ALEXANDRIA, Va. -- The NCUA Board issued three proposed regulations concerning board member indemnity and mutual savings bank conversions.
Federal credit unions wouldn't be able to indemnify officials and employees against liability based on "aggravated breach of duty of care when a breach affects members' rights and financial interests."
Paul Peterson of the NCUA Office of General Counsel said the agency purposely made the exemption from indemnification "very narrow," so that it takes effect when the decisions involved impact the financial situation of creidt union members and when a court of law determines if there is negligence or misconduct.
NCUA Chairman Debbie Matz said the agency felt the need to create a uniform standard for fiduciary obligations, because federal credit unions often have to rely on the varying standards of the states in which they operate.
Within three months of joining the board of an FCU, volunteers would have to develop a level of financial proficiency, which includes basic finance and accounting proficiency. This training can be done by credit union employees, outside sources or, in the case of small credit unions, the NCUA's Office of Small Credit Union Initiatives.
If a credit union is considering a bank conversion, the board and its executives must break down the costs of converting and distribute it to members and provide "complete and accurate" information about possible changes in service.
Peterson noted that during the process, the board must get an independent evaluation, especially because individual members' rights will be diminished "when a member goes from having an equal vote in a credit union to being a shareholder."
Conversion ballots would have to be conducted in secret and tallied by an independent entity and preliminary vote tallies would be prohibited.
The top regulatory analysts at CUNA and NAFCU said they welcomed the discussion that these proposals will generate but hoped the proposed rules don't discourage people from becoming volunteers.
Another proposal regarding the Regulatory Flexibility rule would repeal the exemptions allowing FCUs to invest more than 5% of their shared and retained earnings in fixed assets; permitting an FCU to obtain the liability and guarantee of the borrower's principals in member business loans; allowing RegFlex credit unions to skip the stress tests to determine the impact of a 3% increase or decrease in interest rates; and permitting delegation of discretionary control to third parties over the purchase and sale of investments of up to 100% of net capital.
Board Member Gigi Hyland voted against sending the proposal out because of concerns about the last item. She said there is no way of telling if credit unions are using that exemption in a way that is causing potential harm.
All three proposals went out for 60-day comment periods.