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NAFCU requests more transparency in emergency mergers rule
The NCUA's proposed change to its "in danger of insolvency" definition as it relates to emergency mergers should contain increased transparency and a more streamlined process for smaller credit unions, NAFCU Regulatory Affairs Counsel Ann Kossachev said Friday in an official comment letter to the agency.
The letter is in response to the proposal made during the NCUA's July board meeting. The proposal is intended to give the agency more flexibility in situations where an emergency merger is necessary.
The NCUA proposes to add a fourth category to the "in danger of insolvency" definition and, for two of the three current categories, lengthen by six months the timeframe the agency has to forecast a credit union's future insolvency when a predictive assessment of the credit union's declining net worth is in play.
NAFCU is overall supportive of the modification to modernize forecasting procedures for emergency mergers. In the letter, Kossachev suggested more transparency from the agency as it starts following the new timeline for determining "in danger of insolvency."
The best way to guarantee that the NCUA effectively helps troubled credit unions merge with willing partners "in a timely and efficient manner is to most accurately predict when a credit union is likely to become insolvent," wrote Kossachev. "As part of this process, prospective merger partners should be fully apprised of important information regarding the selection process and should also have the opportunity to make their case for the merger. Additionally, the NCUA should provide prospective merger partners with a written explanation of the reasons for its decision."
Kossachev also recommended improving the process for acquiring smaller credit unions, which is "unnecessarily burdensome" considering they have fewer resources to merge.
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