ALEXANDRIA, Va.-NCUA tackled several issues during its September board meeting, but none raised as much debate as a typically uncontroversial community charter conversion. The board also discussed foreign branching, federal credit union employee benefits, and made updates to its advertising reg. Additionally, NCUA Chairman Dennis Dollar announced that the agency would be holding its second annual Budget Briefing and Public Forum on the morning of November 7. Among the many federal credit union community charter conversions, CME Federal Credit Union caught the wrath of Board Member Deborah Matz, who adamantly opposed the conversion. The $140 million in assets credit union proposed a field of membership (FOM) serving all of Franklin County, Ohio, with the state capital of Columbus serving as the area's `hub' for interaction purposes under NCUA rules. While Dollar and Board Member JoAnn Johnson gave glowing reviews of the community package, Matz shredded it as not ambitious enough. She pointed to CME's business plan, which included a goal of adding 4,000 new members by 2005 out of the 1,068,000 potential members being added. She also noted that the credit union had no plans, in her mind, to serve the underserved area included within the proposed FOM, even though CME officials acknowledged there is one. Matz lambasted the marketing plan as not spending nearly enough money and being unnecessarily complicated, even though, as Dollar emphasized, it was a 74% increase over the current year. She made the comparison of another recent conversion where Mid-Hudson Valley Federal Credit Union added 800,000 potential members to its FOM and increased advertising by $250,000, while CME was adding more members with a total of $259,000 in its marketing budget. Dollar later pointed out the incongruity between the price of advertising in New York versus the cost in Ohio. He also said Mid-Hudson Valley was operating under the impression that the Community Action Plan was going to take effect, while CME began their paperwork after it was repealed. "We cannot apply a one size fits all approach to these packages," he added. Matz also questioned the credit union's commitment to serving Franklin County, when its first new branch was outside the defined FOM. Johnson argued that 43% of residents in the adjacent county actually work in Franklin County, and therefore are potential members. "I try to remember that when I review these packages, I remind myself that not all credit unions are alike, not all marketing plans are alike, and not all membership needs are alike," she commented. CME's community charter conversion was ultimately approved 2-1, over Matz' objection. A second big item for the day was the long-awaited proposed rule on foreign branching. After issuing an Advance Notice of Proposed Rulemaking in September of 2000, NCUA received only 19 comments, which Dollar attributed to the specificity of the subject matter, though those credit unions that are interested are very vocal. The agency also conferred with the banking regulators on the issue. Still, the chairman noted that many issues of international banking can be a day and night difference for credit unions, but some, like collection and currency issues, would be quite similar. He also said the idea is not "virgin territory" for credit unions considering the military credit unions operating on installations overseas for decades. There are four basic steps in the proposal to obtaining permission to operate on foreign soil. First, the credit union must receive approval from the host nation and recognition of NCUA's authority over the branch. NCUA Senior Staff Attorney Mike McKenna explained that this provision would probably be the most difficult and time consuming if the rule should be approved as is. The credit union looking to expand overseas must also provide the agency with a business plan. Federally insured state chartered credit unions must receive the green light from the regulator of the state in which they are chartered. Finally, all federally insured credit unions must get NCUA approval. When asked if NCUA was overstepping its bounds in requiring federally insured state chartered credit unions to receive NCUA's stamp of approval, NASCUS Vice President of State Regulatory Affairs Mary Martha Fortney said that NASCUS CEO Doug Duerr would reserve comment for when the appropriate committee considers the issue. For now, she commented, "Management expected, however, that the NCUA would simply establish conditions under which the NCUSIF was obligated to insure foreign members, accounts and would set reserve obligations associated with operating a foreign branch. We really did not expect to see the NCUA deciding when, where, and how a state chartered credit union could open a branch." She also said that state regulators were consulted in drafting the proposal. CUNA Vice President and Associate General Counsel Mary Dunn said that no one questions NCUA's authority over the obvious potential safety and soundness issues, but the organization really wants to ensure the regulation is not overly burdensome or overreaching. Under the proposal, NCUA Director of Examination and Insurance Dave Marquis explained, the appropriate regional director can revoke a credit union's authority to operate an overseas branch for safety and soundness concerns. The proposed rule was issued with a 90-day comment period. The board also considered a proposed rule regarding federal credit union employee benefits. The main changes the proposal would make to the current rule would be to allow credit unions to invest for employee benefit plans in items not normally permissible when done in the interest of the credit union. The proposal piggybacks an earlier, "substantially similar" one from December 2001. At first glance, NAFCU Director of Regulatory Affairs Gwen Baker said the organization generally supported the rule, but that more emphasis needs to be made on recent Internal Revenue Service proposals that would terminate credit unions' and other nonprofits' usage of option plans to retain top-notch employees. She said the group would be seeking comments from its members shortly. NCUA's comment deadline is 60 days after publication in the Federal Register. A proposed rule concerning the accuracy of advertising and notice of insured status that clarifies when credit unions must use their official names or if they can use their trade name and usage of the NCUA logo in advertising was also issued for a 60-day comment period by the board. "I don't think we can overstate enough the importance of the NCUA logo," Matz commented. She has raised the issue of the importance of federal insurance since the application of Patelco Credit Union to convert to a private insurer. The proposal also codifies the regulation with Internet advertising. Except for the community charter, all the agenda items passed unanimously. -email@example.com
CU trades excited to see overseas branching proposal out of NCUA; community conversion raises Matz' eyebrows
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