NCUA Addresses Golden Parachutes, New Public Relations Campaign at Monthly Meeting

July 30, 2010 — At its July meeting, the National Credit Union Administration (NCUA) Board announced a $1.75 million public relations campaign featuring Suze Orman, as well as a proposed rule prohibiting golden parachutes in troubled institutions and limiting indemnification payments.

The proposed rule, approved with a 30-day comment period, prohibits a troubled federally insured credit union (FICU) from making golden parachutes and limits indemnification payments to an institution-affiliated party (IAP). The new proposed Part 750 prohibits (with some exceptions) FICUs that are insolvent in conservatorship, rated CAMEL 4 or 5, or in an otherwise troubled condition from making golden parachute payments.At its July meeting, the National Credit Union Administration (NCUA) Board announced a $1.75 million public relations campaign featuring Suze Orman, as well as a proposed rule prohibiting golden parachutes in troubled institutions and limiting indemnification payments.

The proposed rule, approved with a 30-day comment period, prohibits a troubled federally insured credit union (FICU) from making golden parachutes and limits indemnification payments to an institution-affiliated party (IAP). The new proposed Part 750 prohibits (with some exceptions) FICUs that are insolvent in conservatorship, rated CAMEL 4 or 5, or in an otherwise troubled condition from making golden parachute payments.

The proposal does not prohibit golden parachutes and indemnification for FICUs in sound condition considering reasonable industry practices, and under some exceptions, as detailed in the proposed rule. The intention of this rule, stressed NCUA Chairman Debbie Matz, is to safeguard the share insurance fund and member assets. NASCUS was provided an advance copy of the proposed rule and contributed its comments from the state regulatory perspective for the new regulation.

Also at this meeting, a mid-year session budget review was taken up by the Board, where it was announced that the agency is launching a consumer education program featuring television, radio and print ads with renowned financial expert Suze Orman. The ads, starting in September, will promote federally insured credit unions to better inform the public of the $250,000 federal insurance of FICUs. The program will cost $1.75 million; the mid-year session review revealed a net decrease of $2 million in the agency's operating budget.

An insurance fund report was also given at the meeting. The NCUSIF equity ratio is 1.21% as of June 30, 2010. Problem credit unions CAMEL 4/5 increased to 366 from 291 this time last year, representing 5.69 percent of insured shares. Eighteen credit unions have failed this year; 10 were involuntary liquidations or purchase and assumptions and 8 were assisted mergers representing a cost of $16.4 million.

The other actions taken at the July NCUA Board Meeting include:

  • Adoption of an interim final rule to clarify the low-income rule by amending the definition of "low-income members" so that the regulatory text is consistent with the geo-coding software NCUA uses in making its determination
  • Approval of an interim final rule clarifying provisions addressing electronic disclosures of overdraft fees, overdraft free disclosure terminology, and retail sweep accounts. This interim final rule is substantially identical to the Federal Reserve's recent final rule, but contains changes in nomenclature and minor editorial and reference changes.

To view the documents from this meeting, follow this link.

The proposal does not prohibit golden parachutes and indemnification for FICUs in sound condition considering reasonable industry practices, and under some exceptions, as detailed in the proposed rule. The intention of this rule, stressed NCUA Chairman Debbie Matz, is to safeguard the share insurance fund and member assets. NASCUS was provided an advance copy of the proposed rule and contributed its comments from the state regulatory perspective for the new regulation.

Also at this meeting, a mid-year session budget review was taken up by the Board, where it was announced that the agency is launching a consumer education program featuring television, radio and print ads with renowned financial expert Suze Orman. The ads, starting in September, will promote federally insured credit unions to better inform the public of the $250,000 federal insurance of FICUs. The program will cost $1.75 million; the mid-year session review revealed a net decrease of $2 million in the agency's operating budget.

An insurance fund report was also given at the meeting. The NCUSIF equity ratio is 1.21% as of June 30, 2010. Problem credit unions CAMEL 4/5 increased to 366 from 291 this time last year, representing 5.69 percent of insured shares. Eighteen credit unions have failed this year; 10 were involuntary liquidations or purchase and assumptions and 8 were assisted mergers representing a cost of $16.4 million.

The other actions taken at the July NCUA Board Meeting include:

  • Adoption of an interim final rule to clarify the low-income rule by amending the definition of "low-income members" so that the regulatory text is consistent with the geo-coding software NCUA uses in making its determination
  • Approval of an interim final rule clarifying provisions addressing electronic disclosures of overdraft fees, overdraft free disclosure terminology, and retail sweep accounts. This interim final rule is substantially identical to the Federal Reserve's recent final rule, but contains changes in nomenclature and minor editorial and reference changes.

To view the documents from this meeting, follow this link.