ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release August 29, 2006 #06-48
E-mail: [email protected]

ACB SAYS NCUA CONVERSION PROPOSAL CONTRARY TO LAW, URGES WITHDRAWAL AND REPROPOSAL

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WASHINGTON, D.C. — America’s Community Bankers said today that the National Credit Union Administration’s proposal governing the conversion of credit unions is contrary to law and should be withdrawn and reproposed.

In its comment letter, ACB said: “We do not believe the NCUA has the statutory authority to require converting credit unions to comply with the proposed requirements. The proposal exceeds the authority that the NCUA was granted in the Credit Union Membership Access Act to monitor the methods and procedures of the membership vote and goes beyond the NCUA’s jurisdiction.”

While the NCUA asserts that it “recognizes and fully supports the right of a credit union to change its charter to a bank charter,” the proposal “contradicts that statement by imposing barriers to conversion and denying the option of charter choice,” ACB said.

The law says the conversion rule must be “consistent with the rules promulgated by the other financial regulators” and can be “no more or less restrictive than the [rule] applicable to charter conversions of other financial regulators.” ACB said: “Notably, the fact that the NCUA has cited these requirements had no bearing on the outcome of its proposal, which is more restrictive and inconsistent with the conversion regulations of the federal banking regulators.”

“ACB strongly supports the ability of depository institutions to choose the type of charter and regulatory structure under which they operate,” ACB said. “We believe that institutions should have the freedom to convert to a different charter type when the current charter no longer fits the institution’s business plan or the needs of the local community.

“We also strongly believe that the disclosure of accurate and complete information is essential for the good corporate governance of all types of financial institutions and is particularly important when credit union members are preparing to vote whether to convert to a mutual savings bank,” ACB added.

ACB expressed concern about these specific requirements of the proposal:

Credit unions should not be required to provide advance notice and a 30-day comment period prior to a vote by the board on a conversion plan. ACB said the requirement would fuel the spread of misinformation about the conversion and what it would mean to credit union members. Ultimately, the decision to convert will be made by a full membership vote.
Credit unions would be required to make disclosures that do not accurately characterize the effects of the conversion. “The NCUA is using the pretext of improving corporate governance to require credit unions to make misleading disclosures,” ACB said.
The proposed certification standard would discourage credit union board members from approving a conversion plan even if they support this option. Board members may conclude that voting against conversion “is preferable to opening themselves to possible lawsuits from anti-conversion activist groups,” ACB said.
The proposal would restrict when credit unions can mail ballots for the conversion vote. ACB urged the NCUA to revise the proposal “to encourage the widest possible member participation in this important decision.”
The NCUA should not enable credit union members to access the names and contact information of other credit union members for purposes of contacting them about the proposed conversion. In addition to raising significant privacy issues, the proposal will allow conversion opponents to circulate potentially misleading materials without any controls or oversight, ACB said.

Click here to read the comment letter.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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