Washington State Department of Financial Institutions

Division of Credit Unions

Bulletins 2006

DCU Bulletin

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

November 29, 2006


Internal Audit Is Critical

Volunteers and senior management are responsible for having an effective system of internal controls. They are also responsible for ensuring that the importance of internal control is understood and respected throughout the credit union. This overall responsibility cannot be delegated to anyone else. They may, however, delegate the testing and assessment of internal controls to others. Accordingly, volunteers and senior management should have reasonable assurance that the system of internal control prevents or detects significant inaccurate, incomplete, or unauthorized transactions; deficiencies in the safeguarding of assets; unreliable financial reporting (which includes regulatory reporting); and deviations from laws, regulations, and the credit union's policies.

Read the complete Bulletin B-06-07 (PDF)...

November 17, 2006


Examiners to Focus on Preparedness

Credit unions have both a fiduciary and a philosophical duty to make sure their services are available to members under any circumstances. To live up to that promise, credit unions need to plan for a wide range of potential conditions and be prepared to respond in an orderly and productive manner.

Read the complete Bulletin B-06-06 (PDF)...

August 24, 2006


Division to Implement ACH Collection of Fees

For two years the Division of Credit Union (Division) has discussed with the credit unions officers on the Efficiency & Budget Taskforce the possibility of collecting quarterly asset assessment fees through Automated Clearing House (ACH) process. This topic has also been mentioned in two Government Affairs Committee (GAC) meetings. The Division is now pleased to announce we are prepared to begin collection of the asset assessment fees through the ACH process beginning with fees due in October 2006. This process will use the asset level reported by the credit union in the appropriate quarter (see WAC 208-418-040) and the factor as outlined below to calculate assessment. These factors were previously publicized in Bulletin B-02-12 in June 2002. There are no fee increases in either this process or the listed factors below. We anticipate this process will result in cost savings for both the credit unions and the Division.

Read the complete Bulletin B-06-05 (PDF)...

July 24, 2006


Division Begins Examinations of Credit Union Websites

During the week of April 17, 2006, the Division of Credit Unions (Division) conducted a pilot website examination for a selected sample of credit unions. Those credit unions volunteered for the experience. The examinations tested the credit union’s internet website for compliance with various consumer protection laws and regulations. After reviewing the results of those exams, the Division has adapted the procedures and is now prepared to implement the process for the remaining credit unions having exams beginning after August 31, 2006.

Read the complete Bulletin B-06-04 (PDF)...

July 21, 2006


Corporate Governance Task Force Summary of Characteristics of Good Corporate Governance

The Washington Credit Union League recently sponsored a series of meetings to identify the key elements of good corporate governance in credit unions. Board members, credit union management, a credit union member, League staff, and Division of Credit Unions staff participated in the discussion. The group agreed there is no one path to effective corporate governance. The Carver model of corporate governance was discussed at length. The Carver model would need to be adapted significantly to comply with statutory and regulatory requirements incumbent upon credit unions. Other governance methods seem equally good, particularly if they exhibit the following characteristics identified by the Corporate Governance Task Force:

Member Representation. A well governed credit union should plan for and periodically evaluate how well the profile of the board represents the profile of the membership at large. A credit union’s field of membership may contain groups of occupational, associational, and communities. Each group in the field of membership may have specific issues as a priority. How well those issues translate into products and services desired by the membership will have a significant impact on the viability of the credit union.

Ethics Policy. A well-governed credit union should establish an ethics policy (or policies) that establish a framework for the ethical culture of the organization. The policies should address issues such as: corporate ethics, fraud, conflict of interest, confidentiality, and fiduciary responsibilities. The Board remains responsible to ensure their action and conduct complies with the policies approved for the credit union. The Board should hold the CEO responsible for implementing these policies throughout the organization.

For more characteristics, read the complete Bulletin B-06-03 (PDF)...

July 12, 2006


Division Begins Process to Adopt Rules Implementing RCW 31.12.408

The Department of Financial Institutions (“Department”) has been approached by several credit union executives and the Washington Credit Union League to inquire about credit union shares and deposits in Washington becoming insured by a private insurer. RCW 31.12.408 allows credit unions shares and deposits to be insured under an insurance program that is equivalent to the federal share insurance program. An equivalent share insurance program is defined as one that: “(a) holds reserves proportionally equal to the federal share insurance program; (b) maintains adequate reserves and access to additional sources of funds through replenishment features, reinsurance, or other sources of funds; and (c) has share insurance contracts that reflect a national geographic diversity.”

As part of the statutory process under RCW 31.12.408, the Director of The Department of Financial Institutions must hold a public hearing and make a finding that the alternative share insurance meets the standards set forth above. That finding must then be reported to the appropriate House and Senate committees.

As a first step in this process, the Department has filed the attached CR-101 to notify all interested parties that it intends to begin the process of defining the terms in RCW 31.12.408, setting forth the requirements for credit unions that want to insure privately, and identifying the requirements for the private share insurer. Interested parties can participate in this rulemaking process by contacting either:

Linda Jekel, Director of Credit Unions
PO Box 41200
Olympia, WA 98504
Phone: (360) 902-8778
E-mail: ljekel@dfi.wa.gov
Joanne Conrad, Specialist/Consultant
PO Box 41200
Olympia, WA 98504
Phone: (360) 902-8813
E-mail: jconrad@dfi.wa.gov

Read the complete Bulletin B-06-02 and CR-101 (PDF)...

January 11, 2006
No. B-06-01

Safe & Sound Expansion of MBL Portfolios

The Division of Credit Unions (Division) worked to extend to Washington state chartered credit unions (WSCCUs) the flexibility they need to effectively provide members with the loans to develop their businesses and thereby strengthen the economy in Washington. WSCCUs must follow Chapter 208-460 WAC requirements for Member Business Lending (MBLs). This rule and the statutory requirements on the safe and sound operation of credit unions provide the authority to make MBLs within state chartered credit unions.

As of June 30, 2005, 43 of 79 WSCCUs had a MBL portfolio and 35 of the 43 WSCCUs held less than 5% of their assets in MBLs. In addition to various MBL portfolio sizes, the size of individual MBLs vary. The current rule provides for credit unions wishing to extend small business loans to members as well as credit unions wishing to make MBLs on a much larger scale. The Division recognizes there are credit unions at various places along the size continuum. The Division expects WSCCUs with larger MBL operations to demonstrate adequate sophisticated standards of operation to manage and mitigate the associated risks.

Read the complete Bulletin B-06-01 (PDF)...