PRESS RELEASE
April 30, 2008
ARLINGTON, Va. — NASCUS provided comments to the National Credit Union Administration (NCUA) on April 30 emphasizing the proper role of state authority in the conversion and merger processes of state-chartered credit unions.
The comment letter was in response to the agency’s Advanced Notice of Proposed Rulemaking (ANPR) concerning merger, conversion and termination of insurance processes for federally insured credit unions. NASCUS and 30 state agencies additionally filed a joint comment letter expressing state regulators’ collective concern about the ANPR’s preemption of state authority.
The NASCUS comment letter explains that state-chartered credit unions, as state corporations, follow state law and regulation as their primary sources of credit union powers, governance and membership. Therefore, NASCUS discerns no safety and soundness issue or statutory authority that would justify NCUA’s preemption of state law and the ANPR’s extension to state-chartered, federally insured credit unions (FISCUs). NASCUS emphasizes that NCUA’s statutory authority must be read narrowly in the context of the role of state regulators and the dual chartering system.
“As administrator of the National Credit Union Share Insurance Fund (NCUSIF), NCUA is authorized by Congress to promulgate rules and regulations for administration of the insurance fund. However, state regulators remain the primary regulatory authority of state credit unions,” explained NASCUS. “NCUA’s role should be narrowly tailored for safety and soundness considerations. That is a basic principle of the dual chartering system.”
NASCUS commented specifically on the ANPR’s areas of inquiry including credit union mergers and conversions to financial institutions other than a mutual savings bank (MSB) and management and board duties. Again, NASCUS strongly maintains that the states are the proper rulemaking authority for state-chartered credit union corporate issues. “Conversion to, or merger into, another charter is an action fundamental to the corporate organization of a credit union,” said NASCUS in its comment letter. “As such, any rules should be issued by the chartering regulatory authority. To the extent that NCUA proceeds with rulemaking, it should limit its rules to those entities it charters: federal credit unions.”
Similarly, NASCUS communicates to the agency that fiduciary duty is defined by state law, and that it is not NCUA’s proper role to establish a fiduciary duty standard for state corporations. NASCUS maintains that a “one-size-fits-all” federal standard of care for directors should not be applicable to state-chartered credit unions. “NASCUS cautions that overly broad, loosely defined concepts of ownership and fiduciary duty, unsupported by relevant state law, will result in more uncertainty, not less,” wrote NASCUS.
NASCUS acknowledges that the NCUA’s ANPR discusses issues of concern to both state and federal regulators. However, NASCUS believes the ANPR fails to identify compelling statutory evidence that Congress intended for the NCUA to create a federal common law for the governance of state corporations.
To view the comment letter, click here.
Information
Contact:
Kate Hartig, Director, Communications and Public Affairs,
(703) 528-0669 or kate@nascus.org
The
NASCUS mission is to enhance state credit union
supervision and advocate a safe and sound state
credit union system.
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