NCUA Eyes Rules on Hostile Takeovers

HONOLULU–NCUA is putting together a proposed rule that could prevent attempted hostile takeovers of credit unions, such as the one that lit up the credit union movement in controversy this spring. “This is something NCUA is looking at; we have an open mind about it,” said NCUA General Counsel Bob Fenner, during NAFCU’s annual convention last week. While NCUA has no formal rules governing non-friendly takeovers, it was the agency’s action that ultimately killed the controversial bid by Wings Financial FCU to take over Continental FCU. It was NCUA’s ruling that Wings’ $200-per-member offer to support the takeover ran afoul of existing agency rules which bar the pre-merger promise of a dividend. “In the end, we concluded that (the cash offer) was in the form of a merger dividend,” said Fenner. The resulting elimination of the cash offer forced the $1.6 billion Wings Financial FCU to abandon its hostile bid for the much smaller, $180 million Continental FCU, which enraged a credit union movement that prides itself on cooperation. One possibility under discussion: the regulation of direct communications from management of one credit union to members of another, or of communications to members of a credit union by an outside entity, like a bank that may want to acquire a credit union. The process is still in the early stages, but Fenner suggested that interested credit union executives and directors contact the agency with recommendations. “It’s too early for me to speculate (on a proposal),” he said. “We’ll be making a recommendation and alternatives to our board in the coming months.”