Cyber Security Awareness Month Reminds Consumers, Credit Unions of Threats

NCUA Offering a New Video, a Consumer Twitter Chat and Online Resources

ALEXANDRIA, Va. (Oct. 1, 2015) – Cybercrime and terrorism remain serious concerns, and credit unions and their members can find valuable information from the National Credit Union Administration to help them protect themselves from cyberattacks.

October 2015 is the twelfth annual National Cyber Security Awareness Month, and NCUA Board Chairman Debbie Matz urged credit unions and their members to be watchful online.

“Criminals, hackers and terrorists work around-the-clock to pilfer sensitive data, steal money and disrupt networks,” Matz said. “Internet commerce and communications dominate the lives of most people every day and this demands constant vigilance on the part of consumers, financial institutions and government agencies. NCUA works hard every day of the year to provide detailed information to help the credit unions we regulate and the consumers we protect to prevent, detect and respond to these threats.”

As part of National Cyber Security Awareness Month, NCUA is scheduled to host a consumers’ Twitter chat with the Federal Trade Commission on Oct. 22. NCUA is also planning to release a new video for credit unions that discusses online security and the Federal Financial Institutions Examinations Council’s new cybersecurity assessment tool.

For credit unions, NCUA offers information, including regulations and guidance, on the Cyber Security Resources page on the agency’s website. For consumers, NCUA’s MyCreditUnion.gov and its financial literacy microsite, Pocket Cents, offer helpful tips to protect their finances.

Throughout the month, NCUA will regularly post tips and best practices on Facebook and Twitter that credit unions and members can use to make electronic communications more secure.

Cost estimates of cybercrime vary, and they are always large. Earlier this year, the CEO of Lloyd’s, the British-based international insurance company, estimated cyberattacks cost businesses $400 billion annually. The FBI’s Internet Crime Complaint Center has received more than three million complaints since its inception in 2000 with an estimated dollar loss of more than $3 billion. The center receives an average of 22,000 complaints per month.

National Cyber Security Awareness Month is an initiative sponsored by Department of Homeland Security in cooperation with the National Cyber Security Alliance and the Multi-State Information Sharing and Analysis Center. The month raises awareness and educates Americans about cybersecurity as well as increasing the resiliency of the nation’s cyberinfrastructure. For more information, visit www.staysafeonline.org.

NCUA Ready to Assist South Carolina Credit Unions Affected by Flooding

Agency Monitoring Situation; Grants to Low-Income Credit Unions Available

ALEXANDRIA, Va. (Oct. 5, 2015) – The National Credit Union Administration is closely monitoring conditions in South Carolina counties hit by flooding and is prepared to assist credit unions in those areas.

Regional agency staff are contacting credit unions in areas hit by the flooding to determine if they are open. The agency will be ready to assist credit unions to maintain or restore normal operations, if necessary. NCUA’s Office of Small Credit Union Initiatives can provide Urgent Needs grants up to $7,500 to low-income credit unions for unexpected costs related to restoring operations disrupted by the floods.

President Obama and South Carolina Gov. Nikki Haley have both issued disaster declarations for the affected areas.

NCUA maintains a Hurricane and Disaster Information page on the agency’s website to provide links to resources. Credit union members with questions may contact the agency’s Consumer Assistance Center at 800-755-1030 Monday through Friday between 8 a.m. and 5 p.m. Eastern.

Members’ accounts in federally insured credit unions are protected by the National Credit Union Share Insurance Fund. Administered by NCUA, the Share Insurance Fund insures individual accounts up to $250,000, and a member’s interest in all joint accounts combined is insured up to $250,000. The Share Insurance Fund separately protects IRA and KEOGH retirement accounts up to $250,000. The Share Insurance Fund has the backing of the full faith and credit of the United States.

Federal Regulators Offering Flood Insurance Webinar

ALEXANDRIA, Va. (Oct. 9, 2015) – The National Credit Union Administration will join with other federal regulators for a webinar covering recent updates to the flood insurance regulations.

The one-hour webinar is scheduled for Thursday, Oct. 22, beginning at 12:30 p.m. Eastern. Online registration is open here. Registrants will receive a reply email with instructions for logging onto the webinar. Participants are encouraged to submit questions in advance through the email link on the registration page.

NCUA staff will join representatives from the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency to discuss regulatory updates and cover topics including:

  • Escrow of flood insurance premiums and fees,
  • Force-placed flood insurance, and
  • The detached structures exemption.

This webinar is part of an ongoing series of events sponsored by the Board of Governors of the Federal Reserve System that are focused specifically on consumer compliance issues. The webinar will be archived online here.

September NCUA Board Video Now Available

ALEXANDRIA, Va. (Oct. 9, 2015) – The video recording of the September 2015 open meeting of the National Credit Union Administration Board is now available on the agency’s website.
Archived videos of past Board meetings may be viewed here, and each video remains on the site for one year.

The September open Board meeting’s agenda consisted of five items:

  • A final rule and policy statement raising the asset ceiling of a “small entity” to $100 million, providing special consideration for regulatory relief in future rulemakings to 76 percent of all federally insured credit unions;
  • A request from Charlotte Metro Federal Credit Union, of Charlotte, North Carolina, to expand its community charter;
  • A final rule giving corporate credit unions greater flexibility to provide bridge loans to credit unions awaiting funds from the Central Liquidity Facility, thereby expediting access to needed liquidity;
  • A final rule adjusting civil monetary penalties for inflation, as required by federal law; and
  • A briefing by the Chief Financial Officer on the performance of the Temporary Corporate Credit Union Stabilization Fund, which remained in a positive net position.

NCUA posts these videos as part of the agency’s ongoing efforts to provide transparency and to allow those unable to attend Board meetings the opportunity to become better informed. An interval between the meeting and posting is necessary for the videos to comply with Section 508 of the Rehabilitation Act for the hearing and visually impaired.

The Board Actions page of NCUA’s website has more information, including Board agendas, which are posted at least one week in advance of each open meeting, copies of Board Action Bulletins, which summarize the meetings, copies of Board memorandums and other documents.

NCUA and FTC Team Up for Consumer #NCUAChat on Cyber Security

Join the Conversation to Learn How to Protect Against Online Threats

ALEXANDRIA, Va. (Oct. 14, 2015) – More than one million cyberattacks targeting consumers occur every year, so the National Credit Union Administration and the Federal Trade Commission are teaming up on a live Twitter chat to provide information to help people protect themselves.

The Twitter chat is scheduled for Thursday, Oct. 22, 2015, beginning at 11 a.m. Eastern. Consumers are encouraged to follow the conversation and contribute using the #NCUAChat hashtag on Twitter. The moderators will answer consumer questions throughout the chat, and participants can submit questions beforehand to [email protected].

During the chat, the Federal Trade Commission will share resources and prevention tips from their consumer site www.OnGuardOnline.gov. NCUA will share resources on how consumers can protect their finances from MyCreditUnion.gov.

The Twitter chat is part of NCUA’s activities during National Cyber Security Awareness Month. Consumers can also find and share additional tips and best practices regularly posted on the agency’s Facebook and Twitter sites to help them make electronic communications more secure.

Targeted Risk-Based Capital Rule Will Better Protect Credit Unions

Board Action Bulletin

Nearly 99 Percent of Covered Credit Unions Remain Well-Capitalized; High-Risk Outliers Have Time to Plan

ALEXANDRIA, Va. (Oct. 15, 2015) – The National Credit Union Administration Board convened its ninth open meeting of 2015 at the agency’s headquarters here today and approved three items:

  • A final rule to modernize the risk-based capital requirements for complex credit unions and better protect the credit union system, shield the National Credit Union Share Insurance Fund from losses and fulfill NCUA’s statutory obligations.
  • A proposed rule to provide a measure of regulatory relief by giving federal credit unions more choices when investing in bank notes.
  • Revisions to the agency’s delegations of authority that will streamline the process for granting or amending community charters that involve a population of more than one million.

The Chief Financial Officer also briefed the Board on the performance of the Share Insurance Fund, which had a net income of $40.9 million through the first three quarters of 2015.

Risk-Based Capital Rule Fulfills Agency Obligations under Federal Law
The NCUA Board, by a 2–1 vote, modernized its risk-based capital rule (Part 702) to better protect the credit union system and the Share Insurance Fund from potential losses if complex credit unions with high-risk portfolios fail.

NCUA Board Chairman Debbie Matz said the new rule both fulfills the agency’s obligations under the Federal Credit Union Act and targets high-risk outlier credit unions that pose significant potential risk of losses to the Share Insurance Fund. The targeted rule would apply only to federally insured credit unions with more than $100 million in assets.  Therefore, 76 percent of credit unions will be exempt from the final rule.

Among the 24 percent of credit unions covered by the rule, only 1 percent will experience any change in their capital category, based on current balance sheets. Nearly 99 percent of the 1,489 covered credit unions will continue to be categorized as “well capitalized.”

The rule will become effective on Jan. 1, 2019, to coincide with the full phase-in of risk-based capital rules at federal banking agencies.

“The Federal Credit Union Act requires NCUA to update its risk-based capital standards to be comparable with the federal banking agencies,” Matz said. “NCUA’s existing risk-based net worth rule is outdated, and analyses by both the Government Accountability Office and the agency’s own Inspector General have found the existing rule failed to adequately mitigate credit union losses as a result of the financial crisis.

If the rule were implemented today, only 16 credit unions would fall into a lower capital category. Based on the current risks on their balance sheets, those 16 credit unions would have a combined capital shortfall of $67 million.

In the three years before the rule’s implementation, those 16 credit unions will have three strategic choices to make: reduce the risk on their balance sheets, raise capital to cover those risks or use a combination of both strategies.

“Even though the capital outliers represent a small number of credit unions, they still pose a large threat to the system,” Matz said. “In fact, the 16 outliers hold combined assets of nearly $10 billion—or almost as much as the entire Share Insurance Fund. If any one of those outliers were to fail, all credit unions would have to pay for the losses.”

The new rule, Matz said, achieves significant regulatory improvements, including:

  • Ensuring complex credit unions remain well-capitalized as they grow and expand into activities with greater risk.
  • Identifying high-risk credit union outliers, now and in the future.
  • Incorporating a modern approach for calculating the risk-based capital ratio and making the ratio comparable to other financial institutions.
  • Improving the required capital levels and risk-weight approach for many types of assets.
  • Incorporating an explicit standard that complex credit unions must effectively manage capital and create written plans.

Under the final rule, approximately 97 percent of the risk weights for credit unions are equivalent to or lower than the risk weights for banks. Additionally, 99 percent of complex credit union assets will have a risk weighting of 100 percent or less, and more than half will have a risk weighting of 50 percent or less.

The new rule does not include a supplemental capital provision, but Matz said the Board will propose a new supplemental capital rule for risk-based capital purposes as soon as possible. Matz said NCUA remains committed to counting supplemental capital as part of risk-based capital.

Matz said thousands of public comments were carefully reviewed and contributed to positive changes in the proposed rule.

“Public input was invaluable to us,” Matz said. “We received more than 2,000 comment letters each on the revised proposed rule and original proposed rule, and we welcomed hundreds of participants at each of my listening sessions last year. We’ve carefully read every letter and made changes which are directly attributable to those thoughtful comments.”

The final rule is available online here. Additional materials, including an impact analysis and a risk-based capital estimator tool for credit unions to determine the impact of the rule on their operations, are available online here.

Proposed Investment Rule Changes Would Give Credit Unions More Choices
NCUA’s Board by a 2–1 vote approved a proposed rule (Section 703.14) that would eliminate an unintentionally burdensome investment requirement and provide federal credit unions with greater choices when investing in bank notes.

“This proposed regulatory relief is another example of NCUA responding to thoughtful suggestions from credit union stakeholders,” Matz said. “We’re cutting unnecessary red tape and giving credit unions more options and flexibility in their investment decisions.”

Current NCUA regulations allow federal credit unions to invest in bank notes with original weighted average maturities of fewer than five years. However, the use of the term “original” has created confusion for some credit unions as to which securities are eligible for purchase. The proposed rule would eliminate the term “original” and allow credit unions to purchase bank notes that had maturities greater than five years but have remaining maturities of fewer than five years.

Comments on the proposed rule, available online here, must be received within 30 days of publication in the Federal Register.

Revisions to Delegations of Authority Will Streamline Chartering Process
Actions on community charter requests that would result in a population of more than one million people being served by a credit union will move more quickly under changes to the agency’s delegations of authority approved by the NCUA Board by a unanimous vote.

Matz announced at the September Board meeting she would propose a policy change to streamline the process for approving community charters. She said the change could trim two months from the process for applications for communities with more than one million residents.

“We want to be sure these credit unions have the ability and commitment to serve their entire communities, particularly low-income residents and underserved areas,” Matz said. “It’s clear the Office of Consumer Protection can make these determinations, and staff will be monitoring credit unions to ensure they meet the needs of their communities. There is no longer the need for the NCUA Board to be involved in the approval process.”

Under the approved changes, the Director of the Office of Consumer Protection will have the authority, with appropriate checks and balances, to approve all community charter actions. NCUA Board approval previously had been required for an action involving a population of one million people or larger. Once a community charter conversion or expansion occurs, the office will continue to follow up with a credit union to monitor its progress and ensure continued support for the entire community.

The changes became effective immediately with the Board’s vote. The Board continues to reserve the right to hear appeals of any charter denials.

Positive Share Insurance Fund Trends Continue in Third Quarter
The National Credit Union Share Insurance Fund maintained positive trends in income and operating expenses during third quarter of 2015, primarily reflecting the continued improvement in the performance of federally insured credit unions.

“The continued strong performance of the Share Insurance Fund reinforces the strength of the credit union system overall,” Matz said. “Staff who manage the fund deserve a great deal of credit for their efforts. A strengthening economy and credit union system have helped reduce losses. The numbers we want to see going up are continuing to rise, and the numbers we want to see going down are continuing to fall.”

For the third quarter of 2015, the Share Insurance Fund had a net income of $24.7 million, and it ended the quarter with an equity ratio of 1.29 percent. The equity ratio is calculated on an insured share base of $936.3 billion and includes the recently billed capitalization deposit adjustment.

Third-quarter investment and other income was $56.8 million. Operating expenses were $49 million. The provision for insurance losses was reduced by $16.9 million.

Assets of troubled credit unions, those rated CAMEL code 4 or 5, were 0.7 percent of federally insured credit union assets for the third quarter.

For the third quarter of 2015, the Chief Financial Officer reported:

  • The number of CAMEL code 4 and 5 credit unions declined 19.1 percent from the third quarter of 2014 to 233.
  • Assets of CAMEL code 4 and 5 credit unions were $8.5 billion, a 39.3 percent drop from the third quarter of 2014.
  • The number of CAMEL code 3 credit unions fell 10.6 percent from the third quarter of 2014 to 1,297.
  • Assets of CAMEL 3 credit unions were $93.7 billion, a 10.5 percent reduction from the third quarter of 2014.

Seven federally insured credit unions failed during the third quarter, for a total of 11 for the year. Total year-to-date losses associated with credit union failures are $9.9 million.

The third-quarter figures are preliminary and unaudited.

NCUA tweets all open Board meetings live. Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. NCUA also live streams, archives and posts videos of open Board meetings online.

NCUA Places Helping Other People Excel Federal Credit Union into Conservatorship

Member Deposits Insured up to $250,000; Member Services Uninterrupted

ALEXANDRIA, VA. (October 16, 2015) – The National Credit Union Administration today placed Helping Other People Excel Federal Credit Union of Jackson, New Jersey, into conservatorship.

Members can continue to conduct normal financial transactions, deposit and access funds, and use shares through Pinnacle Federal Credit Union of Edison, New Jersey. Pinnacle will operate Helping Other People Excel during the conservatorship under a management agreement with NCUA. Members can contact Pinnacle by telephone at 732-225-1505 or in person at Pinnacle’s office at 135 Raritan Center Parkway, Edison. Pinnacle is open Monday through Thursday from 8 a.m. to 5 p.m., Friday from 8 a.m. to 6 p.m. and Saturday from 8 a.m. to 12:30 p.m.

Member deposits at Helping Other People Excel Federal Credit Union remain federally insured by the National Credit Union Share Insurance Fund. Administered by NCUA, the Share Insurance Fund insures individual accounts at Helping Other People Excel Federal Credit Union up to $250,000, and a member’s interest in all joint accounts combined is insured up to $250,000. The Share Insurance Fund also separately protects IRA and KEOGH retirement accounts up to $250,000. The Share Insurance Fund has the backing of the full faith and credit of the United States.

While normal member services continue, NCUA will work to resolve issues affecting the credit union’s safety and soundness. 

Helping Other People Excel Federal Credit Union is a federally insured credit union with 96 members and assets of $290,927, according to the credit union’s most recent Call Report. Chartered in 1978, Helping Other People Excel Federal Credit Union serves a community field of membership comprised of persons who live, work, worship, or attend school in, and businesses and other legal entities in Lakewood, New Jersey.

Members with questions about the conservatorship may review the Frequently Asked Questions document attached to this release and available online here.

NCUA Hosting Complaint Process and Fair Lending Oversight Webinar

ALEXANDRIA, Va. (Oct. 19, 2015) – The National Credit Union Administration will host a webinar, “Consumer Complaint Handling and Fair Lending Oversight,” on Thursday, Oct. 29, 2015, beginning at 3 p.m. Eastern.

Online registration is now available here. Participants will also use this link to log into the webinar. Registrants should allow pop-ups from this website. There is no charge.

During this 90-minute webinar, Gail Laster, Director of NCUA’s Office of Consumer Protection, and staff from the Division of Consumer Affairs and the Division of Consumer Compliance Policy and Outreach will discuss:
 
• Improvements to NCUA’s Consumer Assistance Center complaint handling process;
• Effective credit union fair lending oversight practices; and
• Standards for finding practices to be unfair, deceptive, or abusive.

Participants may submit questions in advance at [email protected]. The subject line of the email should read “OCP Webinar.” Participants with technical questions about accessing the webinar may email [email protected]. This webinar will be closed-captioned and then archived online approximately three weeks following the live event.

The Office of Consumer Protection’s Division of Consumer Affairs is responsible for consumer complaints, overseeing the Consumer Assistance Center, financial literacy, and the consumer website, MyCreditUnion.gov. The Division of Consumer Compliance Policy and Outreach is responsible for consumer compliance policy and rulemaking, fair lending examinations, interagency coordination on consumer compliance matters, and outreach.

Related consumer compliance regulatory resources are available here. For more information, please visit NCUA’s Office of Consumer Protection webpage or call 703-518-1140.

NCUA Economic Update Series Returns with New Look, Outlook

Video Reviews Potential for Rise in Interest Rates and Implications for Credit Unions

ALEXANDRIA, Va. (Oct. 19, 2015) – Despite some loss of momentum in the third quarter, forecasters expect the U.S. economy to grow moderately over the next 18 months and for the unemployment rate to continue to decline, according to a new Economic Update video released today by the National Credit Union Administration. If forecasts are accurate, analysts project that the Federal Reserve will raise short-term interest rates later this year or in 2016.

The latest video in the agency’s Economic Update YouTube series is available online here.

For many credit unions, interest rates remains a wildcard and a potential challenge to credit union managers says NCUA Chief Economist Ralph Monaco. And, he notes there is a lot of uncertainty in the interest rate outlook.

“It is important for credit union managers and boards to understand what might happen to net income and balance sheets under a variety of interest rate scenarios,” said Monaco. “Those scenarios might include sharp increases across the maturity spectrum, a rise in short-term rates relative to long-term rates, and no significant changes to either short- or long-term rates.” 

The video also reviews recent developments in the housing market and employment sector as well as their potential impact on credit unions.

NCUA’s economic update video series is an ideal information resource for credit union board members, loan officers and management and is available on NCUA’s YouTube channel.

Barclays Agrees to Pay $325 Million to Settle RMBS Lawsuits

Settlement Resolves Cases in New York and Kansas Federal Courts

ALEXANDRIA, Va. (Oct. 19, 2015) – The National Credit Union Administration today announced an agreement with Barclay’s Capital for $325 million to resolve claims arising from losses related to purchases of faulty residential mortgage-backed securities by corporate credit unions.

NCUA uses the net proceeds to reduce Temporary Corporate Credit Union Stabilization Fund assessments charged to federally insured credit unions to pay for the losses caused by the failure of five corporate credit unions.

“In order to help minimize losses and future costs to the credit union system, NCUA is committed to pursuing recoveries against financial firms we maintain contributed to the corporate crisis,” NCUA Board Chairman Debbie Matz said. “The agency has a statutory obligation to secure recoveries for credit unions and ensure that consumers remain protected, and we take that responsibility very seriously.”

NCUA filed suit against Barclay’s, the U.S. subsidiary of the British financial services firm, in 2012. Once the settlement is completed, NCUA will dismiss pending suits against the firm in federal district courts in New York and Kansas. Barclay’s does not admit fault in the settlement.

NCUA continues to pursue litigation in federal courts in New York, Kansas and California against financial firms, including Goldman Sachs, UBS, Credit Suisse and Morgan Stanley, based on the sale of faulty securities that caused the collapse of five corporate credit unions.

The agency has other litigation pending against securities firms alleging violations of state and federal anti-trust law by manipulation of interest rates through the London Interbank Offer Rate (LIBOR) system. NCUA also has pending suits against financial firms alleging their failure to perform their duties as trustees of residential mortgage-backed securities trusts.

NCUA was the first federal regulatory agency for depository institutions to recover losses from investments in these securities on behalf of failed financial institutions.