Board Proposes Rules on Mergers, Appeals

May 2017
Board Proposes Rules on Mergers, Appeals

Board Action Bulletin

Stabilization Fund Reports Continued Positive Net Position

ALEXANDRIA, Va. (May 25, 2017) – The National Credit Union Administration Board held its fourth open meeting of 2017 at the agency’s headquarters here today and unanimously approved three items:

  • A proposed rule to provide greater transparency to members of federal credit unions when those credit unions are seeking voluntary mergers.
  • A proposed rule to enhance due process and provide consistency with other federal financial institutions regulators in the supervisory appeals process.
  • A proposed rule to provide uniform, comprehensive procedures to govern the agency’s regulatory appeals process.

The Board also received a briefing from the Chief Financial Officer on the performance of the Temporary Corporate Credit Union Stabilization Fund, which remains in a positive net position.

Proposed Rule Opens Up Member Communications in Voluntary Mergers

Members whose federal credit unions are seeking a voluntary merger would have better access to information about that merger and a longer period of time to consider their votes under a proposed rule (Parts 701, 708a, and 708b) approved by the NCUA Board.

The proposed rule would:

  • Increase the required time for notice to members before a merger vote to at least 45 days;
  • Require the merging credit unions to disclose all merger-related compensation for certain employees and officials of the merging credit union;
  • Clarify the contents and format of the members’ notice to provide better information; and
  • Create a member-to-member communications process similar that found in NCUA’s regulations covering credit union conversions to or mergers with banks.

Comments on the proposed rule, available online here, must be received within 60 days of publication in the Federal Register.

Due Process in Supervisory Appeals Enhanced by Proposed Rule

Appeals of material, examination-related supervisory determinations would benefit from greater due process under a proposed rule (Part 746a) approved by the Board.

Changes in the appeals process under the proposed rule include:

  • Expanding the number of material supervisory determinations that can be appealed to the agency’s Supervisory Review Committee;
  • Creating an optional intermediate level of review before an appeal goes to the Committee; and
  • Changing the nature and composition of the Committee.

Under the proposed rule, an appeal at any level would not affect, delay, or impede any formal or informal supervisory or enforcement action in progress. Likewise, it would not affect NCUA’s authority to take any supervisory or enforcement action against a federally insured credit union.

Comments on the proposed rule, available online here, must be received within 60 days of publication in the Federal Register.

Appeals of Some Agency Decisions Improved under Proposed Rule

A proposed rule (Part 746b) approved by the NCUA Board would create a more uniform process for appealing certain program office decisions to the Board.

Several existing NCUA regulations provide a right of appeal, but these generally lack uniformity and may be confusing to parties who might seek to appeal an adverse decision to the Board. The proposed rule would bring these under a uniform set of procedures and would enhance due process for all parties.

Subject matters affected by the new rule would include chartering and field of membership, investment authority, conversions and mergers, creditor claims in liquidations, and share insurance determinations. Certain areas, such as formal enforcement actions, prompt corrective action, and material supervisory determinations, would be excluded from coverage under the proposed rule.

Comments on the proposed rule, available online here, must be received within 60 days of publication in the Federal Register.

Stabilization Fund Holds Positive Net Position

For the quarter ending March 31, 2017, the Temporary Corporate Credit Union Stabilization Fund's net position increased about $43.8 million to end at $1.6 billion.

The increase in the Stabilization Fund's net position resulted from a $37.8 million reduction in the provision for insurance losses and $6.5 million in guarantee fee income during the first quarter. The reduction in the provision for insurance losses was due primarily to improvements in projected cash flows related to the legacy assets securing the NCUA Guaranteed Notes Program.

NCUA's Chief Financial Officer briefed the Board on the Fund’s performance based on the best available preliminary and unaudited information. Earlier this year, KPMG LLP, the independent firm that audits the Stabilization Fund’s financial statements, issued an unmodified, or “clean,” audit opinion of the Fund for the seventh year in a row.

Future changes in the economy or the performance of the legacy assets securing the NCUA Guaranteed Notes are likely to change the value of the assets the agency can access. Based on current projections, NCUA expects no future Stabilization Fund assessments to credit unions.

Created by Congress in 2009, the Stabilization Fund has reduced the impact on credit unions of the costs of resolving the corporate credit union crisis. The Fund is scheduled to expire in 2021; however, the agency is studying the possibility of closing it sooner.

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