Washington State Department of Financial Institutions

DIVISION OF CREDIT UNIONS

BULLETINS 1995

 

DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions

Phone: (360) 902-8718, Fax: (360) 902-8800

July 27, 1995
No. B-95-1

*The DCU BULLETIN is a new publication from the Division of Credit Unions. The purpose of the BULLETIN is to notify state-chartered credit unions of current developments in state regulation. It will not be published on a regular schedule, but will be distributed as developments occur. We hope that you will contact the Division if questions arise about any of the matters discussed in the BULLETIN. This first issue is devoted to organization of the Division.

DCU Organization

As you know, there have been some recent changes in the personnel of the Division. The following is a list of current Division staff, with their titles and direct phone numbers. (The Division’s main phone number is 360 902-8701. The fax number is 360 753-6070.)

Name, Title, Phone/Voice Mail
J. Parker Cann, Acting Assistant Director, 360 902-8778
Linda K. Jekel, Program Manager, 360 902-8753
William Opperman, Review Analyst, 360 902-8758
Caryl Ausejo, Senior Analyst, 360 902-8806
Eugene Fitzpatrick, Senior Analyst, 360 902-8710
Dan Ohashi, Senior Analyst, 360 902-8790
Rogelio M. Pascua, Senior Analyst , 360 902-8803
Joe Rogers, Senior Analyst, 360 902-8801
Rick Ullrich, Senior Analyst, 360 902-8802
Jay Weintraub, Senior Analyst, 360 902-8804
Linda Hurley, Secretary, 360 902-8718

Mailing address:
State of Washington
Department of Financial Institutions
Division of Credit Unions
P O Box 41204
Olympia, WA 98504-1204

Physical address:
General Administration Bldg.
Suite 300, Third Floor West
210 llth Avenue SW
Olympia, Washington

We are located on the edge of the Capitol grounds -- about a block north of the Capitol Building. Drop in and say hello the next time you are in town.


DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8718, Fax: (360) 902-8800

August 17, 1995
No. B-95-2

Messenger Service and Agency Rules

The Department of Financial Institutions (DFI) recently began the rule-making process for rules which recognize the authority of credit unions (and other financial institutions) to:

  1. Offer mobile messenger services to their customers. For example, "messenger service" includes an armored car or courier which stops at a customer's home or business to receive deposits to the customer's account and deliver them to a branch of the credit union.
  2. Act as agent for credit unions (and other financial institutions). For example, a credit union could contract with another financial institution to take deposits on its behalf.

The purpose of the rules is to clarify the authority of financial institutions to engage in these activities. Attached is a copy of the form CR-101 filed by the DFI to begin the rule-making process. The form includes a copy of a working draft of the rules.

The idea for these rules arose out of recent federal banking regulations and legislation. However, we felt that it was important for these issues to be clarified for all state-chartered financial institutions. Consequently, Sections II and III of the draft of the rules authorize credit unions to engage in messenger service and agency activities. The portion of the rules affecting credit unions will be placed in the credit union title of the Washington Administrative Code (WAC), currently Title 419 WAC.

For your information, the rule-making process essentially involves three stages:

  1. The publication of the form CR-101, the Statement of Inquiry.
  2. The publication of the form CR-102, the Notice of Proposed Rule-making, which provides notice of the proposed rule and the scheduling of the public hearing to receive written and oral comments on the proposed rule.
  3. The adoption of the final rule and publication of the form CR-103, the Rule-making Order.

As noted above, a copy of the CR-101 is attached. We anticipate that the CR-102, which will formally propose the rules, will be published in the fourth quarter of this year. A copy will be forwarded to each credit union after it has been filed.

You may provide comments on the CR-101, in writing or orally, to:

Parker Cann, Acting Assistant Director
Department of Financial Institutions
Division of Credit Unions
PO Box 41204
Olympia, WA 98504-1204

Note: For a copy of CR-101, please contact the Department of Financial Institutions, Division of Credit Unions.

PRELIMINARY DRAFT OF MESSENGER SERVICE AND AGENCY RULES

I. Commerical banks, trust companies, savings banks, and savings and loan associations
[a new chapter to be added to Title 50 WAC]

Section 1. Definitions. For purposes of this chapter:

  1. "Branch" means a fixed branch of the financial institution.
  2. "Financial institution" means any institution chartered under Title 30, 32 or 33 RCW.
  3. "Messenger service" means any mobile service, such as a courier service or an armored car service, that travels to customer locations to pick up items from or deliver items to customers of a financial institution to facilitate consumer or commercial deposit transactions between the financial institution and its customers.
  4. "Third party" means a party other than the financial institution, and includes without limit an affiliate and subsidiary of an institution, that has a contractual arrangement with the financial institution to provide messenger service to the institution's customers.

Section 2. Generally. A financial institution may contract with its customers for the institution to provide messenger service, or contract with a third party to provide messenger service, in accordance with this rule.

Section 3. Messenger service which does not constitute a branch.

  1. If a financial institution complies with the requirements of this section, it may contract with its customers for the institution to provide messenger service or contract with a third party to provide messenger service, without prior approval for the service as a branch of the institution.
  2. The third party or financial institution operating the messenger service must:
  1. Maintain adequate insurance covering robberies, employee fidelity, and other in-transit losses; and
  2. Enter into a written contract with each of the institution's customers that utilize the service. The contract must in part provide:
  1. That the operator acts as the agent of the customer when the items are in transit to one of the institution's branches;
  2. The operator agrees to indemnify the customer for any loss which occurs during transit, except for a loss caused primarily by the customer's negligence;
  3. An item is not considered to be deposited until it is delivered to one of the institution's branches; and
  4. In the case of any item representing a withdrawal, the item is considered to be paid when the item is given to the third party.
  1. A financial institution may pay for costs incurred by a customer in using a third party messenger service.
  2. A financial institution may not operate a messenger service or contract with a third party to provide messenger service for the transportation of cash to the institution, unless the transportation is provided by armored car, except with the prior written approval of the director.
  3. In so contracting with a customer or third party, a financial institution may set other terms, conditions, and limitations that it deems appropriate to assure compliance with safe and sound banking practices.

Section 4. Messenger service which constitutes a branch. Any messenger service provided by a financial institution or third party to a financial institution's customers which does not comply with the applicable requirements set forth in Section 3 above constitutes a branch of the institution and is subject to the prior approval of the director in accordance with applicable provisions of state law. The director may set conditions on the operation of such a branch as the director may in his or her discretion deem appropriate.

Section 5. Services at stationary offices not affected. This chapter does not impose limits or conditions on the authority of a financial institution at its stationary offices, as agent for another financial institution as principal, or as agent for customers as principals, to prepare, sign and deliver account documentation, to collect and transmit funds obtained from those accounts, to maintain records with respect to such accounts, or to perform other functions allowed by law, and does not impose limits or conditions on the authority of a financial institution to allow another financial institution to act as such an agent.

II. Agency between financial institutions
[a new chapter to be added to Title 50 WAC]

Section 1. Agency between financial institutions.

  1. A state-chartered financial institution may contract with another financial institution:
  1. For the state-chartered financial institution to act as agent for the other for the purpose of providing banking services to the other institution's customers; and
  2. For the other to act as agent for the state-chartered financial institution for the purpose of providing banking services for the other institution's customers.
  1. The agent institution must use reasonable efforts to maintain the distinction between the two institutions in the eye of the public. The principal and agent institutions should set contractual terms, conditions, and limitations that they deem appropriate to assure compliance with safe and sound banking practices.
  2. The agency shall not constitute a branch or other office of the principal institution, provided, however, that the principal institution shall by contract require its agent to provide notice to the Director of the location of any office at which such agent provides such services on behalf of such principal institution.
  3. The director has determined that the agency permitted under subsection 1) of this section is an incidental power:
  1. Which is necessary or convenient to effect the purposes of a bank, in accordance with RCW 30.08.140(13),
  2. Which is necessary or requisite to enable a credit union to carry on effectively its business, in accordance with RCW 31.12.125(14),
  3. Which is necessary to carry on the business of a savings bank, in accordance with RCW 32.08.140(1), and
  4. Which is necessary to carry on the business of a savings and loan association, in accordance with RCW 33.12.010(25).
  1. This section does not affect the authority of a credit union to contract with another to establish a limited service facility at a branch of the other credit union, in accordance with RCW 31.12.215 and 31.12.005(2). The limited service facility does not constitute a branch and does not require prior approval of the director.
  2. This section does not impose limits or conditions on the authority of a financial institution at its authorized branches, as agent for customers as principals, to prepare, sign and deliver account documentation, to collect and transmit funds obtained from such accounts, or to maintain records with respect to such accounts, and does not impose limits or conditions on the authority of a financial institution to allow another financial institution at such other financial institution's authorized branches, as agent for customers as principals, to perform such functions, including but not limited to facilitating the placement of deposits in new or existing accounts.
  3. As used in this section:
  1. "State-chartered financial institution" means any institution chartered under Title 30, 32 or 33 RCW, or Chapter 31.12 RCW.
  2. "Financial institution" means any state-chartered financial institution and any financial institution chartered under federal law.

III. Credit unions
[a new chapter to be added to Title 419 WAC]

Section 1. Definitions. For purposes of this chapter:

  1. "Branch" means a fixed branch of the credit union.
  2. "Credit union" means nay credit union chartered under Chapter 31.12 RCW.
  3. "Deposit" means any deposit or share account.
  4. "Messenger service" means any mobile service, such as a courier service or an armored car service, that travels to customer locations to pick up items from or deliver items to customers of a credit union to facilitate consumer or commercial deposit transactions between the credit union and its customers.
  5. "Third party" means a party other than the credit union, and includes without limit an affiliate and subsidiary of a credit union, that has a contractual arrangement with the credit union to provide messenger service to the credit union's customers.

Section 2. Generally. A credit union may contract with its customers for the credit union to provide messenger service, or contract with a third party to provide messenger service, in accordance with this rule.

Section 3. Messenger service which does not constitute a branch.

  1. If a credit union complies with the requirements of this section, it may contract with its customers for the credit union to provide messenger service or contract with a third party to provide messenger service, without prior approval for the service as a branch of the credit union.
  2. The third party or credit union operating the messenger service must:
  1. Maintain adequate insurance covering robberies, employee fidelity, and other in-transit losses; and
  2. Enter into a written contract with each of the credit union's customers that utilize the service. The contract must in part provide:
  1. That the operator acts as the agent of the customer when the items are in transit to one of the credit union's branches;
  2. The operator agrees to indemnify the customer for any loss which occurs during transit, except for a loss caused primarily by the customer's negligence;
  3. An item is not considered to be deposited until it is delivered to one of the credit union's branches; and
  4. In the case of any item representing a withdrawal, the item is considered to be paid when the item is given to the third party.
  1. A credit union may pay for costs incurred by a customer in using a third party messenger service.
  2. A credit union may not operate a messenger service or contract with a third party to provide messenger service for the transportation of cash to the credit union, unless the transportation is provided by armored car, except with the prior written approval of the director.
  3. In so contracting with a customer or third party, a credit union may set other terms, conditions, and limitations that it deems appropriate to assure compliance with safe and sound banking practices.

Section 4. Messenger service which constitutes a branch. Any messenger service provided by a credit union or third party to a credit union's customers which does not comply with the applicable requirements set forth in Section 3 above constitutes a branch of the credit union and is subject to the prior approval of the director in accordance with applicable provisions of state law. The director may set conditions on the operation of such a branch as the director may in his or her discretion deem appropriate.

Section 5. Services at stationary offices not affected. This chapter does not impose limits or conditions on the authority of a credit union at its stationary offices, as agent for another financial institution as principal, or as agent for customers as principals, to prepare, sign and deliver account documentation, to collect and transmit funds obtained from those accounts, to maintain records with respect to such accounts, or to perform other functions allowed by law, and does not impose limits or conditions on the authority of a credit union to allow another credit union to act as such an agent.


DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8718, Fax: (360) 902-8800


September 5, 1995
No. B-95-3

Rule-making Initiated on Capital and Liquidity Requirements for WCUSGA-member Credit Unions

On September 1, the Division initiated a rule-making proceeding on our examiners' analysis of capital and liquidity adequacy of credit unions whose deposit and share accounts are guaranteed by the Washington Credit Union Share Guaranty Association ("WCUSGA"). A draft of these capital and liquidity requirements ("Capital/Liquidity Requirements") were initially provided to state chartered credit unions in a letter from the Division dated July 13, 1995.

The Division initiated the proceeding by filing a Form CR-101 for publication in the Washington State Register. For a copy of the Form CR-101, contact the Division of Credit Unions. The Form CR-101 includes a description of the concept of the rule. Comments on the concept may be submitted to Parker Cann or Linda Jekel at the Division.

For your information, the rule-making process is essentially divided into three stages: (1) The publication of the Form CR-101, the Statement of Inquiry; (2) The publication of the Form CR-102, the Notice of Proposed Rule-making, which provides notice of the proposed rule and the scheduling of the public hearing to receive written and oral comments on the proposed rule; and (3) The adoption of the final rule and publication of the Form CR-103, the Rule-making Order.

We expect the rule-making process on the Capital/Liquidity Requirements to take from four to six months.

While the rule-making proceeding is underway on the Capital/Liquidity Requirements, our examiners will, as part of the exam process, advise credit unions of the effect of the Requirements, so that each credit union will understand the impact of the Requirements when adopted.

Explanation of Rule Concept

Capital - During examinations, examiners will analyze each credit union to determine its capital adequacy. For WCUSGA credit unions, examiners will exclude the WCUSGA contingency and capital reserves in determining capital adequacy. These changes are for examination purposes only and will not affect a credit union's call report (form 5300) or its accounting practices.

Liquidity - During examinations, examiners will analyze each credit union to determine the adequacy of its liquidity. Examiners will analyze whether each WCUSGA credit union has sufficient liquidity to satisfy a potential one percent WCUSGA assessment, in addition to the other liquidity needs of the credit union.

The funds and investments which are identified by each WCUSGA credit union to satisfy the WCUSGA portion of the credit union's liquidity requirement should have a remaining maturity of 90 days or less. However, credit unions that have fully implemented SFAS No. 115 may identify investments classified as "available for sale" to satisfy the WCUSGA portion of their liquidity requirement.

Internal policies - Each credit union's policies should provide for a periodic review of its capital and liquidity levels, as affected by this rule, to determine if the credit union's capital and liquidity are at a safe and sound level. This rule will not affect the level of a credit union's regular reserves.

Transition periods - This rule will be implemented as follows:

  1. For credit unions over $90 million in total assets as of the date of this CR-101, the rule will apply beginning at the time the final rule becomes effective.
  2. For credit unions with $20 million to $90 million in total assets as of the date of this CR-101, the rule will apply beginning six months after the final rule becomes effective.
  3. For credit unions with under $20 million in total assets as of the date of this CR-101, the rule will apply beginning two years after the final rule becomes effective.

DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8718, Fax: (360) 902-8800

November 3, 1995
No. B-95-4

Meeting Scheduled to Discuss 1996 DCU Fee Increase

Because of current budgetary problems, the Division of Credit Unions is recommending a significant fee increase for credit unions over $20 million in assets. Legislation will be necessary in the 1996 session to authorize the increase, which would not take effect until July 1, 1996.

A meeting has been scheduled for Thursday, November 16, 1995, from 9:00 to 11:00 a.m., for the DCU to make a presentation and receive comments from credit unions on the fee increase. It is important that a representative from each credit union attend. Budget and fee materials will be mailed to credit unions about one week before the meeting.

The meeting is actually a videoconference which will take place simultaneously at the following four locations:

Department of Information Services
710 Sleater-Kinney Road SE, Suite Q
Lacey, Washington

Washington Interactive Television
4022 E. Broadway
Spokane, Washington

Seattle Central Community College
E. Pike Street & Harvard Avenue E.
Seattle, Washington

Washington School Information
Processing Cooperative (WSIPC)
2000 - 200th Place SW
Lynnwood, Washington

(PLEASE PLAN TO ARRIVE 15 MINUTES EARLY FOR A BRIEF INTRODUCTION TO VIDEOCONFERENCING.) Enclosed is a video-conferencing summary sheet for your information and a map of the meeting location nearest you.


DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8718, Fax: (360) 902-8800

November 13, 1995
No. B-95-5

Proposed Division Budget

The purpose of this bulletin is to provide information regarding the proposed fee increase for the Division. Please review it before the interactive television session on the morning of Thursday, November 16, 1995.

General Background

In 1994, the Division's fund fell into the red, due primarily to significant expenses for tort litigation defense, the loss of S&L revenue upon creation of the DFI, and expenses for computers and additional staffing. In response, beginning in early 1995, several measures were taken to reduce Division expenses. Among other things, staff was reduced, expenses were deferred where possible, and examiner travel schedules were reorganized. In addition, the Division enacted rules which provide for a schedule of automatic annual increases in fees and assessments, within the limits of Initiative 601. At the present time, even with an Acting Assistant Director on half time, the Division's revenues are barely adequate to pay the cost of its operation, without regard to expenses for tort litigation defense. See Exhibits A-1 and A-2, enclosed, for detail on the Division's fiscal-year budgets for fiscal years 1994 through 1996. All fiscal years referred to in these materials, whether or not so stated, are state government fiscal years, which run from July 1 through the following June 30.

Current revenue levels are also inadequate to pay for certain critical needs of the Division: to provide one additional assistant analyst, more examiner training, information systems upgrades, etc. These expenditures are critical for the Division to maintain a professional regulatory staff that is able to meet the regulatory challenges of the changing credit union movement.

In response to this problem, the Division has also reviewed its current fee structure. One of our conclusions was that our fee structure must be more comparable to the cost of a federal charter, particularly for credit unions with under $20 million in total assets.

With these considerations in mind, we are proposing to revamp our current fee and assessment structure. At present, credit unions fund the operation of the Division primarily through the payment of hourly examination fees and semi-annual asset assessments. The Division is proposing to eliminate the hourly exam fee and increase the rate of the semi-annual asset assessments for credit unions over $20 million in total assets. (The total fees for those under this benchmark would be reduced.) In addition, we are proposing to charge credit unions a one-time special assessment in fiscal 1997, to pay non-recurring costs incurred by the Division.

Need for Legislation in 1996

In order to implement the proposed budget and fee structure, which will exceed Initiative 601 limits, it will be necessary for authorizing legislation to be passed. It is important that the proposed fee structure be put into effect on July 1, 1996, in order for the Division to resolve these problems by the end of the current fiscal biennium (June 30, 1997). Consequently, to meet this timeframe, the Division and credit union movement will need to seek passage of a bill in the 1996 legislative session. We expect to implement the legislation through the adoption of rules effective July 1, 1996.

Input from WCUL Committees

The Division has been working with committees of the Washington Credit Union League (WCUL) since early 1995 to review our current budget and the proposed budget and fee structure. We provided detailed data to the individuals on these committees and worked with them extensively to answer their questions. We appreciate their input and the time and energy they have put into this process. The proposals set forth in this Bulletin were developed as a consensus with these individuals.

Proposed Budget

The essence of the proposed budget is as follows:

  1. The Division needs to increase expenditures for an additional assistant analyst, examiner training, information systems upgrades, payment of litigation expenses in the Aitken lawsuit, and the establishment of a contingency reserve.
  2. In order to provide for these needs:
  1. The projected fiscal 1995-97 biennial budget will increase to $2,300,348 from the fiscal 1993-95 biennial budget of $2,010,393.
  2. The projected 1997 fiscal year budget will increase to $1,120,296 from the projected 1996 fiscal year budget of $1,006,208.
  3. A one-time special assessment of $173,844 will be charged to credit unions in fiscal 1997.

See Exhibits A-1 and A-2 for detail on the proposed budget. Relatively speaking, these increases will put the Division on more of a par with the budgets of the Division of Banking and the NCUA, but certainly not in excess of expenditures by these other regulators.

Proposed Fee Structure

The essence of the proposed fee structure is as follows:

  1. Credit unions will no longer pay hourly fees for examinations.
  2. Credit unions will continue to pay semi-annual asset assessments, at revised rates, based on total assets. The rates will be structured in eight different asset tiers. See Exhibit B for detail on the proposed fee structure.
  3. Each credit union will continue to pay an hourly fee for the Division's time in processing its community charter applications.
  4. Each credit union will continue to pay for assistant attorney general's time in providing written legal opinions for the credit union and for representing the Division in enforcement matters against the credit union, on a pass-through basis from the attorney general's office.
  5. In fiscal 1997 only, credit unions will pay a special assessment to cover the cost of certain non-recurring costs, including attorney general's expense incurred in the Aitken lawsuit, and 1994 moving expenses of the Division. This special assessment totals $173,844. It will be assessed to credit unions pro rata on the basis of their total assets. Credit unions will be allowed to pay the assessment in more than one installment over the 1997 fiscal year (July 1, 1996 through June 30, 1997).

See Exhibit C for detail on the bill and rules necessary to implement the proposed budget and fee structure.

Importance of State Charter for Credit Unions

Underlying all of this is our belief that a strong state charter for credit unions is critical to help meet the financial services needs of the consumers of the state of Washington. Indeed, the Washington Legislature has made this clear on several occasions, most particularly in the Credit Union Act, Chapter 31.12 RCW, as well as in the legislation creating the DFI. Our statutory mission is to maintain a viable and competitive state credit union movement and to recognize the uniqueness of state credit unions. Without a strong state charter for credit unions, the credit union marketplace will be dominated by federal charters, and the consumer will lose choice and innovation in shopping for financial services.

Moreover, we believe that, as a charter option, a state credit union charter offers several advantages over the competing charter:

  1. Local, accessible legislature and legislators
  2. Local, accessible regulator
  3. More expansive set of state powers and authorities (FOM, etc.)
  4. Better understanding of local economy and local credit union business
  5. Faster response to applications and interpretation questions
  6. Less bureaucratic
  7. Announced Division plans to develop consensus on modernization of the Washington Credit Union Act and Division rules
  8. Announced Division plans to develop consensus on ways to streamline regulatory burden for small credit unions
  9. Announced Division plans to develop consensus on issues related to FOMs.

In order to maintain and enhance the state charter, it is necessary to have a professional and credible state regulatory function. This will help ward off incursions by the NCUA and Congress on state powers, which would diminish the attractiveness and viability of the state charter.

The nature of the movement is changing, however, with more competition, risk-taking, and reliance on technology. In order to maintain a strong state regulatory function in the face of such change, we must increase spending in certain areas, to provide for additional examiner training, to achieve salary parity with Banking Division examiners, to secure accreditation by NASCUS, to upgrade and maintain information systems, to maintain adequate staffing, to pay attorney general expenses for tort litigation defense, and to establish reasonable reserves. We have not asked for all of these things to be funded in the current budget proposal, but we believe that, with time, all of these important goals must be achieved. Moreover, we may need to seek additional fee increase if revenues do not meet our projections, or if extraordinary expenses (e.g., litigation expenses) must be incurred.

Input from all Credit Unions

All credit unions will be given the opportunity on November 16, 1995, from 9-11 a.m., to provide input to Division staff regarding the proposed budget and fee structure, We have scheduled an interactive television session for this purpose from four sites state-wide: Lacey, Lynnwood, Seattle, and Spokane. (Information was mailed previously under separate cover.) Although the format may be somewhat intimidating, please feel free to ask questions during the interactive television sessions.

Credit unions should also feel free before and after the television session, up through the rule-making process on the fee structure early next year, to provide input to the Division on the proposal. If credit unions from the Vancouver or Yakima/Wenatchee areas find it too inconvenient to make it to the nearest site, we could arrange a visit to a Chapter meeting in these areas to discuss the proposed budget and fee structure.


Please feel free to give Parker Cann or Linda Jekel a call at (360) 902-8778 or 8753, respectively, to discuss the proposed budget and fee structure.

Exhibit A-1
DCU Annual Revenues
(Fiscal year = July 1 to June 30)
1993-1995 Biennium (actual)

Actual revenues

FY 1994
12 mo.

FY 1995
12 mo.

Biennium 93-95
24 mo.

S&L exams fees

-

 

-

S&L asset fees (from 7/93-9/93)

21,882

 

21,882

S&L misc. (from 7/93-9/93)

2,332

 

2,332

S&L Sub-Total

24,214

-

24,214

CU Safety & Soundness exams

434,318

472,596

906,914

CU EDP exams

-

45,546

45,546

CU Compliance exams

-

-

-

CU CUSO exams

-

500

500

CU Com Charter applications

-

-

-

CU Miscellaneous

3,601

12,625

16,226

CU Sub-Total

437,919

531,267

969,186

*One Time Income

-

207,648

207,648

CU Assessments

423,786

385,559

809,345

 

TOTAL

885,918

1,124,475

2,010,393

* early asset assessment collected April 1995

1995-1997 Biennium (estimated and proposed)

Projected revenues from CUs

Status quo FY 96

Proposed FY 97

One time assessment FY 1997

Proposed Biennium 95-97

CU Safety & Soundness exams

496,840

-

 

496,840

CU EDP exams

47,882

-

 

47,882

CU Compliance exams      

-

CU CUSO exams

525

-

 

525

CU Com Charter applications

included below

     
CU Miscellaneous

13,272

-

 

13,272

Sub-Total

558,519

no hourly billing

558,519

 
*One Time Income    

173,844

173,844

CU Assessments

447,676

1,120,296

 

1,567,972

 

TOTAL

1,006,195

1,120,296

173,844

2,300,335

Exhibit A-2DCU Annual Expenditures
(Fiscal year = July 1 to June 30)
1993-1995 Biennium (actual)

Actual expenditures

FY 1994
12 mo.

FY 1995
12 mo.

Biennium 93-95
24 mo.

Salaries - (inc. some admin. overhead)

619,770

623,970

1,243,740

Benefits - (inc. some admin. overhead)

146,803

144,187

290,990

Travel

64,625

67,099

131,724

Goods and service without training

22,363

19,954

42,317

Training

7,192

3,495

10,687

Capital outlays

60,337

-

60,337

Noncapitalized fixed

9,297

7,282

16,579

Debt service

-

3,887

3,887

95 NASCUS past due bill

-

 

-

94 moving balance

-

 

-

Tort bill

-

 

-

Tort fund

-

 

-

salary parity

-

 

-

salary parity - benefit cost

-

 

-

Info. System costs

-

 

-

Contingency reserve fund      
Accreditation      
Other

-

612

612

Fixed revolving accounts

85,834

58,634

144,468

Admin. Overhead

110,653

117,875

228,528

 

TOTAL

1,126,874

1,046,995

2,173,869

1995-1997 Biennium (estimated and proposed)

Projected Expenditures

Status quo FY 96 12 mo.

Proposed FY 1997 12 mo.

One time assessment FY 1997

Proposed Biennium 24 mo.

Salaries - (inc. some admin. overhead)

540,204

610,514

 

1,150,718

Benefits - (inc. some admin. overhead)

143,245

152,628

 

295,873

Travel

76,076

77,000

 

153,076

Goods and service

21,983

25,807

 

47,790

Training

4,502

6,502

 

11,004

Capital outlays

1,391

1,391

 

2,782

Noncapitalized fixed

3,934

3,934

 

7,868

Debt service    

21,200

21,200

NASCUS dues  

2,400

2,400

4,800

94 moving balance    

29,356

29,356

Tort bill debt    

85,088

85,088

Tort bill - Aitken appeal  

20,000

20,000

salary parity      

-

salary parity benefit cost      

-

Info. System costs

13,391

33,450

15,800

62,641

Contingency reserve fund

25,000

20,000

 

45,000

Accreditation      

-

Other      

-

Fixed revolving accounts

54,884

56,434

 

111,318

Admin. Overhead

115,391

130,227

 

245,618

 

TOTAL

1,000,001

1,120,287

173,844

2,294,132

 

Exhibit BDCU Proposed Fee Structure

 

Credit union asset size category

Total assets in that category

Semi-annual factor or fee

over $500M 1,971,684,438 $10,207 + $26,507 + .03 per thousand over $500,000,000
over $100 M to $500 M 2,934,787,968 $10,207 + .0666268 per thousand over $100,000,000
over $20 M to $100 M 1,178,823,841 .10207 per thousand of total assets
over $10 M to $20 M 282,673,682 $2,250 per semi-annual assessment
over $2 M to $10 M 166,617,996 $1,500 per semi-annual assessment
over $200 K to $2 M 14,850,250 $1,000 per semi-annual assessment
under $200 K - no fee
WCCCU 198,419,251 .0504 per thousand of total asset
 

Total

6,747,857,426  

M = million
K = thousand

Exhibit C
Key Provisions of Bill and Rules

Bill

  1. In general, authorizes Division to set reasonable fees, which will pay for costs of operation of Division, and cover the establishment of reasonable reserves.
  2. Authorizes Division to increase fees for fiscal 1997 in excess of the Initiative 601 limits. Fee increases for other years must be within I-601 limits.
  3. Fee changes for fiscal 1997 may not increase projected 1995-1997 biennial revenues in excess of 115% of 1993-1995 biennial revenues.

Rules

  1. Hourly examination fees eliminated.
  2. Semi-annual assessment rates revised effective July 1, 1996.
  3. Special assessment of $173,844 to be paid during fiscal 1997. Assessment to cover certain one-time Division costs (Aitken defense costs to date, Division's 1994 moving costs, etc.). The assessment may be paid in installments during the July 1, 1996-June 30, 1997 period.
  4. Current schedule for automatic annual increases in fees is eliminated.
  5. The size of the contingency reserve will be capped at four months' operating expenses. When the cap is reached, fees will be credited toward future fee assessments to prevent the reserve from exceeding these levels.
  6. Contingency reserves will only be used to meet extraordinary expenses, such as litigation defense expenses, costs associated with resolution of troubled institutions, etc.
  7. The Division will provide annual budget figures to the WCUL for its review.
  8. Each credit union will continue to pay an hourly fee for our time in processing its community charter applications.
  9. Each credit union will continue to pay for assistant attorney general's time in providing written legal opinions for the credit union and for representing the Division in enforcement matters against the credit union, on a pass-through basis from the attorney general's office.
  10. Each third party service provider examined by the Division will be billed hourly for examinations.

Exhibit D
Timeline for Implementation of Proposed DCU Budget and Fee Structure

November 16, 9-11 a.mInteractive television session for all state credit unions to provide input on the proposed budget and fee structure, at the following sites: Lacey, Lynnwood, Seattle, and Spokane. (Information previously provided under separate cover.)

January 1996: introduction of bill in Legislature

February: initiation of rule-making process to adopt implementing rules

June: effective date of bill

July 1: effective date of rule to implement new fee structure.


DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8718, Fax: (360) 902-8800

November 17, 1995
No. B-95-6

State Credit Unions Encouraged to Enhance Liquidity

The DCU is concerned that liquidity levels at state credit unions are generally low from an operational perspective. Moreover, in recent months, at least two credit unions have faced unexpected developments that could have caused a loss of member confidence. Consequently, we encourage all state credit unions to consider taking measures to enhance their internal liquidity levels as well as their arrangements with secondary liquidity sources. Among other options, credit unions should consider secondary sources such as Washington Corporate or the Federal Reserve Bank of San Francisco (Fed). The Fed generally acts as a backup to other industry liquidity sources. Interested credit unions should contact the Fed’s Credit Unit, at 1-800-277-4133, ext. 2265, or at 415-974-2265.

The DCU intends to review the liquidity levels of all state credit unions in the weeks ahead. Those credit unions that raise liquidity concerns will be asked for additional information on their liquidity positions. We will be publishing a separate DCU Bulletin on this topic in the near future.

As you know, the DCU is also in the process of developing a proposed rule concerning the regulatory analysis of capital and liquidity adequacy of WCUSGA-guaranteed credit unions.

Please contact Parker Cann, at (360) 902-8778, or Linda Jekel, at (360) 902-8753, if you would like to discuss this Bulletin.


DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8718, Fax: (360) 902-8800

December 15, 1995
No. B-95-7

Authority to Invest in the Exchange and its Successor

The Department of Financial Institutions has recently issued an opinion that state credit unions possess the authority (as part of their incidental powers) to invest in The Exchange and its proposed successor. A copy of the opinion is available upon request from the Division.