COMMENT CALL: NCUA Proposed Rule on Fiduciary Duties at Federal Credit Unions, and Mergers and Conversions of Insured CUs

CUNA
April 14, 2010 | COMMENTS

The National Credit Union Administration (NCUA) Board has adopted a proposed rule for several related areas, to clarify the fiduciary duties of directors, and to provide additional provisions for insured credit union conversions and mergers, which are intended to protect member rights and ownership interests.

There is a proposed uniform fiduciary duty standard for federal credit union directors. Directors will also be required to have or gain an understanding of basic finance and accounting principles. In addition, federal credit unions would not be permitted to indemnify its employees for "grossly negligent, reckless, or willful" misconduct for decisions that affect the fundamental rights of its members.

There are proposed procedures for an independent entity to tally, record, and certify the votes for a credit union conversion into a mutual savings bank, a credit union merger into a bank, or a credit union merger with another credit union. These procedures are intended to protect the "secrecy and integrity" of the voting process.

For a credit union merger into a bank, the proposed merger definition includes a transfer of "substantially all" its assets. There are additional proposed related due diligence requirements for directors to: 1) obtain an independent valuation of the credit union; 2) determine any compensation for the diminished or loss of ownership rights for credit union members; and 3) disclose other pertinent merger-related information.

For a credit union merger with another credit union and the termination of federal deposit insurance, there are additional proposed requirements for: 1) credit unions with a net worth ratio (NWR) that is at least 500 basis points greater than the NWR of the continuing credit union; 2) any material merger-related financial compensation; and 3) a six month time limit on the merger conversion of federal share insurance to nonfederal insurance.

Comments are due to NCUA by May 28, 2010; please submit your comments to CUNA by May 14, 2010.

Please feel free to e-mail your responses to Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.coop. You may also contact Mary Dunn at 800-356-9655, ext. 6736, if you have questions. Click here to access the proposed rule.

> View the full CUNA regulatory comment call here