NCUA Tightens Rules For Converting ToBank
ALEXANDRIA, Va. - (011/4/05) -- Fueled by growing size of creditunion conversions to banks, The NCUA Board approved new rulesThursday requiring broader disclosures to members prior to voting.The new rules will require that potential converts tell theirmembers whether the conversion plans include the eventual sale ofthe institution in a stock offering; how much the conversionprocess is expected to cost; and the effects the switch will haveon the ownership and voting rights of the current members/owners,and also require that votes by conducted and counted by independentthird-parties. The main impetus for the new rules was thecontroversy surrounding the failed conversion of Columbia CU lastyear when NCUA invalidated the successful conversion vote afterdiscovering widespread irregularities amidst allegations ofvote-rigging. Among other things, the federal regulator found theballots had been counted by credit union employees behind closeddoors. "NCUA believes it is of paramount importance for creditunion members to be fully informed about the conversion so they maycast educated and meaningful votes," said NCUA Chairman JoAnnJohnson. The new rules come just weeks after the $1 billion LakeMichigan CU failed to obtain the necessary member vote which wouldhave made it the largest credit union to convert to a bank. Sincethen, Community CU, at $1.7 billion in assets the nation's largestcommunity charter, has applied to convert to a mutual savings bankand sell stock to the public.