WASHINGTON — Saying they are already overburdened by compliance rules, credit unions and their trade associations told NCUA that they oppose new regulations regarding the merger of federal credit unions with other financial institutions.
CUNA Senior Vice President and Deputy General Counsel Mary Mitchell Dunn wrote that additional regulations are "unwarranted and would needlessly intrude in the operations of credit union boards….We urge the agency to call a halt to overregulation and consider the broader regulatory picture as it applies to credit union operations, not just the merits of any individual rulemaking or discrete set of new requirements."
At issue are rules that the NCUA may promulgate concerning mergers that the agency believes may harm members of a credit union. These regulations would govern issues such as the fiduciary duties of board members and communication between boards of one institution and members of another during merger discussions.
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An NCUA staff report obtained by Credit Union Times said the rules are needed because during past merger negotiations "some credit unions have pressured, required or paid employees to encourage members to vote in favor of conversion even where the employees did not wish to do so or did not believe that the conversion was in the members' best interests."
The report also stated that existing laws and regulations don't establish rules of conduct for board members during merger discussions.
NAFCU contends that the rules might discourage credit unions from making business decisions that would maximize returns for their members and place unneeded burdens on board members.
These corporate governance issues are "best addressed on the individual credit union level, rather than via broad regulation," NAFCU Senior Counsel and Director of Regulatory Affairs Carrie R. Hunt wrote NCUA.
She added that due to the complexity of balancing state and federal rules on director responsibility, "it is prudent that NCUA refrain from regulating credit union fiduciary duties at this time."
Missouri Credit Union Association President Roshara J. Holub wrote that in general "more regulation is an inhibitor, not an enabler" and took issue with the possibility of restricting communications between credit union executives and members of a credit union they want to merge with.
Holub said any competent third party' could guard against concerns raised by the NCUA on voting procedures. Also, regulating some kinds of communication "is in a practical sense unenforceable" and could raise issues of constitutionality.
Kirk Kordeleski, president/CEO of Bethpage Credit Union in New York, wrote NCUA that the agency already has sufficient power to protect the interests of credit union members during mergers.
"We feel that the agency's extensive safety and soundness authority, coupled with its recently enacted enforcement authority in matters related to credit union bylaws, is more than sufficient to deal with the very limited number of instances where members rights violations or fiduciary impropriety have been identified," he wrote.
In January, the NCUA board issued a notice requesting input on possible regulations. An agency spokesman said the agency will take the comments under advisement and no timetable has been set for when the rules might be issued.
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