NCUA Board Holds Busy Meeting

The National Credit Union Administration (NCUA) Board of Directors met on Thursday, May 19 and considered several issues including limits on golden parachute and indemnification provisions, prepayment of corporate stabilization fund assessments, share insurance advertising, and a rule clarifying the temporary unlimited deposit insurance mandated by Dodd Frank.

The Board approved three new final rules and proposed a new program and a rule for comment:

  • Final Rule—Golden Parachutes and Indemnification;
  • Final Rule—Accuracy of Advertising and Notice of Insured Status;
  • Final Rule—Temporary Unlimited Share Insurance to Non-Interest-Bearing Transaction Accounts;
  • Proposed Rule—Community Development Revolving Loan Fund; and
  • Proposed Program—Voluntary Prepayment of Corporate CU Fund Assessments 

Golden Parachutes and Indemnification
This rule applies to all federally insured credit unions.  It was originally proposed to address situations where credit unions in distress provided lucrative rewards to departing officials who may have contributed to the credit union’s financial condition.  It also limits the indemnification credit unions can provide to their executives for things like civil money penalties or the imposition of a cease-and-desist order.

Under this rule, credit unions that are insolvent, in a troubled condition, or rated as a CAMEL 4 or 5 cannot provide golden parachute type compensation to their officers.  Legitimate severance payments or bona fide deferred compensation is exempt from the rule.

Accuracy of Advertising and Notice of Insured Status
Under this final rule, most radio and television advertisements will have to include notice of the credit union’s insured status.  Under prior rules, advertisements under 30 seconds in length need not include this notice.  The new exemption applies only to advertisements under 15 seconds in length.  These new rules also require that the NCUA logo be displayed on credit union’s webpage and on its annual reports and statements of condition. 

Temporary Unlimited Share Insurance to Non-Interest-Bearing Transaction Accounts
The temporary unlimited coverage applies only to traditional non-interest-bearing accounts, such as a demand checking or share draft account, whether or not the account is held by an individual or a business, as well as to official checks issued by a FICU such as negotiable cashier’s or certified checks.  This temporary unlimited share insurance does not apply to NOW accounts, money-market accounts, or IOLTA accounts.  The temporary share insurance will continue until December 31, 2012

Community Development Revolving Loan Fund
The Board proposed a rule for public notice and comment that would substantially revise the Community Development Revolving Loan Fund (CDRLF) regulation to “improve transparency” and improve the CDRLF’s organization and ease of use by credit unions.  While NCUA said the changes are designed to reduce the burden on credit unions seeking an award from the Fund, the proposal would also add new reporting and monitoring requirements.  In addition, it would change the CDRLF rule’s low-income credit union (LICU) designation criteria to use “median family income” in the standard for LICU determination instead of “median household income. 

Voluntary Prepayment of Corporate CU Fund Assessments
In order to help defray the cost of assessments and aid the Stabilization Fund in remaining liquid, the NCUA proposed a program allowing credit unions to prepay their assessments.  The program would be entirely voluntary.  Under the program, credit unions would need to have a minimum assessment of $10,000, and be willing to prepay at least that amount.  In turn, the total assessment for all credit unions would be reduced due to prepayment.   The NCUA is hosting a webinar to explain the program on May 26 at 1:00 p.m. Pacific time.  Credit unions may register on the NCUA’s website


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Posted in Business Solutions, Industry Insight, NCUA.