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Filed on September 17, 2009, published the first business day after.
- EPC to Wash. Post: Consumers pay for interchange changes
- House votes to eliminate Ed. Loan program
- Frank suggests expedited date for some CARD Act provisions
- NCUA releases Sept. 24 meeting agenda
- Inside Washington
- Banks double biz account fees, CUs' stay the same
- StretchPay underwriting, ops changes in effect
- CUNA Mutual sells ownership in Canadian affiliate
- Ohio CUs' 2Q growth defies state trends
- Kansas CUs see strong 2Q
- White named chairman of CU Association of Rhode Island
- Illinois chapter leaders discuss environment
- Pa. foundation board introduces two new grants
- TECH CU approved to serve as public funds depository
- CU System briefs
- Market News
- News of the Competition
- Experts' tips save money--even on health care
- Council paper answers, ‘What is enough capital?’
- Paper explores fixed vs. variable rate strategies
EPC to Wash. Post: Consumers pay for interchange changes
WASHINGTON (9/18/09)--The Electronic Payment Coalition (EPC) on Thursday responded to merchant claims that the current interchange fee regime should be changed by reiterating its claim that customers would ultimately pay for any interchange alterations that would benefit retailers, The Washington Post reported.
In a story published Sept. 17, EPC representative Trish Wexler said that while merchants "appreciate" the benefit and convenience of receiving payments via electronic means, some of the "more vocal" retailers do not want to pay for that benefit. "Who's going to pay? The customers," Wexler added.
The Merchants Payments Coalition today released a study which found that retailers in Europe, Canada and New Zealand generally pay lower interchange fees. A Credit Union National Association (CUNA) epresentative also has detailed her thoughts on interchange fees to congressional staffers, telling them that interchange fee income is vital if her credit union is to stay competitive and relevant.
CUNA itself has also spoken out against interchange fee changes, saying that changes to the current interchange fee structure would grant merchants an antitrust advantage in negotiations with card issuers, networks, and other payment system participants.
While legislation that would allow merchants to negotiate interchange fees has been introduced on both the House and Senate sides of Congress, this legislation is not expected to be brought up during the fall session.
House votes to eliminate Ed. Loan program
WASHINGTON (9/18/09)—The House voted 253-171 Thursday in favor of H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, which would terminate the Federal Family Education Loan Program (FFELP).
The Obama administration has estimated that eliminating the subsidies provided under FFELP could save the government more than $4 billion, annually. A portion of that $4 billion savings could then be used for direct loans to low-income students through need-based Pell Grants, the administration has said.
The Credit Union National Association (CUNA)opposes elimination of the student loan program and has expressed concerns to lawmakers that an elimination of FFELP private student funding would remove a "valuable option" for students.
More than 1,000 credit unions provide student loans, according to CUNA, with a particular concentration among credit unions that base their membership around a university. Credit unions that provide direct student loans also provide individualized service and support to loan holders, but these services would be jeopardized if the FFELP is discontinued, CUNA has warned.
The next stop for this bill is the Senate. A comparable bill has not yet been introduced there.
Frank suggests expedited date for some CARD Act provisions
WASHINGTON (9/18/09)--House Financial Services Chairman Barney Frank is reportedly considering introducing legislation that could move the implementation date for the remaining portions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to December 1, Congress Daily reported on Thursday.
Frank staffer Steven Adamske told Congress Daily that Frank's staff were not pleased by what "banks and credit card companies are doing in advance of the effective date."
Portions of the CARD Act became effective in late August, and the rest of the bill is scheduled to come into effect in February of 2010.
This portion of the recently-passed legislation will restrict lenders ability to increase interest rates and to charge fees or penalties to cardholders.
Credit Union National Association President/CEO Dan Mica has spoken out on the bill, saying that some portions of the legislation could "have the unintended consequence of raising compliance costs and making credit more expensive and less available to consumers."
NCUA releases Sept. 24 meeting agenda
ALEXANDRIA, Va. (9/18/09)--The National Credit Union Administration (NCUA) Thursday released the following agenda for its Sept. 24 meeting:
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1. National Credit Union Share Insurance Fund Premium and Stabilization Fund Assessment.
2. Central Liquidity Fund Policies.
3. Insurance Fund Report.
The meeting will be held at 10 a.m. at NCUA headquarters here and will be the first with Deborah Matz presiding as chairman.
A closed meeting is scheduled to follow.
Inside Washington
- WASHINGTON (9/18/09)--The Federal Deposit Insurance Corp. (FDIC) has reached an agreement with Residential Credit Solutions (RCS), the winning bidder in a pilot sale of receivership assets that the FDIC is conducting to test the funding mechanism for the Legacy Loans Program. RCS will pay $64 million in cash for a 50% equity stake in a limited liability company (LLC), and the LLC will issue a note of $727 million to the FDIC as receiver. The value of the bid is 70.63% of the outstanding principal balance of the portfolio. The closing is expected to take place later this month. RCS will manage the portfolio and service the loans under Home Affordable Modification Program guidelines ...
- WASHINGTON (9/18/09)--Financial observers say the findings of the Financial Crisis Inquiry Commission could be more relevant because financial regulatory reform appears to be put on hold (American Banker Sept. 17). The commission was scheduled to hold its first meeting Thursday. Robert Litan, senior fellow at the Brookings Institution, said the panel could have a stronger impact as financial reform slows down. The commission was mandated by Congress in a mortgage fraud law in May. The panel is expected to study the roots of the nation's financial crisis. Phil Angelides, former California state treasurer, is commission chairman ...
- WASHINGTON (9/18/09)--Senior staff from the Credit Union Association of New York joined credit union leaders to meet with members of New York's congressional delegation, including Sen. Charles Schumer (D-N.Y.)
The credit union representatives urged delegates to lift or eliminate the cap on member business lending, and oppose interchange fee legislation and expansion of the Community Reinvestment Act to credit unions. The group hand-delivered letters from New York small-business owners to Schumer, urging him to continue to take action or lift the lending cap. From left are William J. Mellin, president/CEO of the Credit Union Association of New York, and Schumer. (Photo provided by the Credit Union Association of New York) ...
- WASHINGTON (9/18/09)--Banks and insurers are battling for health savings accounts (HSAs) to remain an option for healthcare reform. Money in HSAs is used toward healthcare expenses and future medical expenses. If Congress passes a healthcare reform bill, health plans would have to fulfill certain standards to qualify as "adequate coverage" (The Wall Street Journal Sept. 17). Not all HSAs would make the cut, according to some financial industry experts. Rodney Hood, former National Credit Union Administration vice chair, said credit unions that provide HSAs offer an "exceptional advantage." Credit unions offering HSAs help businesses with HSA plans, education and employee satisfaction, and provide employees and individuals increased membership to offer more products and services (News Now March 23). As more credit unions begin to offer HSAs, they will be better positioned to be a full-service provider for businesses, Hood added ...
Banks double biz account fees, CUs' stay the same
CHICAGO (9/18/09)--Business checking account fees rose this year, according to a new survey. Minimum balances required on the accounts more than doubled at large banks, while credit unions and community banks maintained the same levels as the year before.
The national median for business checking overdrafts was up $3--to $28 from last year, but the same for nonsufficient funds or returned checks and most other fees, according to Moebs Services, an economic research firm based in Lake Bluff, Ill. (Professional Services Close-Up Sept. 15). Wall Street banks with more than $500 billion in assets charged $35 per overdraft.
Of the more than 2,000 banks and credit unions surveyed by the firm, 94.3% of banks and 27.8% of credit unions offer business checking. Roughly 40.9% of financial institutions surveyed offer a "free" business account.
This is up from last year for all institutions, as large banks try to protect loss of business, especially small business, and community banks and credit unions try to get market share, Michael Moebs, CEO of the firm, told the publication.
For a business owner to avoid a checking account fee, large banks required a $2,250 minimum balance--nearly double the $1,250 required in 2008. Community banks and credit unions that require minimum balances kept the requirement level this year, with the banks requiring $1,000 minimum and credit unions $500.
"Main Street institutions definitely offer a better pricing deal than the big Wall Street banks," Moebs said. "In these hard economic times, businesses should seek the better deal."
Wall Street banks also increased their use of account analysis (a cash management review). This year, 92% of them offered accounting analysis while 66.3% of community banks and credit unions offer them.
Of the more than 27 million businesses in the nation, 10,000 are listed on Wall Street and the exchanges. Small business produces 65% of all U.S. jobs. Financial institutions charged businesses about $9 billion in service charges on deposits in 2008, said Moebs.
StretchPay underwriting, ops changes in effect
COLUMBUS, Ohio (9/18/09)--Changes have been made to StretchPay--a credit union salary advance alternative--to make it compliant with the federal Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.
As of Tuesday, StretchPay no longer is a 30-day, short-term loan product. It now is a short-term revolving loan with repayment due dates, ranging from 28 to 60 days, said the Ohio Credit Union league League (eLumination Newsletter Sept. 17).
The changes were made to ensure that credit unions offering StetchPay are compliant with Regulation Z--Truth-in-Lending--which the Card Act amended in August. StretchPay was affected because it is an open-end loan product.
"The operational change will grant participating credit unions an opportunity to continue offering their members a valuable service," said Laura Busque, league outreach manager.
StretchPay provides annual lines of credit to credit union members during budgeting emergencies. Participating members pay a $35 annual fee to access a $250 line of credit for 12 months at an 18% annual percentage rate or the state usury rate.
"StretchPay would not nearly be the success it is today without the involvement of the National Credit Union Foundation's REAL Solutions program," said Doug Fecher, CEO of Wright-Patt CU in Fairborn, Ohio. "REAL Solutions gave StretchPay a voice in the national credit union community it could not have attained on its own."
CUNA Mutual sells ownership in Canadian affiliate
MADISON, Wis. (9/18/09)--CUNA Mutual Group announced today it is selling the majority ownership of its independently managed affiliate, The CUMIS Group Ltd., to a longtime business partner of the Canadian company and a Canadian credit union central.
CUMIS' board decided to enter into an agreement with Co-operators Life Insurance Co., and Central 1 credit union, which will assume full ownership of CUMIS by the end of the year. Central 1 is a Canadian corporate credit union based in Vancouver, B.C.
"We have been approached on numerous occasions by companies interested in obtaining an ownership interest in CUMIS," said Jeff Post, president/CEO of CUNA Mutual. "The time is right for both organizations to make this move. While improving our financial strength, this decision also simplifies CUNA Mutual's business, enhancing our ability to become more competitive in our core insurance products and provides us flexibility to prudently pursue new avenues for growth."
CUMIS became an affiliate of CUNA Mutual in 1977. It provides insurance and financial solutions to the Canadian credit union system. Its principal companies are CUMIS Life Insurance Co. and CUMIS General Insurance Co.
As of Dec. 31, CUMIS' assets were almost $1 billion. The organization is based in Burlington, Ont.
Co-operators is a Canadian-based cooperative that focuses on insurance and investment products for consumers. It is owned by a group of Canadian co-operatives and credit union centrals.
CUNA Mutual Group provides financial services to cooperatives, credit unions, their members and customers worldwide.
Ohio CUs' 2Q growth defies state trends
DUBLIN, Ohio (9/18/09)--The second quarter of 2009 was strong for Ohio's credit unions, according to the Ohio Credit Union League.
Mortgage originations at Ohio credit unions experienced "phenomenal growth" the past 12 months, increasing 50.2% despite the weak housing marketing, said the league, citing its latest Ohio Credit Union Quarterly Performance Summary.
Outstanding auto loans rose by 12% annually in June, which brought Ohio credit unions' market share to 18.4%. That is up from 10% a year earlier, said the league (eLumination Newsletter Sept. 16).
Membership growth in the state during the first quarter continued through June, reaching 2.66 million members.
Total delinquencies rose to 1.37% in June, up from 1.09% the previous year and below the national average of 1.59%. Capital levels remained high at 11.3% of assets, said the league.
Kansas CUs see strong 2Q
WICHITA, Kan. (9/18/09)--Kansas credit unions experienced growth in assets, loans and deposits in the quarter ending June 30, according to the Kansas Department of Credit Unions' Second Quarter 2009 Call Report.
Loans increased to $2.45 billion from $2.2 billion the year before. Total assets rose to $3.7 billion--a more than 12% increase, the department noted in the Wichita Eagle (Sept. 17). Total deposits climbed to $3.05 billion from $2.77 billion.
Kansas credit unions experienced a 33% increase in loan delinquencies, largely because of assessments they pay to revive the National Credit Union Share Insurance Fund. Delinquencies rose to $31.9 million from $24 million, the newspaper said.
Richard Yadon, Kansas Department of Credit Unions' financial examiner administrator, said the gain in assets and deposits is because people are moving money out of the stock market and other investments into credit unions.
White named chairman of CU Association of Rhode Island
MARLBORUGH, Mass. (9/18/09)--Stephen J. White, president/CEO of Westerly (R.I.) Community CU (WCCU), has been chosen to serve as chairman of the Credit Union Association of Rhode Island's board of directors.
A member of the board since 2002, White has served as board vice chairman as well as chairman of several association committees. He serves on the Audit Committee of North East Member Business Services.
White has 30 years' experience in the credit union industry, serving the past nine years in his current position at the $210 million asset WCCU. Prior to joining WCCU, he was chief operating officer of The People's CU in Middletown, R.I.
Illinois chapter leaders discuss environment
NAPERVILLE, Ill. (9/18/09)--Nearly 70 chapter leaders representing 17 of the Illinois Credit Union League's (ICUL) 25 chapters attended the annual Chapter Leaders Conference hosted by the league and the Illinois Quad Cities Chapter.
This year's theme was "CUs ... Naturally Better" and topics centered on promoting chapter activities and events related to environmental issues.
Speaking at the event was Chat Pregracke, founder of Living Lakes & Waters, an organization to clean up the Mississippi River.
Pregracke and his mother KeeKee told about how Pregracke founded the organization in 1998, starting with a small loan from a credit union in Quad Cities.
Today the $1.3 million relief organization travels the country with several employees and a fleet of barges and workboats. Thousands of volunteers have cooperated to help with community cleanups, Riverbottom Forest Restoration, and Adopt-a-Mississippi River Mile programs.
He was presented a $500 donation by the chapter Chairman Ray Rogers on behalf of the chapter and the league.
The group also heard from local business community leaders about "How Credit Unions Can Help Their Communities Go Green." The panel consisted of the former mayor and current staff of Rock Island, Ill.; the manager of a local grocery chain; and editor of a local consumer environmental publication. They discussed their green initiatives and told how credit unions can become involved in discussing the projects with their communities.
A silent auction during the conference raised $1,500 for the Credit Union Political Action Council, the Illinois Credit Union Foundation and an iBelong campaign in Illinois.
Pa. foundation board introduces two new grants
HARRISBURG, Pa. (9/18/09)--The Pennsylvania Credit Union Foundation board introduced two new grants into its portfolio during its
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| The Pennsylvania Credit Union Foundation board introduced two new grants at a meeting Sept. 10. From left, front row, are: Jim McCormack, Pennsylvania Credit Union Association president/CEO and ex officio; Ed Williams; Dave Ackerman, foundation vice chair; Diana Roberts, foundation chair; Jeff DeBree, treasurer; Denise Kaczmarek, secretary; and Joe Wambach, executive director. From left, back row, are: Norb Kaczmarek, ex oficio; Hugh Bray; Barb Bowker; Louise Lingenfelser; Bob Behlke, ex officio; Chris Woods; Maria Lavelle; George Nahodil; Paula Nihoff; Jay Murray, ex officio; and Margie Coan. (Photo provided by the Pennsylvania Credit Union Association) |
The Home Banking/Bill Pay grant project is expected to expand access to specialized services for small credit unions and enhance marketing opportunities. The Public After School Education project grant will provide financial literacy to students at libraries in Pennsylvania (Life is a Highway Sept. 17).
Diana Roberts, foundation chair, said credit union volunteers will provide financial tutoring to students in the library program. Ed Williams, Grants Committee chairman, said the Home Banking grants will help pay for introducing Internet banking networks to small credit unions.
TECH CU approved to serve as public funds depository
CROWN POINT, Ind. (9/18/09)--TECH CU in Crown Point, Ind., has been approved to receive public funds for deposit.
Indiana's State Board of Finance this week approved the $266.5 million-asset credit union's application to serve as a depository of public funds, which means the credit union can accept deposits from state or local governments in Indiana. Deposits will earn interest (nwitimes.com Sept. 17).
The Public Deposit Insurance Fund protects all government funds in state depositories.
CU System briefs
- HOUSTON (9/18/09)--A Houston man was sentenced to 16 1/2 years in prison for firing a shotgun in Investex CU's Spring, Texas, branch on Nov. 5, 2008 during a heist that involved help from an intern at the credit union. Dominique Sherrard Ervin, 20, was the second person to be sentenced for the crime. Earlier, Carl Edward Preston, 20, was sentenced to 12 years and 9 months in prison. Both men pleaded guilty to the crime. In the heist, the two men phoned the intern, Dorcell Johnson, 19, who was inside the credit union and allegedly gave the go-ahead for the robbery to proceed. Ervin and Preston entered the credit union armed with shotguns. Preston pointed his gun at an armed security guard and Ervin point his at Johnson, pretending to take Johnson hostage. In the vault, they forced the guard and a female employee to lie down, and Ervin fired a shot from his shotgun over their heads, striking the vault's security cameras. The robbers fled with more than $202,000. Preston and Ervin also were ordered to make restitution and must serve three years of supervision after their release from prison. Johnson, who also pleaded guilty, is scheduled to be sentenced Sept. 25 (States News Service Sept. 16) ...
- HARRISBURG, Pa. (9/18/09)--Erie (Pa.) General Electric FCU says it will help members laid off from GE Transportation, a builder of electric locomotives. The company announced that the 1,200 workers on temporary layoff are now permanently without jobs (Life is a Highway Sept. 17). It also announced another 480 job cuts, effective in two weeks. The credit union posted a message on its website reminding members that the credit union is available to help them through challenges and offered free services and financial counseling ...
- WHITEFISH, Mont. (9/18/09)--Whitefish (Mont.) CU, Montana's largest credit union, has named James A. Kenyon III as its new CEO, announced Board Chairman Leo Tracy. Kenyon succeeds Charlie R. Abell. Kenyon previously was with Missoula (Mont.) FCU for 16 years. He served as senior vice president, operations and lending for 14 of those years. His tenure began Monday. Whitefish CU has more than $1.134 billion in assets and 57,000 members ...
Market News
MADISON, Wis. (9/18/09)
- U.S. housing construction in August rose to its highest level in months due to an uptick in apartment construction offsetting a drop in single-family construction, according to the Commerce Department. Construction of new homes and apartments increased 1.5% to an annual rate of 598,000 units in August--just short of the 600,000-unit pace forecast by economists. The August numbers indicate the U.S. housing industry is in the beginning stages of recovery from the worst downturn in decades, analysts said. The August gains moved building activity to it highest level since November and pushed home construction 24.8% above the record-low in April (The New York Times Sept. 18) ...
- U.S. initial jobless claims unexpectedly dropped last week, signaling that the labor market is receding at a slower pace while the economy begins to recover from a recession, analysts said. First-time claims applications for the week ended Sept. 12 dropped 12,000 to 545,000 from a revised 557,000 claims the previous week, according to Labor Department data. However, the number of people collecting unemployment benefits rose to 6.23 million the prior week. Although the job market may be starting to stabilize as the economy grows, economists surveyed by Bloomberg forecast the unemployment rate would reach 10% this year. This indicates hiring likely will not increase for several months, and the broader economic recovery will not be spearheaded by consumers, analysts said (Bloomberg.com Sept. 17) ...
- For each loan they originated in the first quarter, mortgage bankers made an average profit of $1,088, said the Mortgage Bankers Association (MBA). This is a distinct improvement over fourth quarter results in which profits averaged $148 per loan, according to MBA's Quarterly Mortgage Performance Report. The report gauges the performance of independent mortgage bankers and subsidiaries of banks, thrifts and hedge funds. "It is clear the refinance boom in the first quarter of 2009 contributed greatly to an increase in overall production volumes, allowing production operating expenses per loan to finally drop," said Marina Walsh, MBA's associate vice president of industry analysis. "The average share of refinancings to total originations for these companies jumped to 66% in the first quarter, from 42% in the previous quarter. As a result, the average production volume for each firm was $213.9 million in the first quarter of 2009 compared to $125.6 million in the fourth quarter of 2008." For MBA Study Shows Increased Profits in the First Quarter of 2009, Spurred by Heavy Refinancings, use the link ...
News of the Competition
MADISON, Wis. (9/18/09)
- As a result of reining in bad loans, Discover Financial Services' third-quarter profit more than tripled, the company said Thursday. Write-offs for bad loans were 8.39% in the quarter, close to its previous forecast of 8.5% to 9%. The credit card lender had received $1.2 billion from the Treasury's rescue fund. For the quarter ended Aug. 31, net income increased to $577.5 million--or $1.07 per share--from $180.1 million--or 37 cents per share--in the same period last year. Discover's profit was aided by a $287 million gain from an antitrust settlement with MasterCard Inc and Visa Inc., the statement said. Also, Discover's pretax card income rose to $913 million from $245 million (Bloomberg.com Sept. 17) ...
- Citigroup Inc.--the third-largest U.S. bank--intends to exit the federal government's bank rescue program, said people familiar with the matter. Citigroup was the largest user of U.S. government debt guarantees under last year's rescue program. The bank and the Federal Deposit Insurance Corp. (FDIC) have discussed leaving the program when it expires Oct. 31. The bank doesn't intend to seek an emergency extension, one source said. Citigroup had $72.4 billion of FDIC-guaranteed debt outstanding as of June 30. A departure from the program would test the bank's ability to fund itself, analysts said (Bloomberg.com Sept. 16) ...
- New York Attorney General Andrew Cuomo issued subpoenas to five current and former directors of Bank of America (BofA) as part of his continuing investigation into BofA's takeover of Merrill Lynch. At issue is which of BofA's executives knew about large losses and bonus payments at Merrill before the two banks merged last year. Cuomo's move could indicate a more intense investigation of corporate boards, said one person briefed on the investigation. Members of BofA's audit committee--which reviews important legal matters--were the directors served with subpoenas (The New York Times Sept. 17) ...
Experts' tips save money--even on health care
WASHINGTON (9/18/09)--Sunday's H&FF Radio Show is all about saving money, with experts giving listeners valuable advice about cutting health care costs, keeping fear out of the financial decision equation, understanding who's responsible for paying a deceased relative's debts, and handling frugality.
Home & Family Finance airs Sundays at 3 p.m. EDT on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 90 million members, and is presented by CO-OP Network.
The Credit Union National Association (CUNA) and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.
Sunday's show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:
- "Is Fear Stopping You From Making Financial Decisions?" With Laura Rowley, Yahoo! Finance columnist and author of Money & Happiness: A Guide to Living the Good Life, Chicago, Ill.;
- "10 Ways to Save on Health Care," with Ethan Ewing, president, Bills.com, San Mateo, Calif.;
- "Are You Responsible for Your Deceased Relative's Debts?" with Quisaira Whitney, attorney, Federal Trade Commission, Washington, D.C.; and
- "Extreme Frugality: Can You Handle It?" with Karen McCall, founder and president, Financial Recovery Institute, San Francisco, Calif.
Home & Family Finance is a resource center for personal finance information at CUNA. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; Western Corporate FCU, also known as WesCorp, and its member credit unions; and the Defense Credit Union Council and member credit unions, serving those who serve our country worldwide.
For more information, read "Tips to Cut Health Care Costs" in Plan It: Retire Ready Toolkit.
Council paper answers, ‘What is enough capital?’
MADISON, Wis. (9/18/09)--The CUNA CFO Council has published a white paper, "Strategic Planning for Ideal Capital in the New Economy" by Dr. Harold Sollenberger, which seeks to answer the question "What is Enough Capital?"
The paper is an updated version of "A Strategic Approach to Ideal Capital: Building a Consensus," which was published in 2007. The papers consider the significant changes that have taken place in the nation's economy and financial industry, according to the council.
The new economic realities since 2007 include:
- Regulatory changes;
- Mortgage defaults, decreasing home values and a halt in home construction;
- Extreme marketing conditions, illiquidity, and a lack of confidence and trust;
- Changes in acceptable credit standards;
- Dramatic interest-rate yield-curve changes;
- Credit unions' inability to borrow, and lenders' ability to lend;
- Potential loss of value of assets previously considered safe; and
- Problems with generally accepted accounting principles and other-than-temporary impairments.
The paper also includes National Credit Union Administration data going back to 1998 and a spreadsheet template to assist chief financial officers with gathering risk-based equity assessments for their credit union.
"The events of the past several years have magnified the need for capital planning, but the fundamentals of the process are basically the same," Sollenberger said. "Amazingly, no new risks have appeared.Yet we now see that some risks that we thought were rather benign have become major players and need to be upgraded. Liquidity, once only an afterthought, is now a major concern throughout our entire credit union and banking systems."
Sollenberger is a professor of accounting and information systems at Michigan State University's Broad Graduate School of Management.
For more information, use the link.
Paper explores fixed vs. variable rate strategies
DALLAS (9/18/09)--A new white paper from TNB Card Services explores fixed versus variable rate credit cards in light of the recent passage of the Credit Card Accountability, Responsibility and Disclosure Act.
The "Fixed vs. Variable Rate Pricing Strategies in the Era of Card Reform" white paper details the effects of new regulations on credit unions and their cost of funds, which affects the interest rates they must charge to maintain a sufficient margin. It explains the cost of funds issue in the current economic situation, and helps guide credit unions in the future as they determine those costs and their interest rates.
"The issue today is how credit unions can best maintain ongoing interest yields in an environment where there are or may be significant changes in the cost of funds," said Mitch Raymond, senior vice president of product development at TNB Card Services. "While two-thirds of cards today are variable rate cards, this may not be the best approach for all credit unions.
"This white paper highlights the pros and cons of the two pricing strategies to help credit unions make the right decision," he added.
The paper also discusses how variable rates and fixed rates are affected differently by the cost of funds, and what advantages each approach offers to credit unions and their member cardholders. The free paper is available electronically on the TNB Card Services website.
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