BILL ANALYSIS �
AB 1282
Page 1
Date of Hearing: April 22, 2013
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
AB 1282 (Bonta) - As Amended: April 15, 2013
SUBJECT : Financial institutions: credit unions.
SUMMARY : Requires the amount of a state chartered credit
union's annual assessment to be the greater of $2,000 or the sum
of the products determined by multiplying increments of the
credit union's total assets by percentages of the base
assessment rate according to a newly established table with
increments of total assets up to an excess of over
$10,000,000,000. Specifically, this bill :
1)Implements a new table to determine annual assessments:
-------------------------------
|Percentage of Base |Total |
|Assessment Rate |Assets |
|----------------------+--------|
|$0-$3,000,000 |85.0% |
|----------------------+--------|
|$3,000,000-$6,000,000 |25.0% |
|----------------------+--------|
|$6,000,000-$10,000,000|13.0% |
| | |
|----------------------+--------|
|$10,000,000-$100,000,0|12.5% |
|00 | |
|----------------------+--------|
|$100,000,000-$500,000,|12.25% |
|000 | |
|----------------------+--------|
|$500,000,000-$1,000,00|12.0% |
|0,000 | |
|----------------------+--------|
|$1,000,000,000-$2,000,|11.5% |
|000,000 | |
|----------------------+--------|
|$2,000,000,000-$5,000,|8.0% |
|000,000 | |
|----------------------+--------|
|$5,000,000,000-$10,000|3.5% |
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|,000,000 | |
|----------------------+--------|
|Excess over |3.0% |
|$10,000,000,000 | |
-------------------------------
EXISTING FEDERAL LAW establishes the National Credit Union
Administration (NCUA) created by the U.S. Congress as an
independent federal agency to regulate, insure, charter and
supervise federal credit unions. (12 U.S.C. 14)
EXISTING STATE LAW
1)Provides that the Department of Financial Institutions (DFI)
shall regulate state chartered credit unions.
2)Authorizes the Commissioner of DFI to annually levy on and
collect from state chartered credit unions an assessment in an
amount sufficient to meet the expenses for administering the
California Credit Union Law in order to provide a reasonable
reserve for contingencies.
3)Establishes the annual assessment on any credit union holding
a certificate authorizing it to act as a credit union to be
the greater of one thousand five hundred dollars or the sum of
the products determined by multiplying increments of the
credit union's total assets by percentages of the base
assessment rate, according to the following table: [Financial
Code, Section 14351]
----------------------------------
| | |
|Total Assets |Percentage |
| |of Base |
| | |
|--------------------+-------------|
| | |
|(In millions) |Assessment |
| |Rate |
| | |
|--------------------+-------------|
| | |
|First $3 |85.0% |
| | |
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|--------------------+-------------|
| | |
|Next $3 |30.0% |
| | |
|--------------------+-------------|
| | |
|Next $4 |12.5% |
| | |
|--------------------+-------------|
| | |
|Excess over $10 |11.0% |
| | |
| | |
----------------------------------
FISCAL EFFECT : Unknown.
COMMENTS :
Under the dual banking system, banks and credit unions can
determine whether or not to establish as a California state
chartered financial institution regulated by DFI or establish as
a federally chartered financial institution regulated by either
the Federal Reserve, the Office of the Comptroller of the
Currency or NCUA. Recent data shows, credit unions are more
likely to become federally chartered than state chartered
because overall it is more costly to become state chartered.
The main goal of AB 1282 is to equitably redistribute
assessments paid by state chartered credit unions to DFI in
order to keep them more closely aligned with federally chartered
credit unions. Current law requires all state chartered credit
unions to pay assessments based on asset size. These
assessments provide revenue to a special fund agency in order to
administer the division of DFI that regulates and examines state
chartered credit unions. DFI currently needs $7.2 million a
year to operate the credit union division.
AB 1282 hopes to address the issue of larger state chartered
financial institutions who pay a disproportionate amount to DFI
compared to mid and small state chartered credit unions. The
inequity is causing large state chartered credit unions to
consider and ultimately become federally chartered over state
chartered.
AB 1282
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According to the sponsor, the California Credit Union League,
"If the top three state chartered credit unions (as determined
by asset size) were to opt out to move to federal charters, the
DFI would lose approximately $1.7 million out of their current
approximate $7.2 million budget. The loss of the largest credit
unions would severely cut the special fund revenue generated by
their assessments."
In addition, should California lose the larger state chartered
credit unions, it would be the mid and small state chartered
credit unions who would have to subsidize for the loss of $1.7
million.
Currently, California has 251 federally chartered credit unions
and 152 state chartered credit unions. These numbers show that
it is more enticing for a credit union to become federally
chartered. The five largest state chartered credit unions based
on asset size in California are: The Golden 1 Credit Union,
Star One Credit Union, San Diego County Credit Union, Patelco
Credit Union, and Wescom Central Credit Union. It would be
devastating to DFI should any of these credit unions decide
become federally chartered instead.
The new assessment table proposed under AB 1282 would have new
tiers, $10m to $100m, $100m to $500m, $500m to $1b, $1b to $2b,
$2b to $5b, $5b to $10b, and $10b and above. The bill would
spread the assessments among all credit unions above $3m by
adjusting the percent of assets assessed per tier. Assessments
will increase for 128 state chartered credit unions between
0.11% and 9.7%. All state chartered credit unions with
assessment increases would still pay more for a NCUA charter,
between 5.75% and 114.24%. Credit unions below $18m (18 credit
unions) would pay less for a NCUA charter. Of the 12 credit
unions that will pay more for NCUA charter, the CA assessment
will increase between $18 to $119. The largest three credit
unions would pay between 0.87% and 4.45% less than a NCUA
charter.
As an example, the largest state chartered credit union, the
Golden 1 Credit union, currently pays $708,419 in DFI
assessments. If they were a federal charter, they would pay
$478,141 in NCUA assessments. As a state chartered credit
union, the Golden 1 pays 32.5% more than if they were a federal
charter.
AB 1282
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AB 1282 will slightly increase the assessments paid by other
state chartered credit unions, however the proposed
redistribution will allow virtually all mid and small sized
credit unions to pay less in assessments than their federally
chartered counterparts.
REGISTERED SUPPORT / OPPOSITION :
Support
California Credit Union League (Sponsor)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081