Credit unions should revamp their governance rules to ensure that there is increased accountability and less likelihood of improper behavior because of tighter NCUA rules governing board members’ actions, CUNA Mutual Group Vice President of Commercial Products John Wallace said Thursday.
Wallace, who made the remarks during a speech at the National Directors’ Convention in Las Vegas, said the changes are needed because of new NCUA rules increasing financial literacy requirements for board members and limiting how much federal credit unions can indemnify board members.
He said that improved governance programs include “a set of processes, customs, rules, policies and laws that guide how an organization, like a credit union, is directed and controlled for the benefit of its stakeholders.” These could include establishing a lead director on governance, a whistle-blower policy or a risk oversight policy, he said.
Wallace urged credit union boards to consult lawyers when establishing their indemnification policies and to have directors and officers insurance policies to cover losses from claims under the Wrongful Management Liability Act.
Under a rule approved by the NCUA Board last December, within six months of joining an FCU’s' board, 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. The rule took effect last month.
The NCUA Board also approved a rule prohibiting FCUs from indemnifying officials and employees against liability based on "aggravated breach of duty of care when a breach affects members' rights and financial interests."