate rule, debit card issuers would be permitted to charge an additional penny per transaction if they are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets, prepaid cards, and government-issued cards are exempt from the cap provisions. The final rule also prohibits issuers and payment card networks from limiting merchants' ability to choose the network on which a transaction is routed, limited to those networks on which the debit card is enabled to be used. The Fed will be required to report on the interchange cap's impact on small-issuer interchange fee income and whether merchants are discriminating against small issuers that are still able to charge more for debit card purchases. For the full CUNA letter, use the resource link.

Boost sluggish economy with MBL cap lift CUNA

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WASHINGTON (7/11/11)--The Senate should be permitted to consider legislation to raise the cap on credit union business lending -- which would help create needed jobs in a fragile economy -- Credit Union National Association (CUNA) President/CEO Bill Cheney stated in a letter to Senate leaders. The Obama administration on Friday reported that overall payroll employment increased by 18,000 in June. The nationwide unemployment rate increased to 9.2% during the month. In the wake of this lackluster jobs report, Cheney told Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), that America’s credit unions stand “very willing” to help businesses create jobs and hold significant capital that could be loaned to small businesses -- but for a statutory cap restricting credit union business lending. Lifting the credit union member business cap to 27.5% of total assets, as proposed in Sen. Mark Udall's (D-Colo.) S. 509, would inject an estimated $13 billion in funds into the economy, creating over 140,000 new jobs. Sen. Olympia Snowe (R-Maine) is the other original sponsor of the bill. Cheney added that the MBL cap lift legislation “has been endorsed by the Obama administration, has been subject to hearings in the Senate Banking Committee, and is the type of commonsense legislation that Senators on both sides of the aisle should be able to embrace: new jobs, new lending to small business, zero cost.” Bank opposition to the MBL cap lift, and their own lack of business lending activity in the wake of considerable government assistance, are unacceptable, Cheney added. Failing to enact S. 509 “literally leaves money on the table that could help small businesses hire those among the 9.2% of Americans actively seeking jobs,” Cheney said. “The time is now to set aside the banker objections, move the Udall-Snowe bill and let credit unions serve their members who own small businesses,” he added. For the full letter, use the resource link.

Inside Washington (07/08/2011)

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* WASHINGTON (7/11/11)--Friday was Sheila Bair’s last day as the head of the Federal Deposit Insurance Corp. (FDIC), but hers is not the only transition on the board (American Banker July 8). FDIC Vice Chairman Martin Gruenberg is the nominee to assume the chairmanship. Tom Curry will continue to serve on the board; however, as the nominee to succeed acting Comptroller of the Currency John Walsh, Curry would be elevated in his FDIC board position if or when he takes over the comptroller position. The changes don’t stop there. John Bowman, who is acting director of the Office of Thrift Supervision (OTS), will be off the FDIC board when the thrift agency ceases to exist later this month. OTS duties, under the Dodd-Frank Act, are to be assumed by the director of the Consumer Financial Protection Bureau … * WASHINGTON (7/11/11)--Bankers told a House panel Friday that examiners are going too far in declassifying loans, which in turn, they say, is forcing banks to retain higher capital levels than is really necessary (American Banker July 8). The bankers urged federal lawmakers to support a bill, drafted by Rep. Bill Posey (R-Fla.), that would allow banks to treat non-accrual loans as accrual for capital purposes if certain conditions are met. Among those conditions are the requirements that the loans are current, amortizing, not paid from an interest reserve account and have not been more than 30-days delinquent within the previous six months. Generally, modified loans are treated as non-accrual for six months, but the Posey bill also would allow the mortgages to be considered accrual if they continue to meet the legislation’s other standards. Also, the bill would require a study by the Financial Stability Oversight Council to determine how to avoid conflicting guidance from being issued regarding loan classifications and capital requirements. The legislation would expire after two years. As one banker put it, tough treatment by bank examiners is forcing banks to forgo good loan opportunities for fear of examiner write-downs and a resulting income and capital loss. However, a bank regulator also testifying at the House committee hearing warned that the legislation in question would dangerously undermine examiners’ ability to ensure the safety and soundness of banks. … * WASHINGTON (7/11/11)--The first round of capital has been released under the U.S. Treasury Department’s Small Business Lending Fund (SBLF), and six community banks have received a total of $123 million from the fund. The government-funded program is intended to encourage banks to increase their lending to small businesses, and federal lawmakers have been pushing Treasury recently to get the funds distributions going. However, Treasury resisted the pressure saying it would continue to carefully screen applicants to protect the taxpayer dollars funding the bank program. Additional funding announcements are expected to be rolled out over the summer, and, as of June 22, Treasury reportedly had received 869 applications for approximately $11.6 billion in SBLF funds. The deadline to distribute funds is Sept. 27 American Banker July 8). Meanwhile, credit unions continue to urge the U.S. Congress to increase their statutory member business lending limit to 27.5% of assets, up from the current 12.25%. Credit Union National Association research has indicated that the increase would add more than $13 billion in small business credit and more than 140,000 jobs to the U.S. economy--with no involvement of taxpayer dollars … * WASHINGTON (7/11/11)--IndyMac Bank was the first big Federal Deposit Insurance Corp. (FDIC) seizure in the country’s exploding mortgage crisis and now, three years later, the FDIC has filed suit against the bank’s former top executive, Michael Perry. The FDIC has charged in U.S. District Court in California that Perry did not halt IndyMac's operation of a $10 billion pool of risky mortgages meant for resale, even though, according to the FDIC, Perry recognized and acknowledged the instability in the secondary market. While the FDIC action against the former leader of IndyMac may be one of the highest-profile suits brought by the agency, eight such lawsuits have been filed so far under the FDIC’s authority to sue the managers of collapsed banks. The FDIC is pursuing, to some degree, legal actions seeking almost $7 billion from former directors and officers (American Banker July 8) …