NASCUS Emphasizes State Law Deference in Merger and Conversion Issues for State Credit Unions in Comment Letter to NCUA
June 1, 2010 In comments regarding the National Credit Union Administration's (NCUA) Proposed Rule 708a and 708b, Mergers and Conversions, NASCUS reiterated its position that the agency should defer to state law for merger and conversion issues of federally insured, state-chartered credit unions (FISCUs.)
NASCUS shares NCUA's concerns that important decisions regarding the future governance of a credit union must be handled in a fair and transparent manner; however, NCUA's rulemaking in this area should be limited to federal credit unions (FCUs). NCUA did limit its proposed fiduciary duty responsibilities to FCUs; SCUs follow state law with regard to fiduciary duties.
"A show of regulatory deference by NCUA to explicit state law in this arena, without regard to whether that state law or regulation was more restrictive than NCUA's proposal, would be consistent with the dual role played by NCUA as both a chartering and a share insurance regulator," wrote NASCUS. "With respect to state credit unions, NCUA is only the share insurer, not the chartering authority. Vindication of the members' rights and other governance issues are properly left to the chartering regulator - in these cases, the states."
NASCUS reiterates that the areas of the proposed rule regarding definitions of independent entities, secret ballots, disclosures and communications to members are all matters that should be handled by state regulators and state law for FISCUs. Especially with regard to the proposed areas impacting credit union mergers into a mutual savings bank, NCUA is substituting its standard of fiduciary duty for that of the states, which is of concern to NASCUS.
With respect to NCUA's rules regarding conversion to non-federal insurance, NASCUS notes that the Federal Credit Union Act expressly states the voting requirements. All of NCUA's rules beyond those which Congress mandated are discretionary. NASCUS recommends that NCUA work with state regulators of non-federally insured credit unions to craft mutually acceptable standards that would address NCUA's concerns without eviscerating the state authority that allows credit unions to choose their share insurance option.
To read our full comment letter, click here.