ACB Supports OTS Mutual Bylaws Proposal

ACB has spoken out in favor of proposed bylaws that would allow federally-chartered savings associations and mutual holding companies to exclude those accused or convicted of wrong doing from serving as a board member.

ACB filed a comment letter with the Office of Thrift Supervision (OTS) in support of proposed pre-approved bylaw amendments that would allow federally-chartered savings associations and mutual holding companies to preclude persons who are under indictment, have been convicted of a crime involving dishonesty, or have been subject to a cease and desist order from a banking agency from being members of the board of directors. The proposed amendments would also bar such persons from nominating individuals for membership on the board of directors. Both of the pre-approved bylaws would be optional for federal savings associations and mutual holding companies, but if adopted would not require any further approval from the OTS.

The pre-approved, optional bylaws differ from those adopted by the OTS in 2001, in that they make the period of disqualification for the board indefinite and add the prohibition on nomination. OTS would consider any specific time period for disqualification for service on the board pre-approved.

ACB has long supported the OTS’s approach to pre-approved bylaws for federally- chartered savings associations and mutual holding companies in order to streamline the corporate governance procedures, thereby reducing the regulatory burden. In addition, public trust in financial institutions and the persons serving on their boards is critical in the current environment.

OTS Clarifies and Strengthens Support of Mutual Holding Companies

ACB recently obtained a copy of a letter, dated March 13, 2006, in which Director John Reich strongly reaffirms the agency’s commitment to the independence of mutual holding companies. Director Reich’s letter reiterates the OTS’s strong support of the mutual charter expressed in a January 9, 2006, letter to Sen. Mike Crapo’s (R-Idaho) office. As reported previously, dissident minority shareholders in MHCs have recently argued to Congress and to the OTS that the voting rights of the majority mutual interest should be transferred to the minority public shareholders. This would allow the minority shareholders to appoint all of the directors and management and force second-step conversions.

Director Reich’s letter to a group of dissident shareholders states: “In our view any regulatory or legislative action that provides the minority shareholders greater control over the underlying depository institution than a majority and controlling MHC is inconsistent with U.S. corporate governance standards.” The letter also goes on to say, “[I]t is imperative to underscore the fact that a mutual institution undergoes a MHC reorganization so that the institution can continue to operate in quasi-mutual form. By their very nature, mutuals operate to serve the interests of their communities; in a MHC structure, the interests of the depositors are protected at the MHC level.”

Senate Passes Regulatory Relief Bill with No Changes to MHC Structure

The Senate passed a regulatory relief bill for financial institutions on May 25, 2006. Significantly, the bill did not include a provision being advanced by dissident minority MHC shareholders that would allow the minority shareholders to appoint all of the directors and management and force second step conversions. ACB and its members, as well as the OTS (see above), actively opposed this proposal and it was not even considered for addition to the Senate bill.

ACB Discusses Mutual Charter Choice in Credit Union Times

In a letter to the Credit Union Times, Diane Casey-Landry, ACB’s President and CEO, refuted statements made about mutual institutions. A credit union official had written that “the only former credit unions that retain or plan to retain mutual ownership are quite small…a large mutual thrift has become…difficult to locate…”. Casey-Landry’s letter in response corrected the record and pointed to many examples of large organizations that choose self-determination and service to communities in adopting a mutual form of organization. Casey-Landry stated that ACB proudly represents over 90 percent of all mutual community banks in the country, and reminded readers that ACB supports charter choice for all financial institutions.

ACB Testifies Before Congress In Support of Credit Union Charter Choice

ACB member, Laura Lee Stewart, President and CEO of Sound Community Bank in Seattle, testified on ACB’s behalf before Congress in strong support of H.R. 3206, the “Credit Union Charter Choice Act.” Sound Community Bank is a $214 million mutual savings bank created by the conversion of a credit union in 2003. H.R. 3206, sponsored by Reps. Patrick McHenry, R-N.C., and Ed Towns, D-N.Y., would force the NCUA, the Credit Union regulator, to follow congressional intent and allow credit unions to convert to mutual charters under reasonable regulations. Recent actions of the NCUA resulted in Dearborn Federal credit union in Michigan abandoning its attempt to convert to a mutual charter. Stewart told the congressional committee that the NCUA has ignored the will of congress and put a de facto end to credit unions converting to mutual banks. The McHenry-Towns bill would provide charter choice for all institutions and eliminate the barriers to conversions erected by the NCUA.