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NCUA proposes to tighten CU mergers conversion process
ALEXANDRIA, Va. (3/19/10)—The National Credit Union Administration (NCUA) has proposed a significant rewrite of portions of Sections 701, 708a, and 708b of its rules to address the fiduciary duties of federal credit union directors, credit union-to-bank mergers, and charter and insurance conversions. At its March board meeting held on Thursday the NCUA proposed new rules that would require federal credit union directors to “carry out their duties in good faith, and have, or gain, an understanding of basic finance and accounting practices.” The NCUA would also prohibit federal credit unions from “indemnifying its officials or employees for liability associated with misconduct that is grossly negligent, reckless, or willful in connection with a decision that affects the fundamental rights of members.”
Click to view larger image At the Nationaol Credit Union Administration meeting Thursday agency staff briefed board members on a numver of proposals, including one to tighten the RegFlex prgaram and another to adjust merger and conversions rules. Here a staff member makes a presentation as she faces board member Michael Fryzel (left), Chairman Debbie Matz (center), and Vice Chairman Gigi Hyland. (CUNA Photo)
The Credit Union National Association (CUNA) has called on the NCUA to better explain what “indemnifying” would entail under these circumstances. Mergers and credit union-to-bank conversions would also be affected, with the NCUA proposing certain changes to its current standards governing “the information that credit unions seeking to convert must disclose to members.” This includes the approval of a conversion proposal, the certification of a member vote on that conversion proposal, and the guidelines on how that vote must be completed. Rules governing the disclosure of a merger plan to credit union members and the NCUA are also affected, and the NCUA has also proposed altering some of the steps that follow an approved merger or conversion vote. The NCUA board noted that these proposed changes are a response to alleged voter influencing by some credit union executives. CUNA has pledged to review the NCUA’s proposal to ensure that the proposed changes do not make the credit union-to-bank conversion process so burdensome that it is no longer an option for credit unions.


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