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April 17, 2008 - The National Credit Union Administration (NCUA) held its monthly meeting on April 17 with a full state of action items including a proposed rule broadening the agency’s oversight of Credit Union Service Organizations (CUSOs).
Citing safety and soundness concerns, NCUA proposes extending part of its CUSO rule to state-chartered federally insured credit unions. The proposal would require state-chartered federally insured credit unions to comply with federal credit union requirements to obtain agreements from their CUSOs granting NCUA access to CUSO books and records.
While many state regulators have extensive examination authority over state credit union CUSOs, the NCUA proposal would provide books and records access for those states that do not. The proposed rule contains a reciprocity clause allowing state regulators access to books and records of a federal credit union CUSO that has state-chartered credit union investments, loans or a contractual agreement for products and services.
“NASCUS and state regulators worked with NCUA to help them understand the CUSO examination authority of individual states in the development of this proposed rule,” said NASCUS President and CEO Mary Martha Fortney. “In discussions with NCUA, NASCUS emphasized that CUSO state examination authority be maintained in any amendments to NCUA’s Rules and Regulations Part 741.”
The proposed amendment expressly states that it does not preempt any applicable state law or regulation currently authorizing state regulators to review CUSO books or records or to conduct examinations. The proposed amendment also requires state-chartered, federally insured credit unions to take steps to ensure corporate separateness from CUSOs.
At the meeting, NCUA Board member Gigi Hyland stated that the proposed amendments to Part 741 serve as a necessary modernization of its CUSO regulations to reflect the evolving nature and growing geographic complexity of credit unions’ CUSO activities. “Credit unions regardless of charter are engaged in CUSO participations all over the country,” said Hyland. “We need a better understanding of the activity, and with the reciprocal regulator access we can achieve a more modernized view of CUSO activities.”
The NASCUS Board of Directors plans to discuss the proposed rule and provide comments to the NCUA. If you have comments to share with NASCUS, contact Brian Knight at brian@nascus.org. To read more about NCUA's April 2008 Board meeting actions, click here.
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