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CUNA Fiduciary duty corp. rules need greater clarity
WASHINGTON (6/2/10)--The Credit Union National Association (CUNA) in a comment letter asked the National Credit Union Administration (NCUA) to clarify credit union directors’ "existing fiduciary duties” as well as how state corporate laws “apply to federal credit unions on issues not addressed by the Federal Credit Union Act (FCUA) and NCUA regulations.” Doing so “would also protect member rights without having negative operational consequences” and “would be consistent with current NCUA policies as well as the legislative history and judicial interpretation of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) provisions on which the proposed rule is premised,” the CUNA letter added. The NCUA earlier this year proposed a significant rewrite of portions of Sections 701, 708a, and 708b of its rules to address the fiduciary duties of federal credit union directors, credit union-to-bank mergers, and charter and insurance conversions. While the NCUA’s proposed prohibition on director indemnification is, according to CUNA, “unnecessary” and could make it more difficult for federal credit unions to “find qualified, volunteer board members,” CUNA wrote in support of “ensuring directors should understand the finances and balance sheet of the credit union they serve.” “However, it should be the credit union board's collective responsibility to ensure this is the case for each board member and not an authority that an examiner could enforce against an individual director,” and credit union boards “should have a written policy that could be reviewed” by examiners, CUNA added. Generally, CUNA “strongly” urged the NCUA “to support greater regulatory relief for credit unions because credit unions continue to face a challenging business and regulatory environment,” adding that the NCUA’s rules, as proposed, “would increase the complexity and lead times of the affected transactions, especially for credit union to credit union mergers.” For the full letter, use the resource link.


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