Directors’ responsibilities in credit union acquisitions of banks
Proposed NCUA rule lays out director certification requirements.
The National Credit Union Administration’s recent proposed rule on federally insured credit union combinations with banks and other non-credit unions would establish new corporate governance rules for these transactions if it is finalized.
NCUA already has similar rules for mergers of a FICU with another credit union, for mergers of a FICU into a bank, and for conversion of a FICU to a mutual savings bank or to a privately insured credit union, but the agency has not previously established regulations applicable to credit unions acquiring non-credit unions.
These combinations most commonly involve a credit union acquiring a bank or some of the bank’s branches through a purchase and assumption transaction where the credit union purchases the bank’s assets and assumes its liabilities in the functional equivalent of a merger.
If finalized as proposed, the new NCUA rule would require directors of federally insured credit unions to vote on whether to go forward with a credit union’s proposed combination with a non-credit union, meaning that the decision to acquire a bank could not be made by the credit union’s management alone.
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