Trades Press for More Conversion Disclosures

Register now

The credit union trade groups are calling for a number of changes and revisions in NCUA's proposal on credit unions seeking to convert to a mutual savings bank.

CUNA has told NCUA via a comment letter that before any credit union converts to a mutual savings bank that it is imperative members be provided with "timely, balanced disclosures."

CUNA said the disclosures are important because such a conversion is a "fundamental change in the nature of the financial institution." The trade group said the conversion disclosures should be every bit as detailed as those proposed by NCUA for credit unions converting from NCUSIF deposit coverage to private deposit coverage. "While parallels between these two proposals exist, they address fundamentally different processes within a credit union," CUNA CEO Dan Mica said in the letter, noting that under a conversion to a mutual savings bank, the CU is terminated.

CUNA called on NCUA to consider using specific examples in the supplementary information for the final rule that outlines problems that the agency has observed in credit unions converting to another form of financial institution.

CUNA further called for:

  • A requirement that any credit union seeking to convert to a mutual savings bank highlight and segregate specific disclosures (such as ownership and control, operating expenses and their impact on rates and services, effect of a conversion to a stock institution and impact of costs of conversion) in order to assist members in understanding the consequences of a conversion;
  • The agency to clarify its guidelines for conducting a membership vote, so the guidelines are more easily recognized, read and enforced;
  • NCUA to coordinate with state agencies on issues of notification to regulators for federally insured state-chartered credit unions-and to clarify how such coordination should occur.

Similarly, in its comments to NCUA, NASCUS argued that it is "vital" that credit union members be informed fully when presented with a potential change in charter to a mutual savings bank. Moreover, the trade group for state regulators also said steps should be taken to ensure the integrity of the voting process on such conversions.NASCUS recommended that a CPA firm other than the one with an ongoing relationship with the credit union or a reasonable third party be allowed to conduct the vote "as we believe the purpose of the rule is to prevent any insider to exercise control over the voting process. Allowing a CPA firm not on record with the credit union to conduct the vote provides such impartiality and flexibility while accomplishing the same result, potentially in a less costly manner."
In general, NASCUS said it is not a proponent of dictating disclosure requirements for credit unions. "We believe the problem experienced in past conversions is that dissenting members did not have an appropriate mechanism that allowed their views to be heard," it said. "The disclosures themselves were not the only issue."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER