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Board Action Bulletin October 16, 2008

Board Action Bulletin

The NCUA Board signed a proclamation honoring International Credit Union Day. 
Share insurance rule amended
Chairman Michael Fryzel announced that by notation vote October 15, 2008, the NCUA Board amended the share insurance rule to reflect the increase in standard maximum coverage from $100,000 to $250,000, in compliance with the Emergency Economic Stabilization Act of 2008. Also, the rule was amended to improve member insurance protection on “custodial loan accounts,” renamed “mortgage serving accounts,” identical to a recent FDIC deposit insurance amendment.
NCUSIF third quarter report
The NCUA Chief Financial Officer reported to the NCUA Board that through the first nine months of 2008 the National Credit Union Share Insurance Fund’s (NCUSIF) gross income was $220.2 million, operating expense was $61.6 million, insurance loss expense was $137.2 million, and net income was $21.5 million.
Thirteen federally insured credit unions have failed in 2008. Twelve were involuntary liquidations, of which four were purchase and assumptions, and one was an assisted merger. The number of problem code 4 and 5 credit unions has risen from 211 at year-end 2007 to 246 at September 30. These institutions represent 2.08 percent of total insured shares. Sixty-four percent of these problem code credit unions have less than $10 million in shares.
NCUSIF insurance loss expense totaled $137.2 million through September 30, 2008. The Provision for CU Losses (Reserves) account totaled $128.6 million on September 30, down from the August month-end level of $138.6 million.
The NCUSIF equity ratio is 1.28 percent, based on insured shares of $601.6 billion at June 30, 2008. The NCUSIF is expected to end the year with a 1.28 percent equity ratio based on estimated 6.85 percent annual insured share growth.
By statute, NCUSIF is not permitted to consider the temporary increase in the level of insured shares to $250,000 (thru December 31, 2009), when calculating the 1 percent capitalization deposit adjustment or setting premium charges for credit unions.
The NCUA Chief Financial Officer will report on the condition of the NCUSIF at both the November and December Board meetings.
Revisions proposed to shared branch signs
The NCUA Board issued proposed rule §740.4 for federally insured credit unions participating in shared branching networks that would require tellers accepting share deposits for both federally insured and non-federally insured credit unions to post a second sign adjacent to the NCUA insurance sign that states not all of the credit unions served by the teller are federally insured and members should contact their credit union for more information.
Proposed revisions would replace current requirements that the second sign list each federally insured credit union served by the teller along with a statement that only these credit unions are federally insured. The proposal was issued with a 30-day comment period.
Final incidental powers rule issued
The NCUA Board issued a final rule change to Part 721, Incidental Powers, to update and clarify the activities NCUA pre-approves as incidental powers. The rule change is effective 30 days after publication in the Federal Register.
Illustrations of permissible activities have been added to the incidental powers categories of correspondent services, operational programs, and finder activities. The illustrations provide useful information to federal credit unions regarding permissible activities.
The final rule clarifies federal credit unions may provide correspondent services to foreign as well as federal or state-chartered credit unions. The rule also clarifies the category of finder activities and includes an FCU’s negotiation of group discounts and the performance of administrative functions for outside vendors. The final rule also adds payroll services to the operational programs category.
Board votes are unanimous unless otherwise indicated 

Prepared by the Office of Public and Congressional Affairs