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Washington Archive

Washington

Inside Washington (09/27/2010)

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* WASHINGTON (9/28/10)--The Federal Deposit Insurance Corp. (FDIC) Monday was ready to begin creating a resolution procedure for systemically significant firms that improves the bankruptcy process. The FDIC was scheduled to meet Monday in a first step to implement the resolution plan, which allows the government to improve risky banks and nonbanks (American Banker Sept. 27). The board also is expected to finalize a rule on what conditions securitizers must follow to be exempt from FDIC takeovers. Financial observers said they hope the new plan would mirror the bankruptcy model as closely as possible. Michael Krimminger, FDIC deputy for policy, said while the resolution plan will have some new parts, it will aim to track existing models. The new system also could be more efficient than bankruptcy-related court proceedings, he said ... * WASHINGTON (9/28/10)-- The Federal Deposit Insurance Corp. (FDIC) Monday approved a final safe harbor rule for securitizations and participations. The rule would extend through Dec. 31 a safe harbor protection for treatment by the FDIC as conservator or receiver of financial assets transferred by an insured depository institution for a securitization or participation. The FDIC previously extended the protections twice, with the last set to expire on Thursday. The safe harbor was initially adopted in 2000 for securitizations and participations. In the event of a bank failure, the FDIC would not try to reclaim loans transferred into such transactions as long as an accounting sale had occurred. However, some changes made in June 2009 by the Financial Accounting Standards Board caused many securitizations to now longer comply with preconditions for the application of the original safe harbor ... * WASHINGTON (9/28/10)--The Federal Deposit Insurance Corp. (FDIC) approved the issuance of a proposed rule to implement provisions of the Dodd-Frank Act on regulator reform to provide deposits at all FDIC-insured institutions with unlimited deposit insurance coverage on noninterest bearing transaction accounts from Dec. 31 through Dec. 31, 2012. Under the proposal, the FDIC will create a new, temporary deposit insurance category for noninterest bearing transaction accounts. Under FDIC’s Transaction Account Guarantee Program, which will expire at year-end, the Dodd-Frank provision will apply at all FDIC-insured institutions and will cover only traditional checking accounts that do not pay interest. The rule emphasizes that starting Jan. 1, low-interest consumer checking accounts and Interest on Lawyer Trust Accounts will no longer be eligible for an unlimited guarantee ...

FinCEN proposes internatl transaction reporting plan

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WASHINGTON (9/28/10)—The Financial Crimes Enforcement Network (FinCEN) has proposed rules to require some depository institutions and money services businesses (MSB) to “affirmatively provide records to FinCEN of certain cross-border electronic transmittals of funds (CBETF).” FinCEN Director James Freis said that the proposal, which would require MSBs that conduct CBETF to report international transactions equal to or in excess of $1,000 to FinCEN, would “greatly assist law enforcement in detecting and ferreting out transnational organized crime, multinational drug cartels, terrorist financing, and international tax evasion.” “The proposal will produce valuable data for law enforcement agencies by having first-in and last-out depository institutions (those institutions that are the first to receive funds transferred electronically from outside the United States or the last U.S. institution to transmit funds internationally) to report all such transmittals of funds,” according to a FinCEN release. The FinCEN release estimated that less than 300 depository institutions and 700 MSBs would be subject to the proposed rule. FinCEN said that complying with the reporting requirement will take “little additional effort” from reporting financial institutions. The proposed rule will be open to public comment for 90 days following its publication in the Federal Register.

NCUA holds first post-corporate CU plan town hall

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WASHINGTON (9/28/10)—The National Credit Union Administration (NCUA) on Monday held the first in a series of town hall meetings to explain and gather input on its recently passed corporate credit union and legacy asset plans. The NCUA will hold 11 additional town hall-style meetings in Atlanta, Ga.; Boston, Mass.; Dallas, Texas; Chicago, Ill.; Columbus, Ohio; Detroit, Mich.; Los Angeles, Calif.; Orlando, Fla.; Phoenix, Ariz.; Portland, Ore.; and Alexandria, Va. The first of these meetings will take place in Portland on Oct. 5. NCUA Chairman Debbie Matz said that the NCUA has scheduled at least two meetings in each region “to make sure that credit union officials have an opportunity to be personally briefed and ask questions.” The NCUA last week introduced comprehensive plans addressing both the corporate credit union system and the legacy assets held by many of the corporate credit unions. The NCUA corporate rule strengthens capital requirements on the corporates, establishes concentration limits on investments, revises asset-liability management requirements and alters governance standards. The final corporate rule also amends Part 704 of the NCUA's rules, adjusting the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. The new corporate rule will also prohibit the purchase of private-label mortgage-backed securities or subordinated securities. A trio of corporate credit unions were added to the list of corporates under NCUA control, with the NCUA announcing the liquidations of Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU last week. These liquidations, along with the ongoing conservatorships of U.S. Central FCU and Western Corporate FCU, result in the NCUA holding 98% of all distressed legacy assets held in the corporate credit union system. The NCUA’s plan for these legacy assets, which are made up primarily of private label, residential mortgage-backed securities, is to isolate and fund $50 billion of the assets. The assets will then be reissued as NCUA Guaranteed Notes (NGN), which will then be sold on the open market. (See related stories: NCUA acts on Corp. CUs, legacy assets, NCUA reveals new corporate CU rule (9/27/10).

CUs should watch for housing hearings this week

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WASHINGTON (9/28/10)--With Congress scheduled to close until just after November’s midterm elections and little on the legislative calendar, the most pressing events for credit unions during this week will be dual House and Senate hearings on housing finance. The first of these hearings will take place before the House Financial Services Committee on Wednesday morning, with the Senate Banking Committee holding a separate hearing later in the day. The House hearing will cover Federal Housing Administration loan fees and loan oversight, while the Senate hearing will compare various international housing finance systems. The Senate Banking Committee will also discuss the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act with U.S. Treasury Deputy Secretary Neal Wolin, Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corporation Chairman Sheila Bair, and U.S. Securities and Exchange Commission Chairman Mary Schapiro among those scheduled to testify. Votes on standard continuing resolutions, and potential movement on 63 bills that are currently held under suspension, are also expected this week.

CUNA chair at White House small biz act ceremony

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WASHINGTON (9/28/10)—President Barack Obama on Monday officially signed H.R. 5297, the Small Business Jobs and Credit Act, which authorizes a $30 billion fund to bolster bank lending to small business. Credit Union National Association (CUNA) Chairman Harriet May was among those attending the signing ceremony. May on Monday thanked President Obama on behalf of credit unions for expanding Small Business Administration (SBA) loan limits, a move that will allow credit unions to increase their work with small business-owning members. Erie FCU's Sandi Carangi also attended the signing ceremony on behalf of her credit union. Specifically, the legislation increases SBA 7(a) loan limits to $5 million from $2 million, 504 loan limits to $5.5 million from $1.5 million, and 7(a) "Express Loans" to $1 million from $300,000. The bill also ups the definition of microloans from $35,000 to $50,000. The bill will also allow, as of 2011, retirement savings plans sponsored by state and local governments to include Roth accounts. Roth accounts are currently only available in 401(k) and 403(b) plans. Participants in those 401(k) and 403(b) plans, as well as governmental 457(b) plans, will be permitted to roll their pre-tax account balances into a Roth account. The legislation also extends portions of the Stimulus Act that eliminate borrower fees on SBA 7(a) and 504 loans and extend the current 90% government guarantee on 7(a) loans through the end of this year. Credit unions sometimes cite high fees as a reason they are unable to particpate in SBA lending programs. The holding period of assets subject to a built-in gains tax has also been shortened to five years if the fifth taxable year in the holding period precedes the taxable year beginning in 2011. The bill also provides $1.5 billion in grants to existing state small business programs that help private lenders extend more credit to small businesses.