New Rules On CU Conversions

The NCUA board is expected to issue a proposed rule at its next meeting, Sept. 18, that will require credit unions to make more comprehensive disclosures to members when converting to mutual savings banks. Among the requirements will be disclosures of future plans to convert down the road from mutual structures to stock- owned, as half-a-dozen converts have done in recent years.

The rule, which will be issued for public comment, has been proposed by NCUA Chairman Dennis Dollar, who has expressed concerns in recent months over the loss of mutual ownership and the costs to credit unions' member/owners. Dollar has expressed concerns in recent speeches about both the nature of the charter change and the ownership rights of members to capital built up over the life of the converting credit union. In such conversions, first when the credit union switches to a mutual savings bank, then to stock ownership, the capital of the institution is sold along with the rest of the credit union, to the public, with former credit union members usually given precedence in the stock sale.

The proposed rule will not make such switches more difficult, but will require that members be told more about management's plans for the future of the institution. It would apply to all federally insured CUs.

The board will also vote final amendments to its member business loan rule, making it easier for credit unions to make MBLs. The changes will help those credit unions bumping up against the limits on MBLs (12.25% of assets) and make it easier to extend loans to small borrowers.