Compliance

Interchange Proposal Tops Regulatory Priorities

CUNA outlines top issues on the regulatory docket.

February 03, 2011
KEYWORDS banking , board , interchange , ncua
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Financial literacy for directors

An NCUA Letter to Credit Unions is scheduled to be released soon by the agency on the financial literacy requirements of federal credit union (FCU) directors.

The NCUA Board approved a final rule at its December meeting that prescribes certain requirements for FCU directors, including requirements on financial literacy. CUNA urged NCUA to clarify the rule.

The agency intends for the letter to clarify the financial literacy requirements, which become effective July 2011, six months after publication of the final rule in the Federal Register.

The letter provides guidance on the following “base financial literacy requirements”:
1. Financial statements. A director should know what each line item means and its potential effect on the FCU;
2. Various risks to the FCU, such as credit, transactional, and reputational risks; and
3. Internal control mechanisms to control such risks.

NCUA’s Office of Small Credit Union Initiatives will offer free training workshops across the country and will make a training DVD available in May.

The level of necessary financial literacy depends on the size and complexity of the FCU.

Corporate CU guidance

NCUA issued a Corporate Credit Union Guidance Letter (No. 2011-01) regarding permissible activities for corporate credit union service organizations (CUSOs).

The letter addresses how corporate CUSOs may submit requests to NCUA for authorization of nonpreapproved business activities. Starting April 18, 2011, preapproved corporate CUSO business activities will generally be limited to brokerage and investment advisory services, plus other business activities the agency chooses to approve pursuant to a corporate CUSO’s request or the agency’s own initiative.

Letter No. 2011-01 follows an earlier Letter to Corporate Credit Unions (No. 2010-02) issued in December concerning corporate credit union compliance with NCUA’s revised corporate regulations. This letter also addressed corporate CUSOs to some degree.

In addition, Letter No. 2010-02 addressed corporate credit union capital, treatment of legacy assets held by corporates not in conservatorship or liquidation, net economic value standards, and corporate credit union chartering and mergers.

Internet banking authentication

CUNA expects further guidance from NCUA and the Federal Financial Institutions Examination Council (FFIEC) regarding authentication on internet and mobile transactions.

This guidance will update the FFIEC’s 2005 guidelines on internet banking authentication, which included authentication methods, risk assessment, and customer verification and awareness.

In addition, NCUA has indicated it will update its examination procedures on internet and mobile transaction risks later this year.

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