The Credit Union National Association lost a legal fight to kill a regulation affecting the governance of the industry's liquidity centers.

The U.S. District Court for the Eastern District of Virginia issued a summary judgment last Monday upholding a rule the National Credit Union Administration approved last fall banning shared management between the industry's largest trade group and corporate credit unions. The rule would affect about half of the 43 corporates.

"The record is replete with legitimate reasons for the NCUA's determination that interlocking boards and management create actual conflicts of interest," Judge Claude M. Hilton said in his 17-page ruling.

"The NCUA board's reasonable determination that such conflicts pose a threat to the safety and soundness of this nation's credit union system is a finding within the NCUA board's discretion and is entitled to deference."

The CUNA and its co-plaintiff, the National Association of State Credit Union Supervisors, raised a host of objections to the suit, which was filed Feb. 3.

The trade groups claimed the regulation amounted to micromanagement and that NCUA was exceeding its authority by extending the regulation to state- chartered corporates.

Judge Hilton gave those arguments short shrift.

Congress has "provided the NCUA with the power to issue such regulations 'as it may deem necessary or appropriate, to administer the national insurance fund," he wrote.

Another of the plaintiffs' rejected arguments claimed that the agency violated the Administrative Procedures Act by not providing facts to back up the need for regulation. The trade group had asked for proof that interlocking management had created problems; the NCUA declined to issue any, citing the confidentiality of examination reports.

But "the information concerning specific cases under review is confidential and the NCUA is under no obligation to disclose such information when promulgating a rule," the judge wrote.

In a statement, NCUA Chairman Norman E. D'Amours said: "We are gratified that the court has so clearly affirmed the principle upon which NCUA's rule was based - that dangers are presented by trade association control over federally insured credit unions."

The CUNA issued a release that said it was contemplating an appeal.

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