Trade groups are trying to drum up opposition to a plan by the National Credit Union Administration to sever the ties between corporate credit unions and trade associations.

The proposed regulation, issued April 5, would forbid corporate credit unions and industry trade groups from sharing top executives.

The industry's largest trade group, the Credit Union National Association, and at least one state association, the Virginia Credit Union League, are trying to mount a letter-writing campaign to defeat the proposed rules.

'Unnecessary Intrusion'

"We should never support an unnecessary regulatory intrusion into credit union operations," Virginia League president Eugene Farley argued in a May 12 letter to his members. "There is no safety and soundness concern here, and how a corporate is governed and managed should be left to the membership of each corporate."

However, most of the 144 letters NCUA has received on its plan are in favor of keeping trade association officers off the boards of the corporates.

Karl Hoyle, the agency's executive director, said the trade groups might be weighing their interests over those of the industry as a whole.

State Leagues Alerted

"It would seem to me we've gotten a lot of letters, without any encouragement, in favor of removing the interlocks," he said. "If they're trying to gin up opposition, maybe that says something."

Mr. Farley contended that he wanted "to put out something to tell the other side of the story."

CUNA president Ralph Swoboda tried to whip up other state leagues with his own May 20 letter. Mr. Swoboda asked his counterparts in the state leagues to urge their members to write NCUA in opposition of the proposal.

The deadline for comments on the plan is June 20.

CUNA and its affiliates control six of nine seats on U.S. Central Credit Union's board. There are 44 corporates, half of which share executives with various state leagues.

"The issue is not which structure -- integrated or nonintegrated -- works better," Mr. Swoboda wrote. "The issue is that both structures can and do work."

Mr. Farley said he thinks the plan has attracted wide-spread support because the agency slanted it to be appealing.

The proposal said "it was bad corporate practice to have an interlocking board. I'm not aware it's bad corporate practice," Mr. Farley said. The proposal is meant to correct the "appearance of a conflict of interest" rather than any real problems in the system, according to Mr. Farley.

Mr. Farley contended in the interview that interlocks work in Virginia.

Four of the seven board members for the Virginia League Corporate Federal Credit Union also serve on the league's board. In addition, the league has directed and managed the corporate since its inception 1975, Mr. Farley said.

Under the arrangement, the corporate keeps its operating costs low because it shares expenses with other league subsidiaries, and it reimburses the league for overhead costs.

"This has enabled Virginia Corporate to consistently return 90% to 95% of its earnings to Virginia credit unions," according to Mr. Farley's letter.

Both the NCUA and Congress are investigating the corporate credit union structure in the wake of U.S. Central Credit Union's $255 million investment in a troubled Spanish bank.

Mr. Farley said the NCUA issued the proposal in response to political pressure.

"The new NCUA chairman [Norman E. D'Amours] felt he needed to respond" to House Banking Committee Chairman Henry B. Gonzalez, he said.

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