NCUA Implores CUs To Comment On Proposal
ATLANTA – NCUA Board Member Gigi Hyland is imploring credit unions to comment on several proposed amendments to its new corporate rule, which will be issued next month.
NCUA has issued its final rule on corporate stabilization and reform, but additional amendments to the rule already are waiting in the wings and at least one of them – which would bar natural person credit unions from belonging to more than one corporate at the same time – is expected to create some controversy.
At NCUA’s regional town hall meeting here Tuesday, Hyland said, “It is imperative that credit unions comment on it since it will be controversial. Please, please, I’d get on my knees to beg you to comment on that proposal.”
The way the current rule stands, natural person credit unions still can belong to more than one corporate at any given time, but a proposal is being circulated that would restrict CUs to membership in only one corporate at a time.
“It’s a double-edged sword,” said NCUA General Counsel Robert Fenner. “On the one hand, being a member of multiple corporates is a way for a credit union to diversify, but on the other hand, it was that kind of competition that led to some of the problems we had.”
Among the other issues discussed:
• Georgia CU League President Michael Mercer asked if, in light of the changes to the indemnification provisions for corporate board members, NCUA is at all concerned about finding people who will be willing to serve on the boards of the corporates. But Fenner said he didn’t see why anyone wouldn’t want to serve on a corporate board and noted that the rules related to golden parachutes and indemnification have been around on the banking side since the late ‘80s and that it was long overdue that NCUA adopt similar regulations.
• Bill Raker, president of US FCU in Minnesota, asked whether the 22 remaining corporates would be allowed to purchase the NCUA Guaranteed Notes (NGNs) that will be created under the good bank/bad bank scenario, in which the legacy assets of the conserved corporates are transferred to the Asset Management Estate. When told yes, Raker followed up by asking if the NGNs aren’t awfully similar to some of the investment instruments that the corporates have specifically been banned from participating in, as they mirror the mortgage-backed securities and other toxic assets that underlie the notes. The answer: NGNs are different from the prohibited instruments because they are backed by the full faith and credit of the federal government. “And this is an important point to make. We are not repackaging the legacy assets as has been suggested,” explained NCUA’s Melinda Love. “We are holding them to maturity.”
• There were several questions posed related to the 24-month transition period for the bridge corporates relative to the Dec. 31, 2012, end date for the corporate share guarantee extension.
Credit Union Journal will have additional coverage of the regional town hall meeting in its Oct. 18 issue.