CUNA Critical Of OTS Actions In CU Charter Conversions
CUNA has submitted a statement for the record of a House subcommittee oversight hearing on the Office of Thrift Supervision (OTS) that is critical of the agency for ignoring its responsibilities in supervising its end of credit union conversions.
"Given the role that the OTS plays in supervising newly converted credit unions, and the fact that the banking industry is advocating a policy toward credit unions of 'contain and convert,' it is vital that credit unions have a voice in the oversight of the OTS," CUNA General Counsel Eric Richard said in a released statement.
"Our statement will be aimed at providing the subcommittee a more complete picture of the role that this regulator plays in the evolution of the credit union movement, and the importance of the regulator meeting its responsibilities in that role."
Among the points made by CUNA:
* OTS must take responsibility when its rules produce negative results for consumers, regardless of the technicalities of the transactions involved-such as when a credit union converts to a mutual thrift, and then switches to a stock form of ownership.
* Applying existing OTS conversion policies to credit unions makes little sense. Credit unions convert to thrift charters partly because it will allow them to operate with less capital and follow less conservative business and capitalization strategies. OTS policies, on the other hand, were designed to reward investment in capital-starved thrifts-not deal with institutions like credit unions which are already well capitalized.
* Applying existing OTS rules to conversions of credit unions to mutual savings banks can produce perverse results, particularly in transferring equity from members of the credit union-which was built up on a tax-exempt basis, largely through the efforts of volunteers-to insiders in credit union leadership and management, without any corresponding public benefit.