Compliance

More Details Emerge on Corporate CU Plan

The focus of the plan will be the securitization and sale of legacy assets.

September 28, 2010
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Asset/liability management

The final rule—like the proposed rule—will establish a maximum two-year limit on the weighted average life (WAL) of a corporate's aggregate assets. Most ALM provisions in the rule will take effect 90 days after the final rule’s publication in the Federal Register.

In addition, the final rule eliminates the proposal’s two cash flow mismatch tests and replaces these with an “asset WAL extension test.”

The final rule’s asset WAL extension test limits a corporate portfolio to an “asset WAL extension to 2.25 years assuming a 50% slowdown in prepayment speeds, regardless of asset type.”

Corporate governance

The final rule requires corporate credit union directors to hold the position of CEO, chief financial officer, chief operating officer, or treasurer/manager at a member institution.

The final rule will also:

• Require, upon request, compensation disclosures for the corporate’s most highly compensated employees to the members of the corporate at least annually. The disclosures must include the top five compensated employees for corporates with 41 or more employees, the top four compensated employees for corporates with 31 to 40 employees, and the top three compensated employees for corporates with 30 or fewer employees, as well as the CEO if not already included;

Require disclosure of material increases in executive compensation related to corporate mergers;

Prohibit golden parachute payments when the corporate is troubled, undercapitalized, or insolvent, and prohibit certain indemnification provisions regardless of the financial condition of the corporate;

Require that a majority of corporate boards consist of representatives from natural-person credit unions; and

Prohibit an individual from serving on the boards of more than one corporate at a time and prohibit an organizational entity from having two or more individual representatives on the board of a single corporate.

Proposed chartering guidelines

The board has adopted a proposed Interpretive Ruling and Policy Statement (IRPS) for the requirements and process for chartering new corporate federal credit unions (corporate FCUs).

NCUA currently has no outstanding guidance on chartering corporate FCUs. The proposed IRPS includes requirements for charter applicants, such as information about a detailed business plan, management, member support, and other required forms.

In addition, the proposed guidance includes NCUA’s standards of review for the feasibility of a new corporate charter and their timelines for action. The proposed guidelines will have a 30-day comment period, and would be used to process any applications during the comment period.

CUSOs

The board also adopted a new policy regarding services of credit union service organizations (CUSO). Generally, corporate credit union services that are preapproved will be investment advisory and brokerage services. Any other services that corporate CUSOs provide must be approved by NCUA.

The board today provided authority to the director of the Office of Corporate Credit Unions to approve, approve with limitations, or disapprove new categories of corporate CUSO business activities. Such categories may include checking and currency services, financial counseling services, business loan origination, and similar services.

The NCUA General Counsel and the director of the Office of Examination and Insurance must concur with the OCCU director’s determination. Requests for categories that are other than these preapproved categories will be referred to the NCUA Board.

MARY DUNN is senior vice president/deputy general counsel for the Credit Union National Association.

Corporate Bailout

Tim Clark
October 12, 2010 12:21 pm
Spreading out losses over 10 years or more is wrong. It's against GAAP and makes no sense for those credit unions, like ours, that actually grow. As we grow, our share of the bailout becomes larger each year. I would rather pay our portion now and be done with it. Most credit unions are very well capitalized and should be able to afford to pay the cost now.


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Recovery of ill-gotten gains?

Lee Mosher
October 19, 2010 1:39 pm
Any plans to seek recovery from the vendors who sold the these "legacy assets", the rating agencies, the auditors, or the board members and officers that approved these toxic investments? Can you spell CLAWBACK?


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