ARLINGTON, Va. - Twenty-eight state regulatory agencies have signed a comment letter sent to NCUA expressing “serious concerns” about the agency’s Advanced Notice of Proposed Rulemaking related to rules on mergers, charter conversions and termination of insurance for federally insured CUs.
Specifically, NCUA’s proposals relate to Parts 708a and 708b of the Federal Credit Union Act.
In the letter, NASCUS and state regulators said they believe that if the agency moves ahead with a formal proposal, NCUA will overstep its statutory authority by preempting the longstanding precedent that state law dictates corporate governance.
“The NCUA Board should understand that our actions as state regulators to sign this letter are indicative of the both the serious nature of the issue and our commitment to preserving state authority in these matters,” the letter states.
The state regulators said that as state corporations, state-chartered credit unions follow state corporate governance laws and fall under the authority of state regulators. The agencies represented by NASCUS said they are questioning whether the NCUA has the statutory authority to preempt state law in corporate governance matters. “NASCUS and state regulators see no clear Congressional intent for such broad preemptive actions by NCUA in the Federal Credit Union Act,” NASCUS said.
“The ANPR represents an overly broad application of NCUA’s regulatory authority on state-chartered credit unions,” the comment letter reads. “There is no apparent basis for the NCUA approach, which obliterates nearly a century of state originated financial institution law and two centuries of law deferring to the states on such important matters of corporate governance.”
NASCUS said it shares some of NCUA’s concerns expressed in the ANPR, but recommended that the issues at hand are better left to state law and regulation. NASCUS maintains that this is not only the more practical approach, but the more sound legal approach.
