Washington State Department of Financial Institutions

Division of Credit Unions

Bulletins 1999

DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8701 FAX: (360) 704-6901

January 12, 1999 
No. B-99-1

Division Repeals MBL and Appraisal Rules

Repeal - MBL Rules. The Division has repealed its member business loan (MBL) rules, Chapter 208-464 WAC, effective February 28, 1999. However, the Division has initiated a separate rule-making to adopt a new set of MBL rules.

State credit unions must continue to comply with the NCUA rules on MBL, unless the NCUA determines that our new MBL rules adequately minimize risk. See NCUA rules at 741.203, and criteria for the determination at 723.20. The Division intends to submit its new MBL rules, after final adoption, to the NCUA for such a determination. If the NCUA reaches such a determination, state credit unions will no longer be subject to the NCUA's MBL rules. Nonetheless, state credit unions will continue to be subject to the MBL limitations in the Credit Union Membership Access Act (H.R. 1151).

Notwithstanding the repeal of the Division's MBL rules, the Division has taken the position that as a matter of safety and soundness the aggregate amount of a credit union's MBL, as defined by the Federal Credit Union Act, may not exceed an amount equal to 3 times its reserves, without the written permission of the Division.

New MBL Rules. As indicated above, the Division has initiated a separate rule-making to adopt new MBL rules. The Division believes that more flexible MBL rules can be crafted which will allow credit unions to better serve the needs of their members while also protecting the safety and soundness of these institutions.

The Division will use the NCUA's MBL rules as a starting point for drafting the Division's new MBL rules. See the NCUA's new MBL rules at Part 723, recently amended at 63 Federal Register 51793, 51802, September 29, 1998.

Interested parties should provide comments to the Division on which provisions of the NCUA's MBL rules should be amended or deleted, and what new provisions should be added, for the purpose of drafting the Division's new MBL rules.

Repeal - Real Estate Appraisal Rules. The Division has repealed its real estate appraisal rules, Chapter 208-480 WAC, effective February 28, 1999.

However, state credit unions must continue to comply with the NCUA rules on real estate appraisals, at Part 722. See NCUA rules at 741.203.


DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8791 FAX: (360) 704-6991

January 14, 1999
No. B-99-2

Year 2000 (Y2K) Liquidity/Currency and Communication Plans
DCU’s Y2K Update #9

Credit unions must consider Y2K contingencies and plan to have adequate liquidity and currency through the first quarter of 2000. Your liquidity/currency demands during this time period will also be affected by your communication with your members on Y2K. Credit unions should consider each of these three elements (liquidity, currency, and communication) in their written Y2K-related plans.

This Bulletin is intended to provide guidance as you develop your liquidity/currency and communication plans. The Board of Directors of your credit union should approve your plans and any revisions to them. The Board should review your plans on a regular basis through the first quarter of 2000.

Background Information

While the Federal Reserve (Fed) believes that there will be no serious problems with financial institutions or ATMs being able to dispense currency in connection with Y2K, the Fed is planning to have additional currency available as a precautionary measure. The Fed has informally estimated that each of the 70 million households in the U.S. may withdraw an average of $462 in currency to purchase such necessities as gas and food.

There is approximately $460 billion of currency in circulation at the present time. The Fed has announced that it will increase its $150 billion currency reserve by $50 billion by the fourth quarter of 1999.

In addition, the Fed has the option to implement the following procedures:

This process is not new for the Fed. It has increased currency reserves in the past on a regional or local basis, such as when a natural disaster has forced citizens to temporarily conduct personal business with currency.

Communication

Member confidence is important to your credit union. We expect each credit union to promote member confidence through on-going communication regarding the Y2K issue.

Credit Union Action

By March 1, 1999, each credit union should (if it has not already):

  1. Adopt a communication plan which addresses, at a minimum: on-going communication with members regarding Y2K, and identification and training of staff to handle member and media inquiries on Y2K. You should consider the potential for litigation based upon your representations.
  2. Adopt a liquidity/currency plan. Your credit union should develop and document a variety of Y2K withdrawal estimates (at least a high, low, and most likely) based upon assumptions that are reasonable for your credit union. You should adjust your liquidity/currency plan as appropriate if 1999 withdrawals are significantly different than your Y2K estimate. (The frequency of ATM servicing in late 1999 should also be re-assessed, as necessary.)
  3. Arrange adequate liquid assets and borrowing capacity to meet the anticipated withdrawals. At the least, each credit union should arrange an adequate collateralized or guaranteed line of borrowing through a corporate, the Federal Reserve Bank, or the Federal Home Loan Bank.
  4. Arrange for access to adequate amounts of currency under your Y2K withdrawal estimate.

Failure to take these actions may be considered an unsafe and unsound practice.

Credit unions should keep the Division informed should media attention or member withdrawals exert unreasonable pressures on the credit union.

We will be reviewing each credit union’s liquidity/currency and communication plans as part of our exam process. Our review will include the items noted above.

Estimating Liquidity/Currency Needs

Unfortunately, no one really knows how much currency will be needed to cover withdrawals because of the Y2K issue. The currency demand will depend on how the public reacts to Y2K.

However, we expect each credit union to evaluate the potential impact of Y2K-related withdrawals on the operation of the credit union. The basis for this evaluation is an estimate of the aggregate level of withdrawals related to Y2K, over and above normal liquidity/currency levels.

One approach to develop an aggregate is to multiply the estimated number of members who will withdraw cash because of Y2K by the estimated average amount per withdrawal. For example, what would your liquidity/currency needs be if 75% of your membership withdrew an extra $500 in December 1999? Another approach is to ball-park the needed cash as a multiple of typical liquidity/currency levels.

Your analysis may need to be a good deal more complex than the above approaches. It should also estimate the timeframe over which you believe the withdrawals may occur. Depending upon the Y2K disruption, withdrawals may continue into 2000.

Some observers have suggested the following theories in regard to withdrawal behavior:

Each credit union must determine for itself how it believes withdrawal behavior will occur based on its membership and share mix.

Resources

The following contacts may assist you in establishing borrowing lines at the respective institutions:

DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8791 FAX: (360) 704-699

January 15, 1999
No. B-99-3

List of Division Opinions and Bulletins Issued in 1998

Opinions

From time to time, the Division issues written opinions in response to questions about how a statute or rule should be applied to a particular factual situation. In order to make these opinions available generally to credit unions, we will publish a list of new opinions twice a year. The Division is happy to provide "redacted" copies of the opinions upon request. Enclosed is a list of opinions issued in 1998.

Please be aware that the opinions are limited to their facts; we may reach a different conclusion if presented with different facts or conditions.

Bulletins

In addition, the Division issues bulletins on regulatory developments. Enclosed is a list of the bulletins issued in 1998. A copy of each bulletin was provided to credit unions at the time the bulletin was issued.

Please call or fax your request to Diane Moye (at the Division office at the numbers above) if you would like a copy of an opinion or bulletin on the enclosed lists.


1998 DCU Opinions

Number

Subject matter Date
O-98-1

Canceled

 
O-98-2 Requirement for submission of Form FI 6002, 1997 Economic Census, to U.S. Department of Commerce March 27, 1998
O-98-3 Investment in real property primarily for own use (RCW 31.12.438) April 1, 1998
O-98-4 Summary of new 1997 Washington State Credit Union Act, Chapter 31.12 RCW, effective January 1, 1998 January 1, 1998
O-98-5 Signature guarantee program April 20, 1998
O-98-6 Approval of Progressive Financial Institutions Bond June 24, 1998
O-98-7 Disclosure of records to state law enforcement agencies April 23, 1998
O-98-8 Control of non-profit charitable organization July 9, 1998
O-98-9 Taking former employees of occupational group as members August 14, 1998
O-98-10 Effective date of credit union mergers August 14, 1998
O-98-11 Director's absences aggregated over 12 month period regardless of intervening re-election December 10, 1998
O-98-12 Definition of "voluntary committee" December 30, 1998

1998 DCU Bulletins

Number Subject matter Date
B-98-1 List of Division Opinions and Bulletins Issued in 1997 January 22, 1998
B-98-2 Distribution of Copies of IRS Form 990-Filed by the Division in ‘95-‘96-’97 (Sent to state-chartered credit unions only) January 23, 1998
B-98-5 Follow-up on IRS Form 990 March 9, 1998
B-98-6 Guidance on DCU’s Year 2000 (Y2K) Quarterly Reports April 2, 1998
B-98-7 DCU examiners achieve salary parity with other divisions May 21, 1998
B-98-8 Division begins rule-making to implement 1997 Credit Union Act and to review rules under Governor’s Executive Order 97-02 June 18, 1998
B-98-9 New DCU rules on prohibited fees and nonpreferential loans take effect June 22, 1998
B-98-10 Reminder on quarterly Year 2000 (Y2K) reports June 24, 1998
B-98-11 List of Division opinions issued in the first half of 1998 July 17, 1998
B-98-12 List of DCU and NCUA guidance on Year 2000 (Y2K) July 8, 1998
B-98-13 Effective date of credit union mergers August 17, 1998
B-98-14 Important points relating to Year 2000 (Y2K) September 18, 1998
B-98-15 Division starts rule-making process to revise MBL rules and repeal real estate appraisal rules November 18, 1998
B-98-16 Year 2000 (Y2K) update #8 December 4, 1998
B-98-17 Division says "Thank You" to 1998 Speakers December 17, 1998
B-98-18 Governor’s Year 2000 (Y2K) request for CEO contacts December 29, 1998

DCU BULLETIN

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8718 FAX: (360) 704-6991

February 11, 1999
No. B-99-4

DFI Director John L. Bley Announces Year 2000 Meetings With Financial Institutions (In Two Series - Late Winter and Summer)
First Series of Y2K Meetings

The first series of Year 2000 (Y2K) meetings will be held in Bellingham, Seattle, Vancouver, Spokane and Yakima in March. Our agenda for each meeting is as follows:

We will assemble together for the morning session, then break out into two sessions for the afternoon.

The first series of meetings are scheduled as follows:

  • March 02, 1999 Bellingham
  • March 03, 1999 Seattle
  • March 05, 1999 Vancouver
  • March 11, 1999 Spokane
  • March 12, 1999 Yakima
  • Please RSVP for the meeting you wish to attend by completing and faxing back page three. We will be contacting individual banks/thrifts/credit unions to arrange meeting rooms, and will advise you when the arrangements have been made.

    We invite you to visit DFI's website for a discussion of Y2K issues by the Director and by the Division of Banks (DOB) and Division of Credit Unions (DCU):

    Director: http://www.dfi.wa.gov/

    DOB: http://www.dfi.wa.gov/banks/

    DCU: http://www.dfi.wa.gov/cu/

    Second Series of Y2K Meetings

    We intend to conduct the second series of Y2K meetings this summer, perhaps through Washington Interactive Television (WIT). We will let you know when we have firmed up the second series of meetings.

    DFI's March 1999 Y2K Meetings - RSVP Form

    NAME:
    Credit Union:
    Telephone number:
    Number of persons who will attend at the following site(s):
      March 02, 1999 in Bellingham:
      March 03, 1999 in Seattle:
      March 05, 1999 in Vancouver:
      March 11, 1999 in Spokane:
      March 12, 1999 in Yakima:

    Please fax this page back to the Division of Credit Unions at (360) 704-6991.


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    February 24, 1999
    No. B-99-5

    Completing Year 2000 (Y2k) Testing with TransAlliance Before March 31, 1999

    DCU’s Y2K Update #1

    At a recent meeting with DFI, TransAlliance indicated that time is available for most Washington credit unions to complete their Y2K testing (with TransAlliance) prior to the end of March 1999. However, credit unions must make such arrangements with TransAlliance soon in order to take advantage of this window of availability.

    We strongly encourage those credit unions that have not yet tested with TransAlliance to contact Deborah J. Olivey at TransAlliance, at (425) 644-5124, to schedule a time for your testing. We understand that many of you will need to schedule testing through your primary share and loan vendor. Others will need to schedule tests directly with TransAlliance. In each case, we encourage you to get your credit union on the schedule as soon as possible.

    Credit Unions That Did Not Substantially Complete Y2K Testing By December 31, 1998 - Attachment To Supervisory Agreement

    By letter dated January 19, 1999, DCU asked credit unions that had not substantially completed Y2K testing by December 31, 1998 to sign a Supervisory Agreement. In the Agreement, the credit union agrees to complete Y2K testing by March 31, 1999, which is the DCU benchmark for completion of testing.

    We understand that some of the credit unions that received the January 19 letter will not be able to complete Y2K testing of certain vendor-supplied systems by March 31, 1999. Of course, the enhanced availability of testing with TransAlliance, discussed above, should make it easier for many credit unions to meet the March 31, 1999 benchmark. Nonetheless, some credit unions that received the January 19 letter may still feel that they cannot meet the March 31, 1999 benchmark, because of later testing by vendors. We have developed the enclosed Attachment (to the Supervisory Agreement) to accommodate this situation.

    In the Attachment, the credit union agrees that it will successfully complete Y2K testing of its mission-critical systems by March 31, 1999, except for the vendor systems listed in the Attachment. The credit union must provide a date for the completion of testing of the listed systems. We expect the testing to be completed no later than June 30, 1999, which is the NCUA benchmark for completion of testing.

    Credit unions in this situation should complete and sign the Supervisory Agreement and Attachment and return the entire January 19, 1999 letter with the Attachment to Mike Delimont of the Division as soon as possible.

    Attachment to Supervisory Agreement with DCU
    (Included with DCU Letter Dated January 19, 1999)

    (Credit Union) is not able to comply fully with paragraph 1 of the Supervisory Agreement described above (Supervisory Agreement) because it will not be able to successfully complete Y2K testing of certain vendor-provided, mission-critical systems by March 31, 1999. However, the Credit Union has agreed to complete Y2K testing of such systems by certain dates, in accordance with the following:

    Notwithstanding paragraph 1 of the Supervisory Agreement, the Credit Union agrees that it will successfully complete Y2K testing of its mission-critical system(s) by March 31, 1999, except for the vendor-provided, mission-critical system(s) listed below. The Credit Union agrees that it will successfully complete Y2K testing of the system(s) listed below by the applicable date(s) provided below.

    Mission-critical

    System Vendor Testing Completion Date

     
     
     

    The Board of Directors of the Credit Union has duly approved the Credit Union's execution of this Attachment at a meeting held on , 1999.

    On behalf of the Credit Union:

     
    Board Chairman Date Managing Officer/CEO Date

     

     
    Print name Print name

     


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    March 5, 1999
    No. B-99-6

    Year 2000 (Y2K) Reporting to the Division for March 31, 1999

    DCU’s Y2K Update #11

    As you know, the next quarterly Y2K report to the Division is due on March 31, 1999. You should focus in your report on member communication efforts, liquidity planning (see DCU Bulletin No. B-99-2) and business resumption planning (see NCUA Letters 98-CU-12 and 99-CU-1). In your report, please provide the following items as well as any other materials you believe demonstrate your progress on these essential Y2K topics:

    1. A copy of your analysis estimating the potential Y2K liquidity and currency need. The worksheet developed by CUNA for this purpose is one acceptable approach. However, a credit union may use a reasonable approach.
    2. A copy of the most recent Y2K liquidity plan approved by your board.
    3. A list of resources available for Y2K liquidity purposes including assets as well as collateralized or guaranteed borrowing lines now in place or in process.
    4. A brief summary or list of member Y2K communication efforts completed during the first quarter 1999 as well as any planned for the remainder of 1999.
    5. A brief statement outlining the progress toward completion of your business resumption contingency plan.
    6. Documentation to support resolution of any outstanding Y2K examination recommendations.

    Beginning March 1, 1999, we will, during our on-site safety and soundness examinations, analyze your Y2K liquidity planning efforts. We will factor our analysis into the liquidity component of your CAMEL rating.


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    March 24, 1999
    No. B-99-7

    Division of Credit Unions’ Phone list

    The following is a list of current Division staff, with their titles, direct telephone and fax numbers, and e-mail addresses. The Division's main telephone number is 360/902-8701. The Division’s fax number is 360/704-6991.

    Office Staff:

    Name           Phone number Fax number E-mail address

    Parker Cann - 360/902-8778 - 360/704-6978 - pcann@dfi.wa.gov
    Director of Credit Unions

    Linda Jekel - 360/902-8753 - 360/704-6953 - jekel@dfi.wa.gov
    Program Manager

    William Opperman - 360/902-8758 - 360/704-6958 - wopperman@dfi.wa.gov
    Financial Examiner Supervisor

    Mike Delimont - 360/902-8790 - 360/704-6990 - mdelimont@dfi.wa.gov
    Sr. Financial Examiner

    Tina Philippsen - 360/902-8718 - 360/704-6918 - tphilippsen@dfi.wa.gov
    Division Secretary

    Diane Moye - 360/902-8791 - 360/704-6991 - dmoye@dfi.wa.gov
    Office Assistant

    Field Staff:

    Caryl Ausejo - 360/902-8806 - 360/704-7006 - causejo@dfi.wa.gov
    Sr. Financial Examiner

    Sue Graham - 360/902-8816 - 360/704-7016 - sgraham@dfi.wa.gov
    Financial Examiner Assistant

    Austine Izuagbe - 360/902-8813 - 360/704-7013 - aizuagbe@dfi.wa.gov
    Financial Examiner Assistant

    Jaime Manio - 360/902-8807 - 360/704-7007 - jmanio@dfi.wa.gov
    Sr. Financial Examiner

    Rogelio Pascua - 360/902-8803 - 360/704-7003 - rpascua@dfi.wa.gov
    Sr. Financial Examiner

    Joseph Rogers - 360/902-8801 - 360/704-7001 - jrogers@dfi.wa.gov
    Sr. Financial Examiner

    Glenn Ross - 360/902-8817 - 360/704-7017 - gross@dfi.wa.gov
    Sr. Financial Examiner

    Rick Ullrich - 360/902-8802  -360/704-7002 - rullrich@dfi.wa.gov
    Sr. Financial Examiner

    Jay Weintraub - 360/902-8804 - 360/704-7004 - jweintraub@dfi.wa.gov
    Sr. Financial Examiner

    Feryl Woodworth - 360/902-8814 - 360/704-7014 - fwoodworth@dfi.wa.gov
    Financial Examiner

    If you have a problem reaching an employee, please contact Tina Philippsen at 360/902-8718.

    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) 704-6991

    March 25, 1999
    No. B-99-8

    Division Increases Maximum Size of SOG Groups to 200 Persons

    Under Division rules, state credit unions with an approved small occupational group (SOG) bylaw amendment may add SOGs that meet certain restrictions to their field of membership (FOM) without prior Division approval. WAC 208-472-041. Among these restrictions is a size limit - each SOG may not exceed 100 persons, or a higher number authorized by the Division. WAC 208-472-041(3)(d). The SOG provision was added to Division rules in 1996, and the 100 person maximum has not been increased since that time.

    Effective January 1, 1999, the NCUA increased from 100 to 200 the maximum size of small occupational groups which may be added by federally-chartered credit unions to their FOM under the NCUA's streamlined procedure, without regard to whether the group was already included in another credit union's FOM. See NCUA IRPS 99-1. We believe that it is appropriate for state credit unions to enjoy the same level of regulatory flexibility to serve new groups of small size.

    Consequently, the Division is increasing the maximum size of SOGs from 100 to 200 persons. This change takes effect as of the date of this Bulletin. No other restrictions on SOGs are affected.

    The Division is considering additional changes to the SOG restrictions. The Division is seeking input from credit unions whether:

    1. A further increase in the 200-person size limit of SOGs is warranted considering general population increases or competitive or other relevant factors.
    2. SOGs may be added without regard to overlaps.

    Please provide your written comments on this matter to Parker Cann at the Division.


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    May 14, 1999
    No. B-99-9

    Division Files NASCUS Accreditation Application

    Application Filed

    The Division of Credit Unions is pleased to announce that we filed the NASCUS accreditation application on May 7, 1999. We answered 65 questions and provided supporting documentation that covered the following areas:

    In late June 1999, the NASCUS accreditation team will be on-site in Olympia to examine us. The team will interview staff and review on-site materials.

    How Many States Are Accredited?

    As of May 1, 1999, 21 state credit union regulatory agencies have been accredited by NASCUS.

    More Questions?

    We would happy to answer any questions. Please call Parker Cann at 360/ 902-8778 or Linda Jekel 360/ 902-8753.

    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    May 25, 1999
    No. B-99-10

    Year 2000 Benchmarks and Reporting for June 1999

    Y2K Update # 12

    June 30, 1999 Benchmarks

    As noted in NCUA letters and previous Division Bulletins, credit unions must by June 30, 1999:

    1. Successfully complete Y2K testing of their mission-critical systems.
    2. Complete their Business Resumption Contingency Plans.

    The NCUA will roll up credit unions' Y2K compliance information into a national database for reporting to Congress.

    June 1999 Reporting

    Credit unions must file certain documents with the Division between now and June 30:

    1. By June 8, 1999 - Filing of BRCP Questionnaire. The NCUA has drafted a questionnaire that we must use in evaluating your Business Resumption Contingency Plans (BRCP). Please complete the questionnaire, enclosed as Attachment I, and return it to the Division by June 8, 1999.

    2. By June 30, 1999 - Filing of Quarterly Reports, etc. By June 30, 1999, credit unions must submit to the Division:

    1. Their NCUA Year 2000 Quarterly Report for the second quarter.
    2. The information requested in the enclosed Attachment II. If your Business Resumption Contingency Plan has changed since a copy was last submitted to the Division, please include a copy of the current Plan.
    3. The credit union's response to any outstanding Y2K examination recommendations.
    4. If your credit union signed a Supervisory Agreement with the Division regarding completion of testing, submit an updated NCUA Quarterly Report as soon as you have completed testing. Any credit union that signed a Supervisory Agreement that does not report completion of testing before June 8 will be contacted by the Division to verify the current status of testing. Credit unions that do not anticipate meeting the June 30 benchmark for the completion of testing will be asked to enter into administrative action with the Division and NCUA before June 30, as required by NCUA policy.

    Summary of Liquidity Plan Information

    As you are aware, each credit union was required to submit to the Division a Best, Worst, and Most Likely scenario for Y2K liquidity. The table below summarizes the data provided to date:

     

    Best Case

    Worst Case

    Available Assets

    Low

    .3%

    2.8%

    3.4%

    High

    6.0%

    39.0%

    41.0%

    Average

    2.3%

    12.6%

    18.3%

    Each credit union must independently evaluate their field of membership and other circumstances to determine adequate liquidity and currency levels for late 1999.

    Liquidity Plan Considerations

    Business Resumption Contingency Plan

    As noted above, credit unions should complete their Business Resumption Contingency Plans by June 30, 1999. Quality contingency planning will help you and your members deal with unanticipated disruptions. The NCUA has provided guidance on business resumption planning in Letters to Credit Unions 98-CU-12 and 99-CU-1. Depending on circumstances at individual credit unions, the following practical suggestions may be useful.

    Washington State's Year 2000 Readiness Report

    The Governor’s office has compiled information on Y2K progress in a variety of industries. It is available to the public as the Washington State Year 2000 Readiness Report. This report is on the internet at http:access.wa.gov/2000 and may be useful to help inform your members about the Y2K issue. Two additional volumes of the report are anticipated, one in late July and another in October.

    There is also an interactive database available at that web site that you may want to tell your members about. It allows the public to indicate the county they live in, choose from a variety of options for services provided (electric, gas, financial, etc.) in that county, and then print out a report of statements from those service providers on their progress on Y2K.

    Attachment I

    Contingency Plans

    Charter #:  
    CU Name:  

    Section 1 - Contingency Planning

       

    Y, N, N/A

    1-1 Does the credit union have a written BRCP?
    (If yes, complete Section 2.)
     
    1-2 Provide the date the credit union completed or expects to complete the BRCP (mm/dd/yy):  
    1-3 Does the credit union have a written LCFP?
    (If yes, complete Section 3)
     
    1-4 Provide the date the credit union completed or expects to complete the LCFP (mm/dd/yy):  

    Section 2 - Business Resumption Contingency Plan

       

    Y, N, N/A

    2-1 Is the BRCP reasonable and acceptable for the credit union’s size and complexity?  
    2-2 Has the credit union established the BRCP Organizational Planning Guidelines?  
    2-3 Are the Organizational Planning Guidelines reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Establish a continuity project work group and assign roles and responsibilities.
     
     
    • Identify core business processes.
     
     
    • Establish an event timeline.
     
     
    • Develop a risk management process and reporting system.
     
     
    • Review existing business continuity or contingency plans and disaster recovery programs.
     
    2-4 Has the credit union performed a Business Impact Analysis?  
    2-5 Is the Business Impact Analysis reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Perform a risk analysis of each core business process which considers:
     
     
    1. the status of Year 2000 readiness renovation or replacement plans for mission-critical systems, whether administered internally or by service providers;
     
     
    • the financial and marketing impact of the loss of a core business process, including what impact the loss might have on the viability of the financial institution; and
     
     
    • the impact of regulatory guidelines.
     
     
    • Define and document Year 2000 failure scenarios (consider the risk of both internal and infrastructure failures).
     
     
    • Determine the minimum acceptable level of outputs and services.
     
    2-6 Has the credit union developed a Core Systems Contingency Plan?  
    2-7 Is the Core Systems Contingency Plan reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Evaluate options and select the most reasonable contingency strategy.
     
     
    • Develop a specific recovery plan for each core business process that considers the minimum level of acceptable output.
     
     
    • Document the products of the core business processes that may need to be recovered such as:
     
     
      1. machine-readable copies of the institution’s master-files and transaction files;
     
     
      1. printed (or other similar medium such as microfiche) trial balances;
     
     
      1. master list of Year 2000 readiness contact points of every client, supplier, bank, and government agency that shares data with the institution;
     
     
      1. electronic text-format copies of all master files and trial balance reports; and
     
     
      1. copy of machine-readable data files for all customers (in those instances where the financial institution’s data processing facility is providing services to other financial institutions).
     
     
    1. Other important review processes to consider include:
     
     
      1. legal counsel reviews of data processing and service providers’ contracts where necessary to determine the responsibilities of each of the parties;
     
     
      1. comprehensive review of all of data processing insurance coverage;
     
     
      1. public relations responsibilities that are organized and delegated to specific individuals or committees ensuring that appropriate staff make accurate statements;
     
     
      1. review of all Local Area Network (LAN) and Wide Area Network (WAN) access to other systems; and
     
     
      1. review and testing the financial institution’s disaster recovery site to ensure that Year 2000 capable hardware is available if needed.
     
     
    1. Establish trigger dates to activate the contingency plans.
     
     
    • Assign responsibility for business resumption of core business processes.
     
     
    • Implement an independent review of the feasibility of the contingency plan.
     
     
    • Develop an implementation strategy for the physical rollover.
     
    2-8 Has the credit union validated (tested) the BRCP?  
    2-9 Is the Validation reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Perform periodic tests of the contingency plan (review, update, and validate on a continual basis).
     
     
    • Test plans approved by senior management.
     
     
    • Independent validation of test plans by one or more knowledgeable individuals who were not involved in the development of the plans.
     

    Section 3 - Liquidity Planning

       

    Y, N, N/A

    3-1 Is the Liquidity Contingency Funding Plan reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Identify key liquidity personnel and resources.
     
     
    • Identify sources of liquidity.
     
     
    • Estimate liquidity needs:
     
     
    1. perform a historical cash needs analysis;
     
     
    • estimate cash demand due to the century date change.
     
     
    • Obtain backup liquidity sources (if needed);
     
     
    • Address monitoring liquidity prior to, during, and after the century date change.
     
     
    • Address security issues such as vault limitations, bond/insurance coverages, armored car or other cash delivery services, etc..
     
     
    • Address currency delivery and handling.
     
     
    • Address member communication.
     
     
    • Provide for employee education.
     
    3-2 Was the LCFP approved by the board of directors?  
    3-3 Has the credit union performed a Cash Needs Analysis?  
    3-4 Is the Cash Needs Analysis reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Perform an analysis of cash needs for the periods prior to, during rollover, and immediately after the century date change.
     
     
    • Review existing lines of credit to ensure they are adequate to meet unanticipated needs.
     
     
    • Require at least quarterly reviews of the credit union’s cash position and future cash needs prior to June 30, 1999, and monthly reviews after June 30, 1999.
     
    3-5 Has the credit union developed a Member Awareness Campaign?  
    3-6 Is the Member Awareness Campaign reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Methodologies for disseminating information (such as statement mailings (such as statement stuffers), news letters, specific Y2K statement issuances, websites, or other means determined acceptable by the credit union)
     
     
    • Discussing their Y2K statements with their attorneys prior to releasing the information.
     
     
    • Determining that Y2K statements are made in accordance with the Year 2000 Information and Readiness Disclosure Act (Note: Compliance with this Act is not required, but is recommended).
     
    3-7 Has the credit union developed a Staff Education Program?  
    3-8 Is the Staff Education Program reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Education of key staff members on the credit union’s Y2K efforts.
     
     
    • Assignment of key staff members to handle member inquires.
     
     
    • Assignment of key staff members to handle media inquires.
     

    The information provided in this report is certified correct by:

         
    CEO/ Manager   Date

     

    Attachment II

    June 30, 1999 Y2K Report to Division

    Credit Union Name CU #

    Circle the correct response or fill in the blank below.

    1) Which Corporate Credit Union(s) does your credit union belong to? What is the size of your guaranteed line of credit through that Corporate?

    Wash. Corporate Yes No

    Size of Guaranteed Line $

    WesCorp Yes No

    Size of Guaranteed Line $

    Size of Guaranteed Line $  

    2) Does your credit union have a borrowing line established through the FHLB? Yes / No

    3) Does your credit union have a borrowing line established through the Federal Reserve Bank? Yes / No

    4) Does your credit union have debit or credit cards through Equifax in:

    1. the pass-through system Yes No
    2. the Card-source program Yes No
    3. the BT2000 CUMA program Yes No
    4. the TBS system Yes No

    5) Have the following plans been approved by the Board of Directors for your credit union?

    1. Liquidity Yes No Date
    2. Business Resumption Yes / No Date
    3. Communications Yes / No Date

    6) Does your credit union plan to perform any additional testing over the weekend of December 31, 1999 – January 2, 2000? Yes / No

    ******

    Certified Correct by Manager/CEO:

    Signature:

     

    Date:

     

    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-8991

    June 29, 1999
    No. B-99-11

     

    Division fax number to change

    Effective July 15, 1999, the Division will no longer use the 902-8800 fax number. The following is a list of current Division staff, with their titles, direct telephone and fax numbers, and e-mail addresses. The Division's main telephone number is 360/902-8701. The Division's fax number is 360/704-6991.

    Name                 Phone number    Fax number     E-mail address

    Office Staff:

    Parker Cann          360/902-8778                 360/704-6978             pcann@dfi.wa.gov
    Director of Credit Unions

    Linda Jekel              360/902-8753                 360/704-6953              ljekel@dfi.wa.gov
    Program Manager

    Mike Delimont         360/902-8790                  360/704-6990             mdelimont@dfi.wa.gov
    Financial Examiner Supervisor

    Tina Philippsen         360/902-8718                  360/704-6918              tphilippsen@dfi.wa.gov
    Division Secretary

    Diane Moye              360/902-8791                  360/704-6991            dmoye@dfi.wa.gov
    Office Assistant

    Field Staff:

    Caryl Ausejo              360/902-8806                  360/704-7006             causejo@dfi.wa.gov
    Sr. Financial Examiner

    Sue Graham                  360/902-8816                 360/704-7016          sgraham@dfi.wa.gov
    Financial Examiner Assistant

    Austine Izuagbe              360/902-8813                  360/704-7013          aizuagbe@dfi.wa.gov
    Financial Examiner Assistant

    Rogelio Pascua              360/902-8803                     360/704-7003      rpascua@dfi.wa.gov
    Sr. Financial Examiner

    Joseph Rogers              360/902-8801                      360/704-7001      jrogers@dfi.wa.gov
    Sr. Financial Examiner

    Glenn Ross                      360/902-8817                  360/704-7017          gross@dfi.wa.gov
    Sr. Financial Examiner

    Rick Ullrich                      360/902-8802                  360/704-7002          rullrich@dfi.wa.gov
    Sr. Financial Examiner

    Jay Weintraub                  360/902-8804                  360/704-7004          jweintraub@dfi.wa.gov
    Sr. Financial Examiner

    Feryl Woodworth              360/902-8814                  360/704-7014      fwoodworth@dfi.wa.gov
    Financial Examiner

    If you have a problem reaching an employee, please contact Diane Moye at 360/902-8790.

    Please remember the 902-8800 fax number will no longer work after July 15, 1999.


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    August 30, 1999
    No. B-99-12

    Year 2000 Reporting by September 30, 1999;
    Systems Conversions in Remainder of 1999

    Y2K Update # 13

    Reporting Due September 15 and September 30, 1999

    1. Reporting due by September 15, 1999 – Filing of the BRCP Questionnaire. The NCUA has prepared a questionnaire for evaluation of credit unions’ Business Resumption Contingency Plans (BRCP). Please complete the enclosed questionnaire and return it to the Division by September 15, 1999. We expect that all credit unions will have completed their BRCPs to the extent that they can answer "yes" to all of the questions on the questionnaire. If this is not the case, please contact Mike Delimont at (360) 902-8790 to discuss your situation.
    2. We expect that we will ask you to complete this questionnaire again in October.

    3. NCUA Quarterly Reports due by September 30, 1999 – From credit unions not 100% implemented as of June 30, 1999. Credit unions that were not fully Y2K implemented by June 30, 1999 should file an NCUA Y2K Quarterly Report by September 30, 1999, if they have not already filed a quarterly report indicating that they have achieved full implementation. Credit unions that do not expect to meet the September 30 implementation milestone should contact Mike Delimont well in advance of September 30 to discuss their situation.

    Systems Conversion Reminder

    Credit unions planning to convert or upgrade a system during the remainder of 1999 should review NCUA Letter No. 99-CU-10. The Letter contains regulatory guidance on conversions and upgrades and requires state credit unions to notify the Division of Credit Unions of the specifics of their conversion plans. The circumstances and content for such notifications are outlined in the Letter.

    Attachment I

    Contingency Plans

    Charter #:  
    CU Name:  

    Section 1 - Contingency Planning

       

    Y, N, N/A

    1-1 Does the credit union have a written BRCP?
    (If yes, complete Section 2.)
     
    1-2 Provide the date the credit union completed or expects to complete the BRCP (mm/dd/yy):  
    1-3 Does the credit union have a written LCFP?
    (If yes, complete Section 3)
     
    1-4 Provide the date the credit union completed or expects to complete the LCFP (mm/dd/yy):  

    Section 2 - Business Resumption Contingency Plan

       

    Y, N, N/A

    2-1 Is the BRCP reasonable and acceptable for the credit union’s size and complexity?  
    2-2 Has the credit union established the BRCP Organizational Planning Guidelines?  
    2-3 Are the Organizational Planning Guidelines reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Establish a continuity project work group and assign roles and responsibilities.
     
     
    • Identify core business processes.
     
     
    • Establish an event timeline.
     
     
    • Develop a risk management process and reporting system.
     
     
    • Review existing business continuity or contingency plans and disaster recovery programs.
     
    2-4 Has the credit union performed a Business Impact Analysis?  
    2-5 Is the Business Impact Analysis reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Perform a risk analysis of each core business process which considers:
     
     
    1. the status of Year 2000 readiness renovation or replacement plans for mission-critical systems, whether administered internally or by service providers;
     
     
    • the financial and marketing impact of the loss of a core business process, including what impact the loss might have on the viability of the financial institution; and
     
     
    • the impact of regulatory guidelines.
     
     
    • Define and document Year 2000 failure scenarios (consider the risk of both internal and infrastructure failures).
     
     
    • Determine the minimum acceptable level of outputs and services.
     
    2-6 Has the credit union developed a Core Systems Contingency Plan?  
    2-7 Is the Core Systems Contingency Plan reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Evaluate options and select the most reasonable contingency strategy.
     
     
    • Develop a specific recovery plan for each core business process that considers the minimum level of acceptable output.
     
     
    • Document the products of the core business processes that may need to be recovered such as:
     
     
      1. machine-readable copies of the institution’s master-files and transaction files;
     
     
      1. printed (or other similar medium such as microfiche) trial balances;
     
     
    1. master list of Year 2000 readiness contact points of every client, supplier, bank, and government agency that shares data with the institution;
     
     
      1. electronic text-format copies of all master files and trial balance reports; and
     
     
      1. copy of machine-readable data files for all customers (in those instances where the financial institution’s data processing facility is providing services to other financial institutions).
     
     
    1. Other important review processes to consider include:
     
     
    1. legal counsel reviews of data processing and service providers’ contracts where necessary to determine the responsibilities of each of the parties;
     
     
    1. comprehensive review of all of data processing insurance coverage;
     
     
      1. public relations responsibilities that are organized and delegated to specific individuals or committees ensuring that appropriate staff make accurate statements;
     
     
      1. review of all Local Area Network (LAN) and Wide Area Network (WAN) access to other systems; and
     
     
    1. review and testing the financial institution’s disaster recovery site to ensure that Year 2000 capable hardware is available if needed.
     
     
    1. Establish trigger dates to activate the contingency plans.
     
     
    • Assign responsibility for business resumption of core business processes.
     
     
    • Implement an independent review of the feasibility of the contingency plan.
     
     
    • Develop an implementation strategy for the physical rollover.
     
    2-8 Has the credit union validated (tested) the BRCP?  
    2-9 Is the Validation reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Perform periodic tests of the contingency plan (review, update, and validate on a continual basis).
     
     
    • Test plans approved by senior management.
     
     
    • Independent validation of test plans by one or more knowledgeable individuals who were not involved in the development of the plans.
     

    Section 3 - Liquidity Planning

       

    Y, N, N/A

    3-1 Is the Liquidity Contingency Funding Plan reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Identify key liquidity personnel and resources.
     
     
    • Identify sources of liquidity.
     
     
    • Estimate liquidity needs:
     
     
    1. perform a historical cash needs analysis;
     
     
    • estimate cash demand due to the century date change.
     
     
    • Obtain backup liquidity sources (if needed);
     
     
    • Address monitoring liquidity prior to, during, and after the century date change.
     
     
    • Address security issues such as vault limitations, bond/insurance coverages, armored car or other cash delivery services, etc..
     
     
    • Address currency delivery and handling.
     
     
    • Address member communication.
     
     
    • Provide for employee education.
     
    3-2 Was the LCFP approved by the board of directors?  
    3-3 Has the credit union performed a Cash Needs Analysis?  
    3-4 Is the Cash Needs Analysis reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Perform an analysis of cash needs for the periods prior to, during rollover, and immediately after the century date change.
     
     
    • Review existing lines of credit to ensure they are adequate to meet unanticipated needs.
     
     
    • Require at least quarterly reviews of the credit union’s cash position and future cash needs prior to June 30, 1999, and monthly reviews after June 30, 1999.
     
    3-5 Has the credit union developed a Member Awareness Campaign?  
    3-6 Is the Member Awareness Campaign reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Methodologies for disseminating information (such as statement mailings (such as statement stuffers), news letters, specific Y2K statement issuances, websites, or other means determined acceptable by the credit union)
     
     
    • Discussing their Y2K statements with their attorneys prior to releasing the information .
     
     
    • Determining that Y2K statements are made in accordance with the Year 2000 Information and Readiness Disclosure Act (Note: Compliance with this Act is not required, but is recommended).
     
    3-7 Has the credit union developed a Staff Education Program?  
    3-8 Is the Staff Education Program reasonable and acceptable for the credit union’s size and complexity? Evaluation criteria includes the following, as applicable:  
     
    1. Education of key staff members on the credit union’s Y2K efforts.
     
     
    • Assignment of key staff members to handle member inquires.
     
     
    • Assignment of key staff members to handle media inquires.
     

    The information provided in this report is certified correct by:

     
     

    CEO/ Manager

     

    Date


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    September 16, 1999
    No. B-99-13

     

    Y2K Testing and Implementation of Upgraded Equifax System

    Y2K Bulletin # 14

    The Division of Credit Unions (Division) has learned that Equifax implemented certain changes to its VISA/Mastercard systems on July 4, 1999. We understand that the changes affect on-line, batch processing, and pass-through systems.

    Credit unions should test their upgraded Equifax system. Please review your testing documentation to ensure that your credit union has appropriately tested the upgraded Equifax system you are using.

    If your credit union has not appropriately tested your upgraded Equifax system, you must complete testing and implementation of the system by September 30, 1999. If you have not tested this system, please sign the enclosed Supervisory Agreement below and return it to the Division promptly. In addition, please submit an NCUA Y2K quarterly report to the Division by September 30, 1999 reflecting the status of your systems.

    Should you have additional questions, please contact Mike Delimont at (360) 902-8790.


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    September 22, 1999
    No. B-99-14

    Credit Unions May Disregard Division Bulletin No. B-99-13

    Status on Y2K Testing and Implementation by Equifax

    Y2K Bulletin # 15

    In preparing our previous Bulletin, No. B-99-13, concerning testing of the Equifax VISA/Mastercard systems, we relied on information provided to us that subsequently turned out to be erroneous. After the Bulletin was issued, we learned that Y2K testing of the Equifax systems was completed in a timely manner by all of our credit unions prior to the June 30, 1999 Y2K benchmark.

    Please disregard Bulletin No. B-99-13. We apologize for any confusion.


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    November 2, 1999
    No. B-99-15

    Year 2000 Rollover Contact Numbers

    Y2K Bulletin # 16

    It may be particularly important that the Division of Credit Unions be able to reach key individuals from your credit union over the weekend of December 31, 1999 through January 3, 2000.

    Please take a few minutes to provide the contact numbers requested on the following form. If your credit union utilizes a telephone system that is not answered over the weekend and during non-business hours, please provide the alternative means of quickly contacting the key people at your credit union. The forms will be destroyed by March 6, 2000. Should an individual not have a particular method of communication, simply mark it N/A. The form should then be faxed to Mike Delimont at (360) 704-6990 by November 10, 1999.

     


    DCU BULLETIN

    Division of Credit Unions
    Washington State Department of Financial Institutions
    Phone: (360) 902-8718 FAX: (360) 704-6991

    November 3, 1999
    No. B-99-16

    Investments in Certificates of Deposit

    The recent experience with the failed Keystone National Bank (Keystone) reminds us that certificates of deposit are not without risk. Keystone had significant amounts of brokered deposits. Brokerage firms create brokered deposits by splitting up large master certificates of deposits (CDs) into smaller dollar denominations. Brokerage firms then sell the smaller denomination CDs to credit unions and other customers.

    At Keystone, several credit unions may well lose interest and/or principal in excess of the $100,000 FDIC insurance limit. At this point it is possible that a credit union in another state will lose $300,000 in principal that is above the limit. In addition, several credit unions stand to lose interest from the time of the failure of the bank to the date the principal is returned.

    A further danger may result when neither the depository institution's records nor the deposit broker's records show that the customer (e.g., credit union) is the owner of the deposit. Those deposits may not be insured.

    Credit unions who choose to purchase certificates of deposit in other financial institutions should weigh carefully and monitor the potential risk. In addition, management should consider structuring the investment to avoid loss of principal or interest to the degree possible. This would include ensuring that the credit union name appears on the certificate of deposit or the broker's records.