In a July 13 opinion piece in Credit Union Journal, the National Credit Union Administration Board member Todd Harper criticized those credit unions that had garnished members economic impact payments.
While the CARES Act exempted these stimulus payments from being offset for debts owed to federal and state agencies (except for child support), it did not protect these payments from garnishment or the right of offset.
Harper wrote that these payments were meant to cover daily living expenses of credit union members, who had been impacted by COVID-19.
Credit unions that garnished these payments faced potential damage to their reputation and potentially their business model.
He also pointed out that these credit unions could damage the image of the whole industry.
In related news, the Senate voted unanimously on July 23 to pass a bill (S. 3841) that would exempt the CARES Act economic impact payments from assignment or garnishment.
The legislation must still be passed by the House and signed into law in order to protect these payments from garnishment.
Showing posts with label COVID-19. Show all posts
Showing posts with label COVID-19. Show all posts
Sunday, July 26, 2020
Thursday, July 9, 2020
Report: Very Little Progress Has Been Made in Reforming COSSEC
A 2020 Fiscal Plan report of the Financial Oversight and Management Board for Puerto Rico found that very little progress has been made in reforming the Public Corporation for Supervision and Insurance of Cooperatives of Puerto Rico (COSSEC) that was proposed in 2016 and 2017 by the Puerto Rico government.
According to the report, COSSEC’s system is composed of 113 locally-chartered and insured credit unions, holding approximately $8.3 billion in shares and deposits.
However, the Fiscal Plan noted that the island's credit unions face numerous challenges. Puerto Rican cooperatives had increased their investment in Puerto Rico government bonds in the run-up to the government's default on its debt. In addition, COVID-19 and the subsequent 4-month loan moratorium will have a negative impact on many cooperatives’ cash flows in the short term. Approximately, $1 billion in loans have participated in the 4-month loan moratorium.
The 2020 COSSEC Fiscal Plan recommends that COSSEC to develop and commit to a plan to identify and resolve any cooperatives that are currently insolvent and undercapitalized within 24 months.
The report states that COSSEC governance must be overhauled to allow COSSEC to act quickly, decisively, and in the best interests of the safety and soundness of the cooperative system and to ensure depositor protection. The COSSEC Board must be reformed to ensure that it is an independent
body.
Currently, COSSEC’s board is comprised of 9 members, 5 of which are cooperative members and the remaining 4 are government officials. It is being recommended that the board be comprised of 5 members, who cannot have any affiliation or financial ties to a cooperative regulated by
COSSEC or the cooperative movement. The Oversight Board recommended that legislation reforming COSSEC become law by March 2021.
The 2020 COSSEC Fiscal Plan looked at improving transparency in accounting. The legal system currently allows cooperatives to use Regulatory Accounting Principles (RAP). However, RAP does not require disclosure of the current market value of assets under distress.
Additionally, legislation permitted cooperatives to amortize over a 15-year period any losses resulting from the default of Puerto Rico Government Bonds.
The Government must submit legislation that addresses this critical gap by requiring all cooperatives to adhere to GAAP within 5 years. Also, legislation needs to abolish any special accounting treatment for holdings of Puerto Rico Government Bonds.
Furthermore under the current structure, COSSEC is the regulator for both financial and certain non-financial cooperatives in Puerto Rico. However, non-financial cooperatives do not contribute to COSSEC’s resources. The report recommended that the regulatory power over these non-financial cooperatives be transferred to Comisión de Desarrollo Cooperativo with an effective date of no later than the end of Fiscal Year 2023.
To read the document, go to the Financial Oversight and Management Board's documents page.
According to the report, COSSEC’s system is composed of 113 locally-chartered and insured credit unions, holding approximately $8.3 billion in shares and deposits.
However, the Fiscal Plan noted that the island's credit unions face numerous challenges. Puerto Rican cooperatives had increased their investment in Puerto Rico government bonds in the run-up to the government's default on its debt. In addition, COVID-19 and the subsequent 4-month loan moratorium will have a negative impact on many cooperatives’ cash flows in the short term. Approximately, $1 billion in loans have participated in the 4-month loan moratorium.
The 2020 COSSEC Fiscal Plan recommends that COSSEC to develop and commit to a plan to identify and resolve any cooperatives that are currently insolvent and undercapitalized within 24 months.
The report states that COSSEC governance must be overhauled to allow COSSEC to act quickly, decisively, and in the best interests of the safety and soundness of the cooperative system and to ensure depositor protection. The COSSEC Board must be reformed to ensure that it is an independent
body.
Currently, COSSEC’s board is comprised of 9 members, 5 of which are cooperative members and the remaining 4 are government officials. It is being recommended that the board be comprised of 5 members, who cannot have any affiliation or financial ties to a cooperative regulated by
COSSEC or the cooperative movement. The Oversight Board recommended that legislation reforming COSSEC become law by March 2021.
The 2020 COSSEC Fiscal Plan looked at improving transparency in accounting. The legal system currently allows cooperatives to use Regulatory Accounting Principles (RAP). However, RAP does not require disclosure of the current market value of assets under distress.
Additionally, legislation permitted cooperatives to amortize over a 15-year period any losses resulting from the default of Puerto Rico Government Bonds.
The Government must submit legislation that addresses this critical gap by requiring all cooperatives to adhere to GAAP within 5 years. Also, legislation needs to abolish any special accounting treatment for holdings of Puerto Rico Government Bonds.
Furthermore under the current structure, COSSEC is the regulator for both financial and certain non-financial cooperatives in Puerto Rico. However, non-financial cooperatives do not contribute to COSSEC’s resources. The report recommended that the regulatory power over these non-financial cooperatives be transferred to Comisión de Desarrollo Cooperativo with an effective date of no later than the end of Fiscal Year 2023.
To read the document, go to the Financial Oversight and Management Board's documents page.
Saturday, June 27, 2020
CDC Posts Information for Banks and CUs for Keeping Employees Safe from COVID-19
The Centers for Disease Control and Prevention (CDC) has posted webpages for banks and credit unions and their employees with tips for protecting staff and slowing the spread of COVID-19.
The tips for bank employers include creating a COVID-19 workplace health and safety plan, conducting a hazard assessment and developing hazard controls.
Among these controls are engineering controls (isolating workers from hazards through workspace distancing and transparent shields, as well as adjusting HVAC ventilation and adding filtration) and administrative controls (including changing workflows and practices, cleaning facilities and encouraging cloth face coverings as appropriate).
Read the bank employee page.
Read the bank employer page.
The tips for bank employers include creating a COVID-19 workplace health and safety plan, conducting a hazard assessment and developing hazard controls.
Among these controls are engineering controls (isolating workers from hazards through workspace distancing and transparent shields, as well as adjusting HVAC ventilation and adding filtration) and administrative controls (including changing workflows and practices, cleaning facilities and encouraging cloth face coverings as appropriate).
Read the bank employee page.
Read the bank employer page.
Tuesday, June 23, 2020
Guidance Issued to Examiners for Assessing COVID-19 Impacts
Recognizing the significant and long-lasting effects of the coronavirus pandemic on financial institutions, federal and state financial regulators on June 23 issued joint guidance for how examiners should assess the effects of COVID-19 on the safety and soundness of banks and credit unions.
The guidance directs examiners to assess institutions according to existing agency policies and procedures, and to consider the appropriateness of management actions to address COVID-19 challenges. It provides specific instructions for examiners when considering an institution’s risk assessment, capital adequacy, asset quality, management actions, earnings, liquidity and market risk sensitivity.
“Examiners should assess the reasonableness of management’s actions in response to the pandemic given the institution’s business strategy and operational capacity in the distressed economic and business environment in which the institution operates,” the agencies said. “When assigning the composite and component ratings, examiners will review management’s assessment of risks presented by the pandemic, considering the institution’s size, complexity, and risk profile.”
The guidance states that examiners will not criticize financial institutions for the appropriate use of government backstops to meet liquidity needs, such as the Federal Reserve's discount window or the National Credit Union Administration's Central Liquidity Facility.
When determining whether a formal or informal enforcement is necessary, examiners should consider whether the institution appropriately planned for resiliency and operational continuity, has implemented prudent policies and is pursuing “realistic resolution of the issues confronting the institution,” they added.
Read more.
C
The guidance directs examiners to assess institutions according to existing agency policies and procedures, and to consider the appropriateness of management actions to address COVID-19 challenges. It provides specific instructions for examiners when considering an institution’s risk assessment, capital adequacy, asset quality, management actions, earnings, liquidity and market risk sensitivity.
“Examiners should assess the reasonableness of management’s actions in response to the pandemic given the institution’s business strategy and operational capacity in the distressed economic and business environment in which the institution operates,” the agencies said. “When assigning the composite and component ratings, examiners will review management’s assessment of risks presented by the pandemic, considering the institution’s size, complexity, and risk profile.”
The guidance states that examiners will not criticize financial institutions for the appropriate use of government backstops to meet liquidity needs, such as the Federal Reserve's discount window or the National Credit Union Administration's Central Liquidity Facility.
When determining whether a formal or informal enforcement is necessary, examiners should consider whether the institution appropriately planned for resiliency and operational continuity, has implemented prudent policies and is pursuing “realistic resolution of the issues confronting the institution,” they added.
Read more.
C
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