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WASHINGTON-It comes as no surprise that despite their battles, credit unions and banks are concerned about many of the same issues. As members of America’s Community Bankers made their way to Washington, D.C. last week during their Government Affairs Conference, issues like regulatory relief and data security were at the forefront of their minds. Regulatory burden is a factor in industry consolidation, according to ACB Chairman Weller Meyer. The community banker pointed out that the top 10 banks represent 53% of the market share and regulatory burden contributes to mergers. “We need to get action in the Senate,” Meyer stated. Office of Thrift Supervision Director John Reich, a former community banker himself, said in his remarks to the group, “Regulatory burden is suffocating the banking industry.” He added that the smaller 43% of banks only earned 1.5% of the industry profits so “the record profits are not equally shared.” However, the specifics of what the community bankers want to come out of reg relief are quite different from the credit union provisions. ACB wants the currency transaction report threshold bumped up from the $10,000 set in the 1970s to $30,000; separate internal control and audit requirements for smaller public companies; and increased commercial lending powers. However, one key point credit unions and banks are both pushing for is eliminating the annual privacy notice requirement for institutions that have not changed their policies. One item that is crucial for ACB’s members to keep out of regulatory relief legislation is the transfer of voting rights at mutuals to the minority shareholders. “We think we have that issue under control,” ACB First Vice Chairman Mark Macomber commented. “It is a critically important time.for us to influence those probabilities,” said ACB Executive Vice President of Government Affairs Bob Davis. He pointed out that H.R. 3505 passed the House 415-2 and there was very little dissention from anyone at the recent Senate Banking Committee hearing. ACB President and CEO Diane Casey-Landry said she was concerned that with the retirement of House Financial Services Chairman Mike Oxley (R-Ohio) after this year, the bill may not get another chance. Concerning data security, specifically, ACB wants the retailers that do not properly protect credit and debit card data to reimburse the banks for the cost of canceling and reissuing potentially compromised cards. The cost is approximately $25 per card, Casey-Landry said. Meyer, president and CEO of Acacia Federal Savings Bank in Falls Church, Va., added that there is also a reputational risk to financial institutions, particularly when the entity that `lost’ the information is not disclosed. “Ultimately that comes back on us because we’re the connection to the customer,” he said. Davis added, “If they are subject to liability, they will take greater care of this data.” ACB would also like to see a national standard for data security set, according to Meyer. He pointed out that right now 16 states have different rules. The group is backing the Financial Data Protection Act (H.R. 3997), which was slated for markup in the House Financial Services Committee at press time. Credit unions are also keeping a close eye on the bill’s progress. ACB plans to ward off a number of amendments to the bill, but the trade association will be supporting Oxley’s manager’s amendment, which includes very limited credit freezes for victims of identity theft that have documented it with a police report. Another ACB priority, shared by the FDIC and NCUA, is the implementation of the Deposit Insurance Reform Act. Acting FDIC Chairman Marty Gruenberg told the bankers, “Deposit Insurance Reform will be a No. 1 priority of the FDIC this year.” FDIC and NCUA both issued interim final rules last week increasing the coverage amounts for certain retirement accounts to $250,000 effective April 1. The Bank and Savings Association Insurance Funds will be merged into the Deposit Insurance Fund around the same time. FDIC plans to issue proposals for premium assessments and risk-based pricing this summer, in time to have final rules in place before the Nov. 5 deadline. ACB is also pushing for legislation to reform the government-sponsored enterprise entities, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks System. “It’s not perfect,” Casey-Landry admitted, “but it’s one we can live with and can get to conference.” The group was waiting to see if new Federal Reserve Board Chairman Ben Bernanke would differ with Alan Greenspan on portfolio caps, but he continues to push for them. ACB would prefer the regulator to have that authority. “This is a logjam that can be broken,” Casey-Landry said. And, of course, both banks and credit unions are interested in the credit union tax-exemption, though from different sides of the fence. “Large, sophisticated credit unions who do the exact same things your bank is doing and my bank is doing should be taxed,” Macomber said. He stated that credit unions “are supposed to be serving people of modest means,” but recent surveys show otherwise. If they are not serving their fundamental purpose, he argued, the tax-exemption should be shut off. Suggested questions were placed on each of the tables at the conference, but after Treasury Secretary John Snow concluded his remarks no one was brave enough to ask about his support of the tax-exemption reiterated during CUNA’s GAC just a couple weeks before except Casey-Landry. Snow stated that there was a purpose for both credit unions and community banks in the United States and each charter type has its own advantages. “This controversy has gone on for some time. The president has spoken on that,” he said. Macomber also encouraged members to lobby against the Credit Union Regulatory Improvements Act (H.R. 2317) as it would increase credit unions’ commercial lending authority, giving them greater powers than thrifts, and increase the taxes on everyone in the room. Home Federal Bank ($700 million in assets) President Daniel Stevens said that in Idaho, “We have not seen the encroachment that some of the banks on the East Coast have.” However, he accused Westmark Credit Union ($347 million in assets) of Idaho Falls of hopscotching across the state to expand its membership. Idaho is a big state for credit unions and financial services generally. Congressman Butch Otter (R-Idaho) has been particularly credit union friendly, though Stevens said the banks have a good working relationship with him as well. Additionally, Senate Banking Committee Member Mike Crapo (R-Idaho) has been charged with introducing the Senate’s reg relief legislation, which includes more than a dozen provisions specifically targeting credit unions. -

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