Violators of NCUA's new rule on financial literacy for directors will not be forced to step down or undergo a test, according to CUNA's summary of last week's audio conference conducted to guide CUs on the basic expectations in the rules, which become effective Jan. 27.
Taking part in the Thursday session which drew nearly 2,000 participants was Paul Peterson, NCUA's associate general counsel, who said that documented training on financial literacy by CUs would create "a three year safe harbor" but that board training needs to be documented by a certificate of completion, according to CUNA.
"Can examiners ask volunteers questions?" was one query posed during the audio session. The answer: They can, and will recommend training "if the volunteer cannot adequately answer the examiners' questions," CUNA said.
More information on the literacy rules which have a six month window for full compliance is expected in an NCUA letter being sent by the end of the month covering the basic requirements and explaining "the safe harbor for directors with respect to the exam process."
One speaker participating in the Jan. 13 session, Tim Harrington, CPA consultant and head of Team RESOURCES, of Tucson, Ariz., said the basic NCUA goal appears to be directors obtaining education on the key elements of balance sheets and income statements.
"In addition, they want directors to have a better understanding of the areas of risk common in credit unions and the ways their credit union is attending to these risks," he said.
During the session, Harrington said many CU directors in the audio feed asked how CUNA would measure compliance. "The answer was primarily through education sessions taken and so if a director has taken an education session of adequate length on balance sheet and income statements, on risk and risk mitigation, on internal controls to monitor risk and on asset liability management, they would fall into a safe harbor," he said.
There was also some discussion, he said, that the education had to be recent, perhaps in the past three years.