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Weekly recap — Small institutions expect few changes following rate increase

The weekly recap features news on regulatory actions, mergers and other issues facing the credit union space. Send tips, ideas and chatter to ken.mccarthy@spglobal.com.

News

The National Credit Union Administration issued a cease-and-desist order to Philadelphia-based SM Federal Credit Union. The credit union is to cease granting new loans, calculate and track loan delinquency, actively and effectively collect past due loans and reconcile and maintain accurate financial statements and member share and loan records, among other requirements. The credit union has $56,005 in assets.

The U.S. Treasury Department's Financial Crimes Enforcement Network fined Bethex Federal Credit Union $500,000 for violating anti-money laundering regulations. Violations included Bethex's failure to timely detect and report suspicious activity to FinCEN and not filing any suspicious activity reports from 2008 to 2011. Bethex was liquidated in late 2015; at the time, it had 5,824 members and $12.2 million in assets.

Oregon stood out as a top grower of assets and shares year-to-date, according to the NCUA. Oregon grew median loans by 8.1%, second only to Washington's median growth of 9.7%. It also had the fastest growth in shares and deposits, at 8.5%. Median loans have grown 3.9% nationally year-to-date, while median deposits and shares grew 4.5%.

Total delinquencies for U.S. credit unions increased to $13.02 billion in the third quarter, driven by weakness in used vehicle loans. Delinquencies increased from $12.40 billion the quarter prior and $12.26 billion the year prior. Used vehicle loans were the largest category in the third quarter, accounting for 28.41% of the total, followed by first mortgage real estate, which was 27.8%.

The first interest rate increase of 2016 occurred after the December Federal Open Market Committee meeting. The increase of 25 basis points means that the target federal funds rate range is now between 50 basis points and 75 basis points. Small lenders say the immediate impact to income statements and consumer will likely be minimal but the change is welcome.

The National Credit Union Administration board approved revisions to Texas' member business lending rule on Dec. 15 that will make it similar to the NCUA's own MBL rule. The state has privately insured credit unions, so it must have a rule to cover those institutions. NCUA staff said Texas wants to have its own rule because it is a proponent of states' rights and finds it easier to enforce its own rules. An NCUA spokesman said there is another state's application in the pipeline but he was not allowed to identify it.

Regulation/Legislation

The video recording of the Nov. 17 NCUA meeting is now available and will be for one year. At that meeting, the board unanimously approved the 2017 and 2018 operating budgets to fund essential activities and strategic priorities, including the recommended changes to the Exam Flexibility Initiative and a final rule making technical changes to the agency's Community Development Revolving Loan Fund regulation to improve transparency, organization and ease of use by credit unions, according to the regulator.

The National Association of Federal Credit Unions provided an overview to Regulation E requirements for foreign remittance transfers in a recent compliance blog post, following regulators' recent publication of revised interagency questions and answers. NAFCU said it receives "a lot" of questions around these transactions and highlighted that U.S. military installations in foreign countries count as being located in the U.S. for the purposes of the rule, how a credit union can determine if a sender is making a remittance transfer primarily for personal, family, or household purposes, and discussed error resolution, among other things.

Chatter

The nonprofit Financial Services Information Sharing and Analysis Center will hold two credit union-specific webinars to explain its cybersecurity services and platforms. One of the webinars is at 1 p.m. ET on Dec. 20 and one will be at 1 p.m. ET on Jan. 12, 2017. NAFCU Director of Regulatory Affairs Alexander Monterrubio will deliver remarks at the start of this webinar. Registration is open for the Dec. 20 webinar.

The NCUA will host a webinar called "Growing Loans by Partnering with the USDA" at 2 p.m. on Jan. 11, 2017. The webinar will go over the Community Facilities Loan and Grant program, the Single Family Housing Guaranteed Loan program and the Business and Industry Guaranteed Loan program. It will include a discussion of eligibility requirements for USDA programs and benefits to credit unions. Registration is currently open; participants can submit questions in advance at WebinarQuestions@ncua.gov with the subject line "Partnering with the USDA."

NAFCU will change its name, effective Jan. 1, to the National Association of Federally-Insured Credit Unions, according to a Dec. 19 press release. The name change reflects that all of the association's federally insured members have full voting rights and the ability to serve on the NAFCU board of directors. NAFCU's logo and acronym will stay the same. The name change follows members' vote in September to amend the association's articles of incorporation to give federally insured, state-chartered members full membership.