WASHINGTON – Despite massive opposition by credit union groups to last year’s hostile takeover attempt by Wings Financial FCU, there appears to be little, if any, interest among credit union executives in having NCUA regulate against hostile takeovers.
Credit union executives commenting on an NCUA proposal are overwhelmingly opposed to increased NCUA efforts to regulate in the area of conversions to mutual savings banks, as well as hostile takeovers – such as the Wings Financial bid to acquire Continental FCU that sparked a major uproar last year.
“NCUA should not develop any new rulemaking on conversions or mergers,” said Matadors FCU President Dale Verderano, in a comment letter submitted on NCUA’s advanced notice of proposed rulemaking that is typical of other commenters. “They [NCUA] should rescind any previous rulemaking that does not comply with the 1998 Credit Union Membership Access Act.
NCUA, said Verderano, “has already exceeded the intent of the 1998 CUMAA and the rules are already more complicated. NCUA needs to consider rescinding these rules.”
Several other commenters also urged NCUA not to proceed with new rules to thwart hostile takeovers, such as a proposal to allow NCUA to review third-party solicitations in mergers. “We do not believe that a new rule governing third party merger communications would be any more effective in controlling the ‘hostile takeover’ scenario,” wrote George McNichols, president of Hoosier Hills CU. “There are currently regulations that require any advertising to not be inaccurate or misleading.”
Roshara Holub, president of the Missouri CU Association, said NCUA already has the powers necessary to intervene when one credit union [for example, Wings Financial] may undertake actions to disrupt another credit union’s [Continental FCU’s] operations, and urged NCUA to avoid adding any regulatory burdens and postpone any rulemaking.
The one commenter who issued express support for a new NCUA rule on hostile takeovers was California attorney Joseph Melchione, who represented Continental FCU in its fight to stave off Wings Financial.
Melchione said his firm believes NCUA should “enact rules limiting or eliminating the ability of a third party to interfere with the relationship between the membership of a federal credit union and its board. An effective way of doing so would be to prohibit merger inducements offered directly to the membership of a federal credit union by another entity.”
In the Wings/Continental case, the board of Continental rejected offers by the Wings board to merge, so Wings advertised to Continental members that Wings would pay them $200 each if they were successful in petitioning the Continental board to hold a special meeting to vote on the merger. NCUA eventually killed the hostile takeover bid by ruling that the Federal CU Act bars any pre-merger offers of payment to members such as the Wings offer.
