This past June, the National Credit Union Administration issued a notice of proposed rulemaking that would expand and amplify credit union procedures related to merger initiatives. Specifically, NCUA’s objective is to enhance transparency—often thought of as “honesty” or “openness”—with members about merger-related transactions. And indeed, transparency and accountability are generally considered the two main pillars of good corporate governance.

The agency explained in the notice that the current environment is “a period of significant consolidation.” This, in turn, has created situations in which “… some prospective merger partners may be seeking to influence the merging credit union’s financial incentives …” that implicate conflicts of interest in the merging credit union’s management. This explains NCUA’s concerned interest in transparency for members.

During the comment period, many suggestions were submitted to NCUA. We don’t know what the final rule will look like, but we do know critical elements that NCUA will address—elements that boards of directors and management will want to be mindful of in the future should they be involved in a merger. The proposed merger rule touches, among others, five significant areas: definitional changes that accommodate the proposed rule’s modifications; an obligation for greater credit union information submissions to NCUA; revised information standards for members; a right of members to communicate their views with other members; and delineation of the timing of merger process notices.

 

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