ALEXANDRIA, Va. -- The National Credit. Union Administration on Thursday claimed the power to block conversions by credit unions to thrift charters.
The agency pitched its plan at an open board meeting. Approved unanimously, the proposal is a preemptive strike against lawyers who have been soliciting credit unions to switch to savings banks.
No credit unions have converted, but the NCUA has been disturbed by the lawyers' approaches.
'Solicitations Should Stop'
"The board hereby serves notice that these solicitations should stop," according to documents supporting the proposal.
The NCUA said it would collect comments for 30 days.
In addition to winning approval from the NCUA, the proposal also requires any conversion to be supported by a majority of the credit union's membership.
The agency said it would monitor that vote.
The proposal clarifies that agency rules on mergers, voluntary terminations, and insurance conversions apply to federally insured credit unions converting to any institution not insured by the credit union regulator.
The existing regulation deals explicitly only with federally insured credit unions converting to nonfederally insured credit unions.
The agency is concerned that a distressed credit union might spend time and money on a conversion, and then need to be liquidated if its bid failed.
It also believes management might try to switch solely for financial gain.
"This amendment will clarify that NCUA has the authority to protect the interests of the NCU.SIF [the National Credit Union Share Insurance Fund] and the credit union's membership," the proposal said.
Attorneys who have discussed conversion with credit unions say the agency merely wants to protect its turf.
On June 17 the agency sent a letter to all Illinois federally insured credit unions that in effect told them to disregard a conversion "solicitation" they may have received from the Chicagobased law firm of Schiff Hardin & Waite.
"This law firm is attempting to attract credit union interest into an area which the NCUA views with concern both for the welfare of members and the safety and soundness of credit unions" and the insurance fund, NCUA General Counsel Robert M. Fenner wrote.
