NCUA Proposed Merger Rules Unnecessarily Burdensome: Trades

The NCUA’s proposed rules governing credit union mergers are unnecessary and would do little more than delay mergers, increase costs and increase the regulatory burdens institutions face, credit union trade groups say.

“While NCUA’s desire to promote radical transparency is commendable, NAFCU is not aware of any problematic trends in credit union mergers that warrant such a heavy-handed approach,” Carrie Hunt, NAFCU’s executive vice president of government affairs and general counsel said in a letter to the agency.

She added, “NAFCU does not see how the proposed rule constitutes anything less than regulatory burden.”

 “While the NCUA has a role as the regulator and insurer in the merger, it should not interfere in any way in the decision of two credit unions to voluntarily merge,” Lance Noggle, CUNA’s senior director of advocacy and counsel said in a letter to the NCUA.

Comments on the proposed rules were due Monday.

In issuing the proposed rules, the NCUA board said it is concerned that some prospective merger partners may be trying to influence the merging credit union through financial incentives.

The board said such financial incentives should be disclosed.

The rules also would increase the time for notice before a merger vote to at least 45 days. They also would require the merging credit unions to disclose all merger-related compensation for certain employees. The rules also would create a member-to-member communication process that is like the NCUA’s regulations governing credit union conversions ort mergers with banks.

Hunt said that disclosing non-merger related increases in compensation would provide no value to members, adding that certain disclosures could put federal credit unions at a significant competitive disadvantage to banks.

Noggle said that CUNA could support the disclosure of a highly compensated person whose salary would increase solely because the merger. However, the association would not support disclosure simply because a person was offered a position at the continuing credit union.

The distribution of communications to members pose a particular difficulty, the trade groups said.

Noggle said that at institutions that do not electronically communicate with members, the mailing of communication would be costly and time-consuming.

The disclosure of certain information could result in a member being less-informed, he said.

Hunt wrote, that “the proposed member-to-member communication procedures are cost-prohibitive, logistically challenging, and may invite unnecessary reputational risk.”

And she added that the longer the NCUA postpones a merger transaction, the longer members must wait for improved services.