e-Weekly
September 9, 2009
Joint Task Force Puts Forward Unified Corporate Credit Union Plan
A unified credit union view of the future of the corporate credit union system is the product of a joint task force appointed by the chairs of the Credit Union National Association (CUNA) and the National Association of Federal Credit Unions (NAFCU).
The task force's detailed recommendations cover the major areas of the corporate credit union system: services, capital, structure, corporate governance, federal regulatory oversight, and insurance of shares and deposits in corporates.
The task force's recommendations are offered as a comprehensive plan. The task force recognized that the suggestions being made represent a departure from the current corporate system. The proposed system implied by the task force's suggestions represents a future corporate system that the task force believes that natural person credit unions would support and use.
Some of the key findings of the joint CUNA-NAFCU task force include:
- Services of corporates should be limited to a defined set, including payments and settlements, liquidity and short-term investments. Further, longer-term, on-balance sheet investments should not be offered by corporates;
- Contributed capital should be required for membership and service use by credit unions; corporates will have to present a sufficiently compelling business case covering both the value of services provided and strong risk control;
- With limits on risk-taking, competition among corporates will be driven by efficiency, placing a premium on economies of scale and thus creating substantial pressures for consolidation;
- Insurance coverage for natural-person credit union (NPCU) shares and deposits in corporate credit unions must be limited to the maximum coverage for personal deposits and shares in the NPCUs;
- National Credit Union Administration (NCUA) oversight of corporates must be improved, with adequate qualified staff with special knowledge of the complex operations of corporate credit unions;
- Corporate board members must have sufficient expertise to govern their corporate consistent with the powers of the corporate credit union.
The task force delivered its views in a report to the NCUA board, and effort intended to maximize credit unions' impact on the NCUA's rulemaking process concerning corporate credit unions.
"The circumstances of the current corporate credit union system have had an enormous impact on the credit union industry, and we want to make sure going forward that credit unions have as much input as possible on how to best enhance the system for the future," said NAFCU Chair Brad Beal.
"We undertook this as a collaborative effort because we wanted to develop recommendations that were comprehensive and strategic. We strived to address the challenges of balancing risk and the needs of natural person and corporate credit unions in our recommendations," said CUNA Chair Kris Mecham.
The task force's recommendations, CUNA and NAFCU said in a release, are a departure from the current corporate system and represent a future corporate system that the task force believes that natural person credit unions would support and use
Appeals Court Rules UIGEA Not ‘Unconstitutionally Vague’
The Unlawful Internet Gambling Enforcement Act (UIGEA) has had its vocal detractors and staunch supporters since even before it became law in 2006 and regulators have since been struggling with the task of implementation. In a recent opinion, the U.S. Court of Appeals in Philadelphia ruled that UIGEA is neither unconstitutionally vague nor does it violate gamblers' right to privacy.
The decision involves a suit filed in 2007 by the Interactive Media Entertainment & Gaming Association Inc., of New Jersey, against the U.S. Attorney General, the Federal Trade Commission (FTC) and the Federal Reserve System (Fed). The FTC and Fed are the federal regulatory bodies tasked with crafting rules to put the law into effect.
In March 2008, U.S. District Judge Mary L. Cooper dismissed the New Jersey association's challenge of UIGEA's constitutionality and the September 1 court of appeals decision upholds that ruling.
The Internet Gambling law forbids the placing, receiving or in any other way knowingly transmitting a bet or wager using the Internet. Financial institutions are prohibited by statute from processing transactions used to place illegal bets online.
A three-judge appeals court panel, rendering the 10-page decision, declared that UIGEA "clearly provides a person of ordinary intelligence with adequate notice of the conduct that it prohibits."
Credit Union National Association (CUNA) General Counsel Eric Richard said, "This decision, however, in no way addresses the costly and vague unfunded mandate this law place on credit unions and other financial depository institutions." Richard reiterated CUNA's support for enforcement of reasonable laws to prohibit unlawful Internet gambling. "However, UIGEA inflicts unreasonable policing requirements on financial institutions, which have proven difficult for financial institutions to meet," he said.
House Financial Services Committee Chairman Barney Frank (D-Mass.) has introduced two bills on this issue. The first, the Reasonable Prudence in Regulation Act (H.R. 2266), would push back implementation of UIGEA by a year. It's currently due to take effect on December 1, this year. CUNA supports this bill. Frank's second bill, the Internet Gambling Regulation Consumer Protection and Enforcement Act (H.R. 2267), would allow Internet gambling companies to accept bets from persons in the United States if they are licensed by the U.S. Treasury Department and maintain effective protections against underage and compulsive gambling and money laundering and fraud. CUNA has not taken a position on this legislation.
Neither bill has yet been scheduled for committee consideration. Please click on this link for additional information. CUNA Issues Summary: UIGEA
What Credit Unions Can Do To Protect Employees During a Pandemic
What should credit unions be doing to prepare for a pandemic flu outbreak? The pandemic planning website defines “pandemic” as “a virulent human flu that causes a global outbreak of serious illness. Because there is little nature immunity, the disease can easily spread from person to person.” Remember, no one knows yet if this outbreak will be mild or severe, or how effective the vaccine will be or when it will be available. But with a potential of 50% of the population getting the H1N1 Flu, precautions need to be taken and plans made. Prepare for the worst, but hope for the best.
As with most major initiatives, communications are the starting point. During a pandemic flu outbreak, the credit union will need to communicate with employees quickly and efficiently. Be sure to set up phone trees or websites for communicating illness.
Education is also critical. The credit union should take very opportunity to remind employees and members to be cognizant of alerts and follow the precautions set out by the Center for Disease Control (CDC). These precautions, shown below, while very basic, are simple and proven ways to limit infection:
- Wash hands with frequency and for a minimum of 20 seconds. According to health care professionals, this one step is the most important one to protect yourself.
- Utilize antibacterial, alcohol-based hand cleaner with frequency, especially when handling money. The credit union should provide large dispensers of hand cleaner in the lobby, and all employees are encouraged to have alcohol-based hand cleaner at their workstations.
- When counting out money, employees might consider wearing gloves.
- Use cough or sneezing etiquette recommended by the CDC -- cough or sneeze into the crook of your arm, or a tissue, but never your hands.
- Clean workstation areas more frequently, and have these antibacterial cleaning products available to all employees.
- Practice “social distancing.” Eliminate unnecessary personal meetings and replace them with phone conferences or emails. Keep a distance of 3 feet between individuals.
- If the pandemic worsens, consider closing the lobby and open only the drive-up or ATMs or expand hours so fewer people are in the lobby at one time.
- Eliminate or limit hand shaking.
The credit union should stock large amounts of supplies that are mentioned above. It should also have a supply of informational posters to affix around its facility to keep employees and members informed. Change these from time to time so people see the messages differently. A great source for posters is: www.publichealth.va.gov/InfectionDontPassItOnFor more information, visit this very informative website: www.flu.govNext week’s e-Weekly article will focus on policy considerations.
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