Conversion or merger of a credit union into a bank would be made easier for a credit union board to propose and decide under the latest round of deregulation proposals issued by the federal regulator Tuesday.
The National Credit Union Administration (NCUA) said the proposals – six of them affecting Code of Federal Regulations (CFR) 708 A Subpart C – would “clarify and eliminate unduly burdensome and duplicative requirements in the Code of Federal Regulations related to bank conversions and mergers.”
The agency said the proposal was made as the tenth round of its so-called “deregulation project” started earlier this year. The project was started after President Donald Trump (R) ordered all federal agencies to reduce their regulations.
“These changes are intended to allow a credit union’s board of directors to exercise its fiduciary duties and business judgement rather than imposing a rigid, agency-defined process,” NCUA said in announcing the six changes outlined in the proposal.
“The intended effect of these changes is to simplify compliance for credit unions, reduce administrative costs, and modernize the merger process, while ensuring members receive clear and effective disclosures,” NCUA added.
Among the changes proposed:
- Remove the definition of “clear and conspicuous” from disclosures about conversions or mergers that “allow credit unions the flexibility to design disclosures that are effective and clear for their members.” The proposal removes specific type sizes and styles and other print publication specifics, ostensibly recognizing that digital media is also used today.
- Revise due diligence reporting requirements which the agency contends “streamlines” reporting requirements, “focusing on the substantive outcome of the board’s decision-making process.” The agency described the proposed revision as minor. However, the specifics of the proposal notes that it would remove the board requirement to describe to NCUA how it located the merger partner and negotiated the union. The agency said it believes that “requiring a narrative on these specific internal processes is overly intrusive and micromanages the board’s deliberative functions. The critical regulatory objective is to ensure the board has conducted sufficient due diligence to conclude that a merger serves the members’ best interests.”
- Remove member “voting guidelines” for agreeing to (or rejecting) a merger or conversion entirely from the regulation. NCUA asserts that the current regulation is not mandatory but are only “guidelines … to help a credit union obtain a fair and legal vote.” According to the proposal, the provision in current regulation “acknowledges its advisory nature and, while such guidance can be helpful, the presence of non-binding guidance within a body of mandatory rules can create confusion for regulated entities, blurring the line between what is required and what is merely recommended.” The agency said removing this section would “streamline the regulatory text, making it clearer for credit unions to understand their legal duties.”
NCUA Announces Tenth Round of Deregulation Proposals
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