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Weekly Recap — Road could be rocky for Obama's NCUA board nominee

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

News

* U.S.credit unions opened 29more branches than were closed during the second quarter of 2016, according to SNLdata. A total of 110 branches were opened during the period, while 81 closed. Asof June 30, there were 21,185 branches in the U.S., up 74 from a year earlier.

* SeanJelen, former CEO of Scranton, Pa.-based ValorFederal Credit Union, pleaded guilty to bank fraud and attempted bank fraud before U.S. MagistrateJudge Karoline Mehalchick in Scranton, according to a July 14 press release fromthe U.S. Attorney's Office. Jelen admitted to executing the scheme to defraud thecredit union of about $718,000, some of which went to pay for his personal expenses.He also admitted to rigging elections held for the Valor board and attempting toobtain an additional amount of about $1.1 million through a forged severance contractthat would be triggered by his termination.

* Briarwood,N.Y.-based Melrose Credit Unionhas let go of its CEO,Alan Kaufman, the credit union confirmed to the Credit Union Journal. The publication said that Melrose Credit Uniondid not provide further details regarding Kaufman's firing or about any plans toreplace him.

* Thecalendar and political gamesmanship could conspire to keep the most recent nomineeto the National Credit Union Administration board from being confirmed anytime soon.President Barack Obama on July 13 nominatedJohn Herrera to the NCUA board, but he must be confirmed by the Senate. If confirmed,his term would end April 10, 2021. Despite the nomination, Credit Union NationalAssociation Chief Advocacy Officer Ryan Donovan said in an interview that the NCUAboard may remain a two-man operationfor a while. He said the Senate will only be in session about two or three dozendays for the remainder of the year. Meanwhile, the Obama administration and thecurrent Congress are winding down. "We'll have a new Congress and a new administrationin the coming months," Donovan said. "I'm not sure there is very muchappetite for any nominations at this point."

Regulation/legislation

* TheNational Association of State Credit Union Supervisors is pushing for a NCUA board. In a July14 press release, the group said NASCUS President and CEO Lucy Ito sent a letterto House Financial Services Committee Chairman Jeb Hensarling and Ranking MemberMaxine Waters expressing interest in the CHOICE bill's provisions calling for afive-member NCUA board and proposing that one of the additional seats would be reservedfor a state credit union regulator. "In our view, expanding the board fromthree members to five would enhance the board's deliberative process, expand itscollective expertise and improve the efficient administration of NCUA business,"Ito wrote. She added that the cost of adding the new board members would not bematerial.

* MichiganGov. Rick Snyder recently signed intolaw the first comprehensive update to the Michigan Credit Union Actin 13 years, with one of the objectives being to level the playing field betweenstate and federally chartered credit unions. The changes — made as a result of acollaborative effort between the Michigan Credit Union League, the Michigan Departmentof Insurance and Financial Services and the state legislature — were in part aimedto remedy several situations in which federally chartered credit unions were ableto take advantage of opportunities that their state brethren could not. For example,charitable donation accounts were permitted under the federal charter but not statecharters, Ken Ross, COO for the Michigan Credit Union League, said in an interview.

* Ata hearing before theHouse Financial Services Committee last week, CUNA President and CEO Jim Nusslesaid, "The time and financial costs of regulatory burden impedes the abilityof credit unions to serve their members, and is really the leading driver of creditunion consolidation, which has accelerated since 2010 and is now at a record pace."Nussle said CUNA estimates that regulatory burden cost America's credit unions andtheir members $7.2 billion in 2014 alone, up from just $4.4 billion in 2010. "Thisis money that's not being put to use to benefit credit union members, but they aredefinitely paying for it," he added.

* A FederalReserve official says regulators will rely heavily on common sense as they work to ensure community banks and creditunions comply with a major shift in loan-loss accounting, and a study by Fed economistsconcludes that examiners have a history of providing small lenders necessary latitudein their efforts to meet accounting standards. "We realize that small bankshave several differences from the larger banks," Julie Stackhouse, senior vicepresident of banking supervision and regulation at the Federal Reserve Bank of St.Louis, said in an interview. At issue now is the FASB's plan, and approved in June, to transitionthe banking and credit union industries away from their current loan-loss model— one based on incurred losses — and toward an expected-loss model, under whichlenders will forecast losses for the entire life of a loan.