ALEXANDRIA, Va. — The NCUA board last Thursday approved a final corporate credit rule that left out two controversial provisions that would have limited credit unions to membership in one corporate credit union and provided for the sharing of expenses for the corporate rescue among all members of corporate credit unions.
Those provisions, which were strongly criticized in the vast majority of the 227 comment letters that the agency received, were the only parts of the seven-part proposal that the agency didn’t include in the final rule.
"They weren’t related to safety and soundness, so after reading the comment letters we looked at them again and decided not to keep them," NCUA Chairman Debbie Matz told Credit Union Times after the meeting.
The newest series of regulations supplements the far-reaching corporate credit union rules that the agency approved last September. Those dealt with a range of governance and concentration risk issues. The agency approved those rules after wide-ranging losses to several corporate credit unions that required loans from the Treasury Department to rescue the corporate credit union system.
The final rule’s other provisions include mandatory risk-management committees at all corporate credit unions, recorded votes on all board actions and mandatory disclosure of any compensation received from a corporate CUSO.
The agency changed the rule to allow a corporate credit union to hire a part-time consultant to staff its risk-management committee, as long as the person or their family has no ties to the corporate’s operational side. Board Member Gigi Hyland said the agency will have to closely monitor how that is implemented to ensure that the outside consultants don’t draw up contracts that limit their potential liability too much.
The rule also mandates that each corporate credit union conduct an annual review of its internal control structure.
In response to a question from Hyland, NCUA Staff Attorney Lisa Henderson said the agency would provide guidance on how to conduct these reviews and would include examples of best practices.
The agency made a slight adjustment on the original proposal regarding board vote disclosures. The final rule mandates that only those directors voting no or abstaining had to be listed, as long as all the attendees were mentioned earlier in the minutes.
The rule also allows corporate credit unions to charge members periodic or one-time membership fees, but these must be proportional to the asset size of the member.
Matz said the agency recognized that these rules would increase the regulatory burden for the management of the corporate credit unions and therefore was delaying the effective date of several of the provisions, including the one on enterprise risk management, until 2013.
CUNA and NAFCU praised the agency’s dropping of the two controversial provisions.
"NCUA has improved its corporate credit union rule by eliminating requirements which we strongly argued were at odds with the interests of credit unions and the agency’s legal authority. We appreciate the agency’s willingness and capacity to listen to credit unions about these issues," CUNA President/CEO Bill Cheney said in a statement.
NAFCU Vice President and General Counsel Carrie Hunt said those provisions would have "had the unintended consequences of providing a disincentive for credit unions to join corporate credit unions."
She also noted that even though the agency had modified the original proposal to mandate fuller disclosures of corporate votes, it could still make it harder for credit unions to attract top caliber individuals to be directors.
The board also approved a final rule allowing corporate credit union CUSOs to provide consulting and other services related to information technology and asset-liability management.
NCUA Chief Financial Officer Mary Ann Woodson told the board that there was a slight increase in the number of CAMEL 4 and 5 credit unions in March and a slight decrease in those ranked CAMEL 3.
There were 366 CAMEL 4 and 5 credit unions at the end of March, compared with 360 at the end of February. Last month’s figure represented 4.92% of all insured shares.
There were 1,798 CAMEL 3 credit unions at the end of March, compared with 1,803 at the end of February. March’s figure represented 17.44% of insured shares.
The NCUSIF’s net income in the first quarter was $29.6 million, including $10.2 million in March.