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Governance Challenges Concern CUs Worldwide

Panelists cite a need for greater director responsibility and capability.

July 14, 2010
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Governance panel
Participants in a Tuesday morning panel focused on recent regulatory developments and challenges around the world. From left: Daniel Burns, moderator and WOCCU director from Canada; Andy Poprawa, president/CEO of the Deposit Insurance Corp. of Ontario, Canada; Gigi Hyland, NCUA board member; and Brandon Khoo, executive general manager for the Australian Prudential Regulatory Authority.

By Michael Muckian and Steve Rodgers

The question of performance standards, capabilities, and remuneration for credit union directors worldwide dominated discussion among regulators and economists who served as panelists during twin general session discussions Tuesday at The 1 Credit Union Conference.

Situations differ for directors in Australia, Canada, Europe, and the U.S., but performance requirements are the same. That means higher levels of both responsibility and risk for volunteer and paid directors at credit unions worldwide.

Participants in a panel focused on recent regulatory development agreed that clearer definitions of board terms and responsibilities would make governance easier to regulate.

Gigi Hyland, National Credit Union Administration (NCUA) board member; Brandon Khoo, executive general manager for the Australian Prudential Regulatory Authority; and Andy Poprawa, president/CEO of the Deposit Insurance Corp. of Ontario, Canada, offered insights into conditions in each of their own countries.

“Currently, there are no board term limits in the U.S.,” said Hyland. “That means some directors can serve 30, 40, 50, and even 60 years. While that’s not necessarily a bad thing, it could mean that directors don’t always have the fresh set of eyes needed to see changes in their credit union and the market.

“Boards of directors need to take a long, hard look in the mirror and ask themselves if they are really the best people to be representing their members.”

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A larger issue in many countries is the absence of board performance standards, which can pose significant risk for some credit unions, noted Poprawa, who also chairs WOCCU’s International Regulators Roundtable.

“Governance is an area of interest and also one of primary risk for global credit unions,” said Poprawa. “The Regulators Roundtable sees this and will be addressing the possible creation of global governance standards at its meeting.”

Poprawa said Canada recently passed legislation requiring term limits for directors, but the law gives credit unions significant leeway in determining those limits.

He said the Canadian regulator would be checking credit unions’ term limits to make sure they were reasonable and in members’ best interests.

“In Australia, we make it the credit unions’ responsibility to develop their own policies for the renewal of their boards of directors,” said Khoo.

Other regulatory panel discussion topics included the future of corporate credit unions and access to supplemental capital.

“Credit unions in the U.S. will have to determine whether or not they want to recapitalize the corporates and, if so, what will be the appropriate services for corporates to provide,” said Hyland. “NCUA is also studying the capital issue, and Congress probably won’t address it anytime soon.”

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