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NCUA PUTS KIBOSH ON CORPORATE BRIDGE BUILDING

ALEXANDRIA, Va.-NCUA has rejected ongoing plans to combine two or more of the four failed corporate credit unions-surviving now as so-called bridge corporates-to create a single entity with a nationwide reach.

NCUA Chairman Debbie Matz said in a new policy statement that the agency worries that consolidation of two or more bridge corporates could create a new entity that would pose new systemic risk concerns for NCUA, as well as create "unfair market advantage."

"The NCUA Board is aware that some Bridge Corporate members are promoting a new charter consisting of consolidated bridge corporate assets, facilities and personnel as the preferred direction to transition out of conservatorship," Matz said. "Such consolidations would only be considered after the bridge corporates transition to independently operated corporates."

The four bridge corporates were created by NCUA after it liquidated the massive investment portfolios at failed corporates U.S. Central Federal Credit Union, WesCorp Federal Credit Union, Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union, and the bridges currently perform a number of back-office functions, including payments services, for more than 4,600 credit unions.

The statement is the second in a week released by NCUA expressing concerns about creation of new corporate entities that would pose "too big to fail" risks for NCUA. Earlier last week NCUA distributed a Letter to Credit Unions referring to plans for a major consolidation of the corporate system or a nationwide payments CUSO that would concentrate resources.

Such a concentration of services or the aggregation of service volumes in one entity, said NCUA, would introduce systemic risk that may create an unacceptable "too big to fail" scenario."

 

INTERCHANGE REFORM SPONSOR DOUBTS RECONSIDERATION

WASHINGTON-The powerful senator who sponsored last year's amendment to the Dodd-Frank Reform Act regulating debit card interchange is confident his provision will stand, even as the House begins deliberations aimed at changing the provision, or at least delaying its enactment.

"The Senate has no plans. There are no hearings scheduled," said Max Gleischman, a top aide to Illinois Sen. Richard Durbin, author of the controversial interchange provision. The Durbin aide said he is confident the Senate will not take up the provision again, even as the credit unions and banks mount a major lobbying effort for repeal, culminating in a hearing by the House Financial Services Committee late last week.

Meantime, Durbin, assistant majority leader in the Senate, tore into the American Bankers Association for what he said were mistruths being spread during the banks lobbying against the provision. He said while the banks are arguing that consumers will derive no benefit form the price controls to be set by the Federal Reserve, numerous consumer groups supported the amendment when it was passed by the Senate, then the House last spring. He disputed that the provision will harm small banks and credit unions that would be exempt from the provision, noting that Visa, among others has indicated it will implement a two-tiered fee system separating the transactions for the smaller, exempt institutions from those over $10 billion that come under the rule. He noted that banks argue they will be forced by the marketplace to set the same lower interchange fees applied to bigger banks, but asserted that the networks-not the banks-set the interchange rates.

In fact, Visa, during separate conference calls in recent weeks with credit unions and banks reasserted its commitment to a two-tiered fee system.

But Durbin, responding to a letter last week from the ABA, said the banks were being disingenuous while trying to protect a setup that is lucrative for them and "not tempered by competitive market forces." He called the system, where banks and card networks levy the fees on merchants, "unfair" to both consumers and retailers who have to pay fees that are non-negotiable.

"Issuers should be incentivized to manage other costs of operating a debit card system efficiently," Durbin's letter said. "The old unregulated system encouraged networks to set rates at levels that subsidize inefficiency and that massively overcompensate banks at the expense of merchants and their customers."

"I will vigorously oppose efforts to block the implementation of this needed reform," Durbin added.

 

4 MORE BANKS SHUTTERED, BRINGING TOTAL TO 18 IN 2011

WASHINGTON-Regulators closed banks in California, Florida, Wisconsin and Michigan recently, making a total of 18 bank failures so far in 2011. The most recent failures included: $390-million Peoples State Bank, Hamtramck, Mich.; $210-million Canyon National Bank, Palm Springs, Calif.; $125-million Sunshine State Community Bank, Port Orange, Florida and $84-million Badger State Bank, Cassville, Wis.

The latest failures are projected to cost the FDIC's Bank Insurance Fund $145 million in losses.

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