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ALEXANDRIA, Va.-In an open session meeting on Oct. 18, the NCUA Board once again approved all motions before the board unanimously. Chairman Dennis Dollar opened the meeting by noting that it fell on International Credit Union Day this year. The board approved for public comment an Advanced Notice of Proposed Rulemaking (ANPR) to broaden federal credit unions’ investment options. “It’s time that we look at part 703 and I think this is the way to start,” Dollar commented. Board Member Yolanda Wheat, who returned after attending the September meeting via teleconference, noted that many of the items may seem to be pushing the proverbial envelope, but that she was interested in hearing what credit unions have to say. “It’s important for credit unions to know that there is not unanimity amongst staff [in the Office of Investment Services, the Office of Examination and Insurance, and the Office of General Counsel],” she pointed out. Specific areas NCUA’s Board Action Memorandum (BAM) indicated for updating include broker-dealer and safekeeper requirements, impermissible investment activities and practices, discretionary control of investments, investment credit ratings, borrowing repurchase agreements, and equity-indexed share certificates. CUNA Associate General Counsel Mary Dunn said the trade association was excited about NCUA deciding to open up this particular regulation. CUNA will be forming a special taskforce from its Federal Credit Union Subcommittee and others with expertise in investments, to sit down with NCUA officials and see how far the agency will go in the area. Dunn noted that the planned pilot programs would be “really critical” to what is eventually permitted across the board. “In fairness to the NCUA, they are limited by statute,” she explained. Dunn added that CUNA would be particularly focused on the expanded investment authorities and discretionary control. The ANPR was issued for a 90-day comment period. The NCUA Board members also upheld two appeals of community charter conversion denials by the Region III director from federal credit unions in Florida. Pan Am Horizons Federal Credit Union and Dade County Federal Credit Union both applied for community charters serving Miami-Dade County (population 2.253 million) and were denied the conversions because NCUA Special Counsel to the General Counsel Hattie Ulan determined that they did not meet the local community definition requirements. While the area was clearly defined geographically, she said they did not demonstrate sufficient interaction across the county, even though the library, school, and emergency systems are countywide operations. Ulan noted that Miami-Dade has two major metropolitan areas, Miami and Hialeah. According to the BAM, the two cities have large downtown areas with “populations tied to each individual city.” “This weighs against one local community,” she explained. NCUA Board Member Geoff Bacino echoed Dollar’s remarks in saying he tried hard “to find a way to get to `yes,’ ” but could not. Dollar noted that if all charters were approved, the system would not have any integrity. However, Wheat said, “ This should not be a deterrent to them going out and serving as many people as they can.” The board members pointed out that much of the Miami-Dade area qualified as an investment area and could be added without having to meet the local community requirements. NAFCU President and CEO Fred Becker was not pleased with the outcome of the two appeals. “They could be more flexible,” he said. Though he was unsure whether it would have helped in this case, Becker said the agency could measure community by “metropolitan statistical areas,” for example. “I’m obviously disappointed by the decision,” Pan Am Horizons CEO Allan Prindle commented after the board meeting. “I believe Miami-Dade is a community and I believe the package demonstrated that.” When asked what went wrong, Dade County CEO George Joseph, a former NCUA examiner, said, “The truth is I’m not sure…How much more interaction can you show?” He pointed out the single school board and county government. Both CEOs praised Regional Director Alonzo Swann and the NCUA Board for its handling of the matter, though they did not like the outcome. However, they also noted that the Office of General Counsel never gave them an indication that the package may not pass or ask for additional information. Joseph said he even spoke with Ulan prior to the board meeting and received no indication that additional information may be necessary to get the package approved. The Minneapolis-St. Paul area is an example of a `community’ with two major cities, NAFCU Senior Vice President and General Counsel Bill Donovan said. To provide clarity regarding federally-insured credit unions’ Allowance for Loan and Lease Losses, NCUA issued a proposed Interpretive Ruling and Policy Statement (IRPS) offering credit unions guidance on their methodologies and documentation, following generally accepted accounting principles (GAAP). An appendix with a Q&A section is included for easier understanding of this complex regulation, Office of Examination and Insurance Deputy Director Herb Yolles said. Under the Credit Union Membership Access Act, credit unions with more than $10 million in assets must follow GAAP. NCUA is catching up with its fellow federal financial regulators. “My reading of this is nothing monumental is going on here,” Wheat pointed out. The rule only emphasizes and clarifies what is already required, Examination and Insurance Program Officer Karen Kelbly said. The IRPS was issued with a 90-day comment period. NCUA also approved the addition of an investment area of nearly half a million for Hughes Federal Credit Union ($274 million in assets) of Tucson, Arizona. [email protected]

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