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April 30, 2008 - In a comment letter signed by 30 state agencies, NASCUS and state regulators communicate serious concern about the National Credit Union Administration’s (NCUA) Advanced Notice of Proposed Rulemaking (ANPR) on Parts 708a and 708b.
The ANPR seeks comment on whether the NCUA should promulgate rules governing various procedures involving mergers, conversions and termination of insurance for federally insured credit unions. NASCUS and state regulators believe that if the agency moves ahead with a formal proposal, NCUA will overstep its statutory authority by preempting the longstanding precedent that state law dictates corporate governance.
“The NCUA Board should understand that our actions as state regulators to sign this letter are indicative of the both the serious nature of the issue and our commitment to preserving state authority in these matters,” stated the April 30 comment letter, filed in addition to NASCUS’ comment letter submitted on the collective behalf of the state credit union regulatory system.
As state corporations, state-chartered credit unions follow state corporate governance laws and fall under the authority of state regulators. NASCUS and state regulators question whether the NCUA has the statutory authority to preempt state law in corporate governance matters. NASCUS and state regulators see no clear Congressional intent for such broad preemptive actions by NCUA in the Federal Credit Union Act.
“The ANPR represents an overly broad application of NCUA's regulatory authority on state-chartered credit unions,” states the comment letter. “There is no apparent basis for the NCUA approach which obliterates nearly a century of state originated financial institution law and two centuries of law deferring to the states on such important matters of corporate governance.”
NASCUS and state regulators share some of NCUA’s concerns expressed in the ANPR, but recommend that the issues at hand are better left to state law and regulation. NASCUS maintains that this is not only the more practical approach, but the more sound legal approach, as well.
“There is no authority for application of the ANPR to state-chartered credit unions. The damage to state law and the dual chartering system cannot be overstated,” concluded the letter. “We are committed to preserving state authority on these issues.”
View the letter by clicking here. To read about the comment letter submitted by the NASCUS organization, follow this link.
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