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NCUA details fin lit requirements for FCU directors
ALEXANDRIA, Va. (2/8/11)—The National Credit Union Administration (NCUA) in its letter to federal credit unions No. 11-FCU-02 sought to remind federal credit union directors of specific financial literacy requirements that will become effective later this year as well as their general responsibilities as credit union leaders. The NCUA in December established a set of guidelines for credit union directors. Those guidelines would seek to ensure that credit union directors have “a base level of financial skills, consistent with the size and complexity of the credit union operation they serve.” In the letter, the NCUA reiterates that directors should have the ability to examine their credit union’s balance sheet and understand specific financial activities that their credit union takes part in. “In particular, a director must understand not only how these activities generate revenue for the credit union but also, and perhaps most importantly, the various risks associated with these activities that could lead to financial loss.” The NCUA has specifically cited the need for complete knowledge of risks, including credit risk, liquidity-related risks, and interest rate, compliance, strategic, transaction, and reputation risks. The NCUA has determined that directors will be given six months to familiarize themselves with the necessary financial information and concepts. Directors elected before Jan. 27 will need to have acquired the necessary knowledge by July 27. NCUA examiners will look for evidence of comprehensive financial training during their inspections, and will evaluate whether a given credit union has the policies needed to offer appropriate training to its directors. However, the Credit Union National Association’s (CUNA) Senior Vice President for Compliance Kathy Thompson noted that NCUA examiners should never quiz credit union board members on the substance of their training. Thompson added that these rules will not apply to state-chartered credit unions. Directors may gain the needed financial understanding through their own in-house credit union training, external training, on the job experience, or online training. The NCUA will offer its own training, and directors may also train through CUNA’s own Center for Professional Development. For the full NCUA letter and more on CUNA’s training sessions, use the resource links.
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