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NCUA makes key changes to final corporate CU rule
ALEXANDRIA, Va. (4/22/11)--The National Credit Union Administration (NCUA) on Thursday approved a final corporate credit union rule that alters some corporate internal control and reporting requirements, but made some key changes from its original proposal.
Click to view larger image The NCUA's finacl corporate credit union rule, approved on Thursday, changes some corporate internal control and reporting requirements, but does not limit credit union choice regarding corporates and does not require so-called 'voluntary' payments into the corporate stabilization fund. (CUNA Photo)
For instance, the agency’s final rule did not include a part of the proposal that would have limited credit union membership in the corporates to one at a time. The final also dropped a plan to require virtually every entity that is a member of a corporate credit union to contribute to the Temporary Corporate Credit Union Stabilization Fund. Credit Union National Association (CUNA) President/CEO Bill Cheney credited the NCUA for eliminating these two potential corporate credit union requirements that CUNA “strongly argued were at odds with the interests of credit unions and the agency’s legal authority.” Cheney said that the decision to allow credit unions to belong to more than one corporate “will develop broader support for corporate credit unions that are well-managed and are able to meet agency and credit union due diligence scrutiny.” He added that the NCUA was right to drop the corporate stabilization-related proposal. The final rule, which was approved unanimously by the board, will require corporates to conduct all board of director votes as recorded votes, and to include any “no” votes or abstentions of individual directors in the meeting minutes. Corporates will also be required to establish enterprise-wide risk management (ERM) committees staffed with at least one independent risk management expert. The corporates will also need to incorporate audit, reporting, and audit committee practices that are modeled on Federal Deposit Insurance Corporation (FDIC) requirements and the Sarbanes-Oxley Act. Under these audit requirements, corporate credit unions will need to ensure that material accounting adjustments conform to U.S. Generally Accepted Accounting Principles (GAAP) and file their yearly reports, audits, and other similar reports with the NCUA. Corporates will be permitted to charge one-time or periodic membership fees. There will be no membership vote on the fees, and the corporate will have the authority to expel any member that does not pay a required membership fee within 60 days of the fee’s invoice date. New rules applying to income that corporate credit union executives may receive from related credit union service organizations were also approved. The NCUA said it does not intend to apply these same executive compensation standards to credit unions. The agency reviewed over 200 comment letters on the proposal, and NCUA Board Member Gigi Hyland said that the final rule appropriately balanced credit union industry concerns with what the agency believed should be addressed by the regulations. Portions of the final rule that address corporate board responsibilities, compensation disclosures, and membership fees will come into effect after they are published in the Federal Register. Most of the final rule’s audit and reporting requirements will come into effect on January 1, but some will be delayed for an additional year. The requirement for an assessment by an independent public accountant will not be effective until January 1, 2014. The ERM provisions are expected to come into effect by April of 2013. NCUA Chairman Debbie Matz said that extending many of the corporate rule’s deadlines was one way that the agency could lighten the regulatory burden.
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