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<p>By SARAH SNELL COOKE CU Times Washington Reporter ALEXANDRIA, Va.-In all the talk about the repeal of the Community Action Plan, it was easy to forget that anything else was accomplished at NCUA’s December board meeting. In fact, several other items appeared on the agenda. The NCUA Board unanimously approved maintaining the normal operating level of the National Credit Union Share Insurance Fund (NCUSIF) at 1.3% for 2002. The agency is authorized to set it anywhere between 1.2% and 1.5%. The NCUSIF expected to complete 2001 at 1.30%. 2001 marks the seventh straight year in which no additional provisions insurance losses were required. As of October 31, the fund’s reserve balance was approximately $53 million, well above the seven-year historical level of $28 to $31 million. By October 31, only 19 credit unions had failed at a cost of about $4.1 million. Compare these figures to year 2000 when 29 credit unions had failed at a total cost of $15.4 million to the fund. Additionally, the number of troubled credit unions for the year, those with a CAMEL 4 or 5, was approximately the same as for 2000. These credit unions represent less than 1% of insured shares. The NCUA Board moved into the 21st century when it approved the purchase of a new video conferencing system at the board meeting. The system is not to cost more than $235,000, plus an additional $14,000 in maintenance each year, according to NCUA. NCUA Chairman Dennis Dollar noted that the upfront costs were far below the amount spent on travel each year, not to mention lost time and productivity. The agency had been considering such a move for the last four years, but now cost and quality have come in tune. NCUA also sent out a request for comment on a study performed by the National Economic Research Associates regarding the methods to value non-maturity shares. The agency plans to use the study to further develop examiner guidance for assessing interest rate risk similar to guidance offered by the other federal financial regulators. Non-maturity deposits are items with no set maturity date, such as share drafts, regular shares, and money market share accounts. The study discusses the use of non-maturity deposits in relation to the mitigation of interest rate risk. The comment period is set for 90 days. Additionally, the board approved a 1% rate on loans from the Community Development Revolving Loan Fund (CDRLF) Program, down from 2% where it was set last year. Dollar noted that it is hard to believe that charging 2% for a loan is actually above the market rate. While NCUA may expect a $15,000 reduction in income to the program, Dollar stated that this was preferred to not being able to loan out the money. He added that the issue could be revisited if the rate environment changes. In the congressional appropriation for 2002, the CDRLF was allotted $1 million as it has been historically. The majority of the appropriation, $700,000, was for the loan program, while lawmakers earmarked $300,000 for technical assistance grants. Also at the board meeting, the panel approved a final rule changing the definition of the term “compensation” to exclude reimbursement of payment of business-related travel costs of an official to be accompanied by a “guest.” Previously the guest had to be an immediate family member. Most of the 37 commenters agreed with the change, while some felt it was morally objectionable and others thought the rule should be completely eliminated. A credit unions can still set a stricter policy if it wishes. “Under the current regulation,” the Board Action Memorandum (BAM) reasoned, “FCUs may not pay or reimburse the cost of travel for an official’s grandson to accompany her to an FCU-sponsored program, or for an official whose mobility is impaired to be accompanied by an aide, even if the FCU thought it necessary and appropriate.” NCUA also issued a proposed rule providing federal credit unions more flexibility to use safe, reasonable, and efficient methods to fund employee benefit obligations. “As competition to attract and retain highly qualified employees has increased and the employee benefits marketplace has become more sophisticated, FCUs are increasingly providing more diverse and less traditional forms of employee benefits,” the BAM noted. For example, the proposal clarifies NCUA’s position that an FCU may purchase an otherwise impermissible investment to fund an employee benefit obligation provided there is a direct connection between the investment and the obligation it funds and the benefit is reasonable given the FCU’s size and financial condition. Credit unions have 60 days to comment on the proposal. The board also considered NCUA’s Annual Performance plan. The plan continues NCUA’s commitment to its mission of safety and soundness through enhanced examination policies and procedures while streamlining internal business processes, increasing efficiencies, reducing the number of full-time staff and controlling budget growth. Five goals for the agency are listed in the plan, including: shifting to a risk-based examination system; increased emphasis on IT system controls, internally and externally; encouraging credit union growth and innovation for all size institutions; balancing credit unions need to remain competitive while ensuring due diligence; and migration of government agencies toward the structural efficiencies in the president’s Management Agenda, requiring NCUA to: Maintain a balanced approach to safety and soundness while shifting to a risk-based focus; Increase organizational efficiency; Develop a means for making necessary changes while remaining within the limits of its annual budgets. [email protected]</p>

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