51st Annual DCUC Conference Showcase - August 2014 (2) [Read … · • 2014 Regulatory Review...
Transcript of 51st Annual DCUC Conference Showcase - August 2014 (2) [Read … · • 2014 Regulatory Review...
National Association of Federal Credit Unions l www.nafcu.org
Presented By: B. Dan BergerPresident & Chief Executive Officer
National Association of Federal Credit Unions
51st Annual Defense Credit Union Council Conference & Showcase
August 2014
National Association of Federal Credit Unions l www.nafcu.org
LEGISLATIVE AFFAIRS
National Association of Federal Credit Unions l www.nafcu.org
Legislative Issues
• Regulatory Relief: NAFCU's Five-Point Plan
• Credit Union Tax Exemption
• Capital Reform
• Interchange Fees
• Annual Privacy Disclosure Notices
• Member Business Lending
• Defense Credit Union Issues
• Privately Insured CUs
• Housing Finance Reform
• Supplemental Capital
• ATM Disclosures
• Data Security
• Cybersecurity
• Flood Insurance
• CFPB Improvements
• IOLTA
National Association of Federal Credit Unions l www.nafcu.org
Housing Finance Reform-“Fixing” Fannie Mae and Freddie Mac
• The Housing Finance Reform and Taxpayer Protection Act, S. 1217 (TheCorker-Warner bill), is the basis for a bipartisan agreement announced bySenate Banking Chairman Tim Johnson and Ranking Member Crapo onMarch 11, 2014. In May this bill was voted out of Committee by a 13-9 vote.
• Divided Committee vote makes any floor action unlikely this year; long-termoutlook may depend on results of 2014 elections
• In November 2013, NAFCU testified before the Banking Committee onhousing finance reform issues from a small lender perspective.
• In July 2013, NAFCU testified before the HFSC on the committee’s housingfinance reform bill - The PATH Act.
• Preserving a government guarantee, access to the secondary market andfair pricing based on loan quality are key principles for NAFCU.
National Association of Federal Credit Unions l www.nafcu.org
Data Security - Making the Merchants do Their Part
• Key component of NAFCU’s five-point plan
• NAFCU was the first financial services trade association to weigh in on this issue on Capitol Hill in the wake of the Target breach
• NAFCU continues to weigh in with key members of Congress and respond to merchant attacks
National Association of Federal Credit Unions l www.nafcu.org
Data Security
• Items NAFCU would like to see addressed in any comprehensive data security bill include:
⎯ Payment of Breach Costs by Breached Entities
⎯ National Standards for Safekeeping Information
⎯ Data Security Policy Disclosure
⎯ Disclosure of Breached Entity
⎯ Enforcement of Prohibition on Data Retention
⎯ Notification of the Account Servicer
⎯ Burden of Proof in Data Breach Cases
National Association of Federal Credit Unions l www.nafcu.org
Credit Union Tax Exemption
• February 26, 2014 - House Ways and Means Chairman Dave Camp (R-MI)released a much anticipated tax reform discussion draft that would preservethe credit union federal tax exemption and federal credit unions’ treatmentas it relates to UBIT.
• New Chairman Ron Wyden (D-OR) of Senate Finance has indicated thattax extenders will be the focus, likely pushing any tax reform discussion to2015 or beyond.
• Chairman Wyden has also expressed his support for the credit union taxexemption.
• NAFCU released a new updated 2014 tax study in February.
National Association of Federal Credit Unions l www.nafcu.org
Key Action
• Regulatory Relief
– Credit Union Interest on Lawyer’s Trust Accounts bill passes House; bill recently introduced in the Senate
– Bill to eliminate duplicative privacy disclosures passed House, under consideration in Senate; pending CFPB proposal on regulatory side
– Bill to provide relief on QM “points and fees” passes House
• MBL
– Introduction of H.R. 4226, the “Credit Union Residential Loan Parity Act”
– Introduction of H.R. 5061 to exclude extensions of credit made to veterans from the definition of a member business loan.
• Regulators hearing held on reducing regulatory burden
• Meeting with Lawmakers on NCUA’s Risk Based Capital proposal; NCUA likely to testify before Senate Banking on September 16, 2014.
National Association of Federal Credit Unions l www.nafcu.org
REGULATORY AFFAIRS/ REGULATORY COMPLIANCE
National Association of Federal Credit Unions l www.nafcu.org
March 3, 2014
• Credit Unions Authorized to Engage in Limited Derivative Transactions
March 15, 2014
• New Annual Reporting Requirement for Dividends Paid to Certain Non-Resident Aliens (if more than $10 paid in 2013)
March 31, 2014
• Liquidity and Contingency Funding Plans
May 30, 2014
• Annual Stress Testing for Federally-Insured Credit Unions with $10 Billion or More in Assets and Annual Submission of Capital Plans to NCUA
Compliance Deadlines
National Association of Federal Credit Unions l www.nafcu.org
June 30, 2014
• CUSO Reporting
July 8, 2014
• Ability-to-Repay Rule in Situations Involving Successors-in-Interest
July 28, 2014
• Voluntary Liquidation
December 15, 2014
• For credit unions over $10 million in assets, ability to elect alternative accounting test for measuring goodwill; amortizes goodwill on a straight-line basis over the useful life (not to exceed 10 years).
August 1, 2015
• Implementation of the new TILA/RESPA, easier-to-use integrateddisclosures at application and at closing.
Compliance Deadlines
National Association of Federal Credit Unions l www.nafcu.org
NCUA
• Risk Based Capital
− Proposed rule to revise calculation of net worth within currentstatutory capital and prompt corrective action (PCA) requirements.
− Would revise the risk-weights for many of NCUA’s current assetclassifications and require higher minimum levels of capital forfederally-insured natural person credit unions with concentrationsof assets in real estate loans, member business loans (MBLs) orhigher levels of delinquent loans.
− Would set forth a process where the NCUA Board could require anindividual federally-insured natural person credit union to holdhigher levels of risk-based capital based on supervisory concernsraised by agency examiners.
− Final Rule expected by year end.
Active Regulatory Issues
National Association of Federal Credit Unions l www.nafcu.org
NCUA
• 2014 Regulatory Review
− NCUA conducts an annual review of one-third of its existing regulations. NAFCU is closely reviewing the list of regulations being reviewed.
− Of interesting note in this year’s list, § 748 Security Program, Report of Suspected Crimes, Suspicious Transactions, Catastrophic Acts and Bank Secrecy Act Compliance.
• Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) ‒ This is the second time NCUA chose to participate. EGRPRA
requires agencies to publish notice of all its Rules and Regulations by category and invite comment on which rules are outdated, unnecessary, or unduly burdensome.
‒ The last time NCUA did this review was in 2003 through 2006, when they did that they did a series of comment periods for categories of regulations.
Active Regulatory Issues
National Association of Federal Credit Unions l www.nafcu.org
Active Regulatory Issues
NCUA
• Associational Common Bonds
− Proposed amendments to the associational common bond provisions ofits Chartering and Field of Membership manual.
− Amendment seeks to:
− Establish a threshold requirement that an association not be formed primarily for the purpose of expanding credit union membership.
− Expand the “totality of the circumstances” test by adding an eighth factor regarding corporate separateness.
− Grant automatic qualification to certain categories of groups.
National Association of Federal Credit Unions l www.nafcu.org
Active Regulatory Issues
NCUA
• Fixed Assets
− Proposal would relieve federal credit unions (FCUs) from the current requirement to obtain a waiver from NCUA to exceed the five percent aggregate limit on investments in fixed.
− FCUs wishing to exceed the five percent aggregate limit could do so, without prior agency approval, but must implement a Fixed Assets Management with program: (1) a written board policy; (2) board oversight; and (3) ongoing internal controls.
− Proposal would also make several changes to the rule’s occupancy requirements.
National Association of Federal Credit Unions l www.nafcu.org
NCUA• Civil Money Penalties for Late Call Reports and Profile Submissions
- 62 credit unions subject to civil money penalties for the late filing of their first-quarter Call Reports.
- The late filers will pay a total of $57,750 in penalties. Individual penalties range from $150 to $20,000.
- The median fine was $243.
Additional Regulatory Issues
National Association of Federal Credit Unions l www.nafcu.org
NCUA• Bylaws
− Last updated in 2007.
− NCUA is expected to issue an updated version in 2014.
− NAFCU has conducted a thorough review of the current Bylaws with our members and submitted specific recommendations to NCUA.
Provide greater flexibility for credit unions in their elections process.
Clarify how FCUs may limit services to members who are disruptive or use the FCU’s services in furtherance of illegal purposes.
Amend how NCUA interprets membership requirements in the trust context.
Reflect that credit unions are allowed approve loans through technology services.
Additional Regulatory Issues
National Association of Federal Credit Unions l www.nafcu.org
Additional Regulatory Issues
NCUA• Member Business Lending
− NAFCU has strongly advocated to the NCUA Board to improve its MBL requirements, including creating an exception to the MBL cap for credit unions with a history of making MBLs, and easing the process for obtaining waivers.
• NAFCU’s “Dirty Dozen” List of Regulations to Eliminate or Amend
• Letters to NCUA’s Board
• NCUA Board Member Fryzel’s Editorial in Support of MBL Changes
• NAFCU’s Response – Berger Letter to the Editor
National Association of Federal Credit Unions l www.nafcu.org
NCUA• Freedom of Information Act (FOIA) Requests:
− October 31, 2013 - request related to the settlement of lawsuits and its application to the NCUSIF and the Temporary Corporate Credit Union Stabilization Insurance Fund.
− January 24, 2014 - request related to the NCUSIF expenses.
− February 28, 2014 - request related to the Central Liquidity Fund and all Board-approved NCUA operating budgets expenses.
Additional Regulatory Issues
National Association of Federal Credit Unions l www.nafcu.org
CFPB• Home Mortgage Disclosure Act (HMDA)
− Proposal would make several substantive changes to Regulation C,including:
• Change the coverage test• Cover more transactions• Require reporting additional data points• Mandate quarterly reporting for some institutions• Incorporate more official commentary for clarification
Under the proposed coverage test, credit unions that originated 25covered loans, excluding open-endlines of credit, or less in the priorcalendar year would be exempt from reporting requirements.
Would make HELOC reporting mandatory.
Making Dodd-Frank required changes but also proposing to addmore data points beyond those mandated by statute.
• Changes would not take effective until a final rule. Expected in 2015.
Active Regulatory Issues
National Association of Federal Credit Unions l www.nafcu.org
Active Regulatory Issues
CFPB• Privacy
- Proposed amendments to Regulation P that would allow credit unions, under certain conditions, to post their annual privacy notices online rather than delivering them individually
- Credit unions that choose to rely on this new method of delivering privacy notices would be required to use the model disclosure form developed by federal regulatory agencies in 2009
- Credit unions that share information with non-affiliated third parties would still be required to deliver their notices individually.
National Association of Federal Credit Unions l www.nafcu.org
CFPB• Enforcement Actions
− Federal Financial Consumer Laws
• Credit Scores on Credit Card Statements
− Certain credit card companies are disclosing credit scores onmonthly consumer statements (Ex. Discover). At a CFPBConsumer Advisory Board (CAB) meeting Director Cordrayannounced that while he encourages the practice, it is strictlyvoluntary.
• eClosings pilot program
- Aimed at helping consumers streamline the residential real estateclosing process by eliminating the need for many of the forms tobe completed by hand and allowing the process to be moreelectronic, thus giving consumers more time to review andunderstand the paperwork.
Additional Regulatory Issues
National Association of Federal Credit Unions l www.nafcu.org
Additional Regulatory Issues
CFPB• Payday Lending
− Released white paper in 2013 and held field hearing and credit union roundtable in 2014.
− Rulemaking expected in 2014.
• Student Lending
− The CFPB has repeatedly linked student loan debt to smaller homeownership rates.
− The CFPB is starting to reach out to industry about possible rulemaking in this space in the coming months.
National Association of Federal Credit Unions l www.nafcu.org
CFPB • CFPB Consumer Complaint Database Narratives
- The Consumer Financial Protection Bureau (CFPB) has issued a proposed policy statement regarding disclosure complaint narrative data.
- Under the proposal, the CFPB would expand their current complaint database to include unstructured consumer complaint narrative data (narratives).
- As with the database currently, the disclosures will only be made regarding issuers under the CFPB’s authority, i.e., those with more than $10 billion in assets.
- Only those narratives from consumers who opt-in and give their consent to use their narratives will be used.
- All narratives will be scrubbed of information that would make the consumer identifiable.
- Companies such as credit unions would be able to submit a narrative response for inclusion in the consumer complaint database.
National Association of Federal Credit Unions l www.nafcu.org
CFPB Fun Facts
1,624 employees + No accountability + Unlimited Financial Resources + Focus on Enforcement = Potential problems for credit unions
Witch hunt to justify their existence.
And everything done under a veil of secrecy.
Annual Budget is approximately $570,000,000.
National Association of Federal Credit Unions l www.nafcu.org
National Association of Federal Credit Unions l www.nafcu.org
NAFCU RESEARCH
National Association of Federal Credit Unions l www.nafcu.org
Number of Institutions
Source: NCUA, FDIC
6,000
7,000
8,000
9,000
10,000
11,000FICUs Banks
National Association of Federal Credit Unions l www.nafcu.org
Mergers^
^ Assisted and unassisted* Annualized through MarchSource: NCUA Data Query 2 (Chartering Events)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0
50
100
150
200
250
300
350
400
Mergers (left axis)Mergers, as % of total FICUs (right axis)Merged Assets, as % of total assets (right axis)
National Association of Federal Credit Unions l www.nafcu.org
Source: NCUA 5300 Call Report
FICUs
FICU Mortgage Lending
0%
10%
20%
30%
40%
50%
60%
$0$20$40$60$80
$100$120$140$160
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Q1
Bill
ions
First Mortgage Originations ($)Total Originations ($)Percent of First Mortgages Sold in Secondary Market (%)
National Association of Federal Credit Unions l www.nafcu.org
National Association of Federal Credit Unions l www.nafcu.org
Failed Financial Institutions
* Annualized through MarchSource: NCUA Share Insurance Reports and Statements, FDIC Failed Bank List
As Percent of Total Institutions
0.22% 0.36% 0.37%0.22% 0.31% 0.25%
0.37%0.29%
1.69%
1.96%
1.20%
0.69%
0.34%0.47%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2008 2009 2010 2011 2012 2013 2014*
NCUA FDIC
National Association of Federal Credit Unions l www.nafcu.org
Problem Institutions*
* Those with a CAMEL rating of 4 or 5Source: NCUA Share Insurance Reports and Statements, FDIC Quarterly Banking Profile
240 211271
351 365409
369307 306
50 76
252
702
884813
651
467411
0100200300400500600700800900
1,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1
NCUA FDIC
National Association of Federal Credit Unions l www.nafcu.org
Credit Union Growth by Asset Size
National Association of Federal Credit Unions l www.nafcu.org
$261
$51
$19
$142
$147
$69
$36
$64
$33
$130
$54
$83
$648
$153
$42
$297
$374
$195
$77
$166
$82
$299
$138
$206
0 200 400 600 800
AK
AL
AR
AZ
CA
CO
CT
DC
DE
FL
GA
GU
$56
$27
$42
$37
$56
$23
$34
$20
$71
$97
$45
$66
$65
$43
$127
$103
$159
$111
$122
$56
$88
$46
$159
$205
$101
$158
$140
$92
0 200 400 600 800
HI
IA
ID
IL
IN
KS
KY
LA
MA
MD
ME
MI
MN
MO
$19
$29
$117
$21
$29
$95
$34
$70
$121
$52
$29
$64
$92
$29
$55
$76
$470
$80
$54
$300
$64
$176
$159
$165
$79
$181
$245
$79
0 200 400 600 800
MS
MT
NC
ND
NE
NH
NJ
NM
NV
NY
OH
OK
OR
PA
$28
$92
$62
$22
$43
$65
$66
$156
$10
$37
$119
$41
$18
$30
$53
$237
$155
$64
$114
$159
$219
$594
$19
$139
$345
$149
$34
$80
0 200 400 600 800
PR
RI
SC
SD
TN
TX
UT
VA
VI
VT
WA
WI
WV
WY
Credit Unions by State
Source: NCUA 5300 data
Average Assets 2003 2013
National Association of Federal Credit Unions l www.nafcu.org
National Association of Federal Credit Unions l www.nafcu.org
Source: NCUA Financial Performance Report
FICU Delinquency and Net Charge-Off Ratios
FICU Performance Trends
1.74%1.60%
1.16%1.01%
0.81%
1.13%
0.91%
0.73%
0.57%0.50%
0.0%
0.5%
1.0%
1.5%
2.0%
2010 2011 2012 2013 2014 Q1
Delinquency Ratio Net Charge-Off Ratio
National Association of Federal Credit Unions l www.nafcu.org
Delinquency Ratios as of March 31, 2014
Source: NCUA Call Report & FDIC Quarterly Banking Profile. Credit union delinquencies are reported as 2 months or more past due. FDIC delinquencies are reported 90 days or more past due.
FICU Performance Trends
0.90% 0.69% 0.91% 0.86% 0.53% 0.81%
4.16%
2.70%
6.85%
1.21%
0.25%
2.46%
0%
1%
2%
3%
4%
5%
6%
7%
8%
All Real EstateLoans
Home EquityLoans
FirstMortgages
Credit Cards Auto Loans Total Loans &Leases
Del
inqu
ent L
oans
/ To
tal L
oans
All FICUs FDIC-Insured
National Association of Federal Credit Unions l www.nafcu.org
Credit Union Member Business Loan Growth vs. Bank Small Business Loan Growth*
Member Business Loans
16.2%
23.0%
15.4%
8.2%4.7% 5.2%
7.5% 8.6%
-10%
-5%
0%
5%
10%
15%
20%
25%
Credit Unions Banks
Credit union member business loans grew 92.5 percent since 2007, while bank lending to small businesses shrank 13.8 percent.
* As defined by FDIC “Consolidated Report of Condition and Income” (generally those under $1 million)
Note: The final figure is annualized growth from June 2013 through March 2014. All prior years show June-to-June growth.
Source: NCUA 5300 call report, FDIC “Statistics on Banking”
National Association of Federal Credit Unions l www.nafcu.org
CONSUMER AND MOBILE BANKING
National Association of Federal Credit Unions l www.nafcu.org
Federal Reserve March 2014
Usage of Mobile Banking and Mobile by Mobile Phone Types
51%
33%
24%
17%
6%
3%
Used mobile banking in the past 12 months: smartphone
Used mobile banking in the past 12 months
Used mobile payments in the past 12 months: smartphone
Used mobile payments in the past 12 months
Used mobile banking in the past 12 months: feature phones
Used mobile payments in the past 12 months: feature phones
Consumer and Mobile Financial Services
National Association of Federal Credit Unions l www.nafcu.org
U.S. Smartphone and Tablet Penetration
comScore MobiLens and TabLens, Age 13+
0E+00
2E-01
4E-01
5E-01
7E-01
Jan2011
Apr2011
July2011
Oct2011
Jan2012
Apr2012
July2012
Oct2012
Apr2013
July2013
Oct2013
Oct2013
Dec2013
65%
34%
70%
50%
30%
10%
Smartphone
Tablet
National Association of Federal Credit Unions l www.nafcu.org
33
48
64
80
96
2012 e2013 e2014 e2015 e2016
Source: Aite Group
Mobile Banking Users in the U.S.
2012 to e2016(in millions)
National Association of Federal Credit Unions l www.nafcu.org
U.S. Mobile Banking Users
18% 19%
29%
33%
38%
42%
46%
51%
0%
15%
30%
45%
60%
2009 2010 2011 2012* 2013* 2014* 2015* 2016*
Sources: MCUL, ProfitStars@ Statista 2014
2009-2016 Estimate
National Association of Federal Credit Unions l www.nafcu.org
March 2014
Percentage of FICUs Offering. . .
73%Home banking via internet website
Automatic Teller Machines (ATM)
Online loan payments
e‐Statements
Mobile banking
Remote deposit capture
Online bill payment
Mobile payments
Kiosks
72%
68%
63%
59%
39%
14%
7%
6%
Source: NCUA 5300 Call Report
Electronic Financial Services
National Association of Federal Credit Unions l www.nafcu.org
March 2014
Number of FICUs Not Offering. . .
1,741Home banking via internet website
Automatic Teller Machines (ATM)
Online loan payments
e‐Statements
Mobile banking
Remote deposit capture
Online bill payment
Mobile payments
Kiosks
1,823
2,102
2,401
2,646
3,987
5,614
6,018
6,117
Source: NCUA 5300 Call Report
Electronic Financial Services
National Association of Federal Credit Unions l www.nafcu.org
Federal Reserve March 2014
34%
28%
25%
19%
15%
Compare prices when shopping
Track your finances
Receive and manage discount offers and coupons
Organize, track and store gift cards, memberships, loyalty and reward points
Receive offers and promotions based on your location
Electronic Financial Services
Would You Use Your Mobile Phone for Any of the Following Purposes?
National Association of Federal Credit Unions l www.nafcu.org
“The bottom line: credit unions are failing to engage millennials online. This is one of the main reasons why millennials are the least likely demographic to join credit unions, despite sharing common philosophical values.”
The Financial Brand
Engaging Millennials
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Products and Services
* Short-term, small amountSource: NCUA 5300 Call Report
11.3%
10.6%
15.5%
17.5%
24.0%
28.4%
30.5%
65.6%
70.8%
0% 10% 20% 30% 40% 50% 60% 70% 80%
STS* Loans (FCU Only)Micro Business Loans
Micro Consumer LoansApproved Mortgage Seller
Participation LoansIndirect Lending
Member Business LoansRisk Based LoansReal Estate Loans
2013 Q1 2014 Q1
Loan ProductsPercent of FICUs offering…
National Association of Federal Credit Unions l www.nafcu.org
Products and Services
Source: NCUA 5300 Call Report
16.1%22.9%
34.6%45.5%46.0%46.1%
51.0%55.0%55.3%
66.8%75.0%
0% 10% 20% 30% 40% 50% 60% 70% 80%
International RemittancesMortgage Processing
Share Secured Credit CardsOverdraft Lines of Credit
Overdraft Protection/Courtesy PayNo Surcharge ATMs
Money OrdersNo Cost Bill Payer
Check CashingLow-Cost Wire TransfersATM/Debit Card Program
2013 Q1 2014 Q1
Transaction ServicesPercent of FICUs offering…
National Association of Federal Credit Unions l www.nafcu.org
Products and Services
Source: NCUA 5300 Call Report
5.7%
6.9%
11.3%
18.4%
19.5%
20.1%
26.9%
28.3%
31.4%
31.7%
0% 5% 10% 15% 20% 25% 30% 35%
In-School BranchesDebt Cancellation/Suspension
First Time Homebuyer ProgramFinancial Literacy Workshops
Bilingual ServicesCredit Builder
Student ScholarshipsInsurance/Investment Sales
Financial CounselingFinancial Education
2013 Q1 2014 Q1
Consumer Products & ServicesPercent of FICUs offering…
National Association of Federal Credit Unions l www.nafcu.org
The Future
Technology, Technology, Technology…
Loan Growth
Share of Wallet Growth
Membership Growth
National Association of Federal Credit Unions l www.nafcu.org
Presented By: B. Dan BergerPresident & Chief Executive Officer
National Association of Federal Credit Unions
51st Annual Defense Credit Union Council Conference & Showcase
August 2014