[Federal Register Volume 62, Number 233 (Thursday, December 4, 1997)]
[Proposed Rules]
[Pages 64185-64187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31501]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 708a
Mergers or Conversions of Federally-Insured Credit Unions to Non
Credit Union Status: NCUA Approval
AGENCY: National Credit Union Administration (NCUA).
[[Page 64186]]
ACTION: Notice of proposed rulemaking.
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SUMMARY: The proposed rule would add a new provision to the disclosure
statement in regulations relating to NCUA approval of mergers or
conversions of federally-insured credit unions to non credit union
status. Credit unions would be required to disclose in plain English on
the cover page of the disclosure statement specific facts relating to
the proposed transaction's impact on the members.
DATES: Comments must be received by February 2, 1998.
ADDRESSES: Comments should be directed to Becky Baker, Secretary of the
Board. Mail or hand-deliver comments to: National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax
comments to (703) 518-6319. E-mail comments to boardmail@ncua.gov.
Please send comments by one method only.
FOR FURTHER INFORMATION CONTACT: Mary F. Rupp, Staff Attorney, Office
of General Counsel, National Credit Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518-6553.
SUPPLEMENTARY INFORMATION:
Background
On September 16, 1994, the NCUA Board issued an interim final rule,
part 708a, and request for comments. 59 FR 48790 (September 23, 1994).
The rule established that the NCUA Board must approve any merger or
conversion of a federally insured credit union to a non credit union
institution. On March 1, 1995, the NCUA Board issued a final rule
setting forth the procedures and disclosure requirements for these
transactions. 60 FR 12659 (March 8, 1995). One of the issues addressed
in the final rule was the requirement that a uniform member notice be
sent to the members as part of the disclosure. Nine of the ten
commenters supported a uniform notice. The reasons given were that a
uniform notice would provide clear and consistent guidelines for
merging credit unions, ensure that important information is not
withheld from the members and require less individual review. The NCUA
Board agreed with these goals, but believed that they could be
accomplished more effectively through a listing of the information that
must be included in the notice to members, rather than a form that may
become outdated or not apply to all transactions. The final rule did
not require a uniform notice.
The NCUA Board has had an opportunity to review Disclosure
Statements under this rule and now, agrees with the commenters that
certain key information should be routinely provided to the members in
plain English. Although most of the information is currently being
provided, it is buried in a multi-page Disclosure Statement, often in
excess of fifteen pages. Further, it is stated in a way that is
difficult to understand.
Proposal
To ensure that the members understand the proposed transaction's
impact, the Board proposes requiring credit unions to provide in plain
English on the cover page of the Disclosure the following information:
(1) The institution will no longer be democratically controlled with
each member having one equal vote. The larger depositors will have more
votes than the smaller depositors; (2) This action would enable the
credit union to further change its organizational structure in the
future. For example, if the institution were to convert to a stock
institution, the members will lose their equity ownership interest. Any
future decision to convert to a stock institution would be made by a
vote of the members. The weight a member's vote carries will be based
on the amount of the member's deposit; and (3) The board of directors
may receive financial benefits not available to other members. For
example, after waiting the two years required by NCUA's regulation,
Board members could be compensated and they could obtain stock under
terms not available to other members.
In the event these statements do not apply to a particular
transaction, they may be modified as necessary.
The NCUA Board is interested in receiving comments on the proposed
uniform disclosure requirements.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires the NCUA to prepare an
analysis to describe any significant economic effect any regulation may
have on a substantial number of small credit unions, meaning those
under $1 million in assets. The NCUA Board has determined and certifies
that the proposed rule if adopted will not have a significant economic
impact on a substantial number of small credit unions. The reason for
this determination is that it is highly unlikely that small credit
unions would be engaged in a merger or conversion to a noncredit union
institution. Accordingly, the NCUA Board has determined that a
Regulatory Flexibility Analysis is not required.
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. The proposed amendments will apply to all
federally insured credit unions. The proposed amendments are not
designed or intended to interfere with the state regulation of state-
chartered institutions. However, existing statutory requirements
mandate the Board approve transactions of this nature for all federally
insured credit unions. Recognizing the interests of states and state
regulators in supervising state chartered credit unions, the rule
governing transactions of this nature includes a provision that allows
federally insured state chartered credit unions, on a case-by-case
basis, to obtain a waiver from NCUA's rule and follow state procedures
if those procedures are determined to adequately address the concerns
of NCUA's rule. With this provision in the rule, the NCUA Board has
determined that the proposed amendments are not likely to have any
direct effect on states, on the relationship between the states, or on
the distribution of power and responsibilities among the various levels
of government.
Paperwork Reduction Act
The proposed amendment requires the credit union to provide to its
members information that is provided by NCUA in the proposal. The
Paperwork Reduction Act does not apply to disclosures that are
directives for a person to disclose information completely supplied by
the agency. 5 CFR 1320.3(c)(2).
List of Subjects in 12 CFR Part 708a
Bank deposit insurance, Credit unions, Reporting and recordkeeping
requirements.
By the National Credit Union Administration Board on November
24, 1997.
Becky Baker,
Secretary of the Board.
Accordingly, NCUA proposes to amend 12 CFR part 708a as follows:
PART 708a--MERGERS OR CONVERSIONS OF FEDERALLY-INSURED CREDIT
UNIONS TO NON CREDIT UNION STATUS: NCUA APPROVAL
1. The authority citation for part 708a is revised to read as
follows:
Authority: 12 U.S.C. 1766, 1785.
[[Page 64187]]
2. Amend Appendix A to part 708a to revise paragraph (2)(m) to read
as follows:
Appendix A to Part 708a--Notice to Members of Special Meeting,
Disclosure and Ballot
* * * * *
(2) * * *
(m) The cover of the Disclosure Statement must contain the
following statement in bold, appropriately modified to the extent
that this statement does not accurately describe the transaction:
PLEASE READ THIS DISCLOSURE DOCUMENT. IT CONTAINS IMPORTANT
INFORMATION ABOUT YOUR CREDIT UNION.
If the credit union converts to a savings bank, the institution
will no longer be democratically controlled with each member having
one equal vote. As explained in this Disclosure, the larger
depositors will have more votes than the smaller depositors.
This action would enable the credit union to further change its
organizational structure in the future. For example, if the
institution were to convert to a stock institution, you would lose
your equity ownership interest. Any future decision to convert to a
stock institution would be made by a vote of the members, however,
the weight your vote carries will be based on the amount of your
deposit in the institution.
If the credit union converts to a savings bank, your board of
directors may receive financial benefits not available to other
members. For example, Board members could be compensated and they
could obtain stock on terms not available to other members, after
waiting the two years required by credit union regulation.
* * * * *
[FR Doc. 97-31501 Filed 12-3-97; 8:45 am]
BILLING CODE 7535-01-P
