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Earlier today, CUNA attended the NCUA’s monthly board meeting. During the public session, the NCUA received the Corporate Stabilization Fund Quarterly Report and approved three Proposed Rules on – Appeals Procedures, the Supervisory Review Committee, and Voluntary Mergers of Federal Credit Unions. The closed portion of the meeting contained three Supervisory Actions.
The next meeting is scheduled for June 22 at the NCUA’s headquarters in Alexandria, VA. Below you will find more information on each of the topics discussed during the open session.
I. Corporate Stabilization Fund Quarterly ReportThe Board received a Quarterly Report on the Corporate Stabilization Fund. The Revenue and Expenses showed Net Income of $43.8 Million and the Total Liabilities and Net Position of the Balance Sheet at 1.579 Billion for the quarter ending March 31, 2017. The discussion focused on the balance sheet and there was no discussion surrounding the merger of the fund into the NCUSIF.
II. Proposed Rule, Part 746, Subpart B, Appeals ProceduresThe Board approved a Proposed Rule to adopt procedures that govern appeals to the Board that would apply to agency regulations that currently have their own embedded appeals provisions. The procedures apply in cases in which a decision rendered by a regional director or other program office director is subject to appeal to the Board. Not included in the proposals are the following areas (most of which have their own appeals process already):
1. Formal enforcement actions;
2. Creditor claims in liquidation;
3. Material supervisory determination within the jurisdiction of the Supervisory Review Committee (note: changes are addressed in the companion rule adopted at this board meeting);
4. Challenges to actions imposed under the prompt corrective action regime; and
5. Appeals of matters that are delegated by rule to an officer or position below the Board for final binding agency action.
Various regulations that have appeals procedures that are replaced by the proposed rule include the following areas:
1. Claims of a Creditor of an Insolvent FICU under an NCUA Alternative Resolution Dispute Process;
2. Payment of Claims regarding Federally Insured Shares or Deposits;
3. Chartering and Filed of Membership determinations;
4. Community Development Loans;
5. Golden Parachutes;
6. Investment Authority – (appeals of denials of authority to engage in derivatives investment activity);
7. Change of Officials for Troubled or Newly Chartered Credit Unions;
8. Conversions and Mergers; and
9. Other Miscellaneous Regulations:
a. NCUA’s general lending rule;
b. NCUA’s eligible obligations rule;
c. NCUA’s loan participations rule;
d. Section 701.32 regarding public unit and nonmember shares;
e. Section 701.34 regarding the low income designation; and
f. Section 741.11 regarding branch offices outside the United States.
The rule provides for an Informal Appeals Procedure which can be utilized at the option of a credit union to go to a particular Program Office with the option for reconsideration by the Board, or a credit union can go right to the Board.
III. Proposed Rule, Part 746 Subpart A, Supervisory Review Committee
The NCUA approved a proposed rule to amend procedures for appealing material supervisory determinations to the NCUA Supervisory Review Committee (SRC). The rule expands the number of supervisory determinations appealable to the SRC and provides credit unions with the opportunity for additional review by the Director of the Office of Examinations and Insurance. It further changes the nature and composition of the SRC.
The rule expands the term “material supervisory determination:” to include supervisory determinations that may affect the capital, earnings, operating flexibility, or that may otherwise affect the nature and level of supervisory oversight of a federally insured credit unions. Certain exceptions are excluded where other appeals procedures exist.
Examples of material supervisory determinations include, but are not limited to the following:
1. Determinations related to the adequacy of loan loss reserve provisions;
2. Classification of loan and other assets that are significant to a FICU;
3. Determinations related to restitution orders under the Truth in Lending Act; and
4. CAMEL ratings (but only if they affect the nature and level of supervisory oversight of an FICU.
IV. Voluntary Mergers of Federal Credit Unions.
The NCUA approved a proposed rule to revise the procedures a Federal Credit Union must follow to merge voluntarily with another credit union. The rule:
1. Revises and clarifies the contents and format of the member notice;
2. Requires merging FCUs to disclose all merger-related financial arrangements for covered persons;
3. Increases the minimum member notice period;
4. Provides procedures to allow reasonable member-to-member communications regarding the proposed merger; and
5. Makes conforming amendments regarding termination of insurance when the surviving credit union is not an FCU.
The definition of “merger-related financial arrangement” does not include compensation arrangements with management and certain highly compensated employees rather than just senior management officials or directors.
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