Credit Union Committees: Required or Optional?
Written by Jennifer Aguilar, Regulatory Compliance Counsel, NAFCU
As I am sure you are all aware, NCUA's model bylaws provide for the formation of several committees to assist the board in carrying out its duties. While committees can be effective in getting tasks accomplished or overseeing a particular project, they can also sometimes feel like a duplication of effort – especially when the same people sit on multiple committees.
Not all committees are formed to meet a regulatory requirement. Committees are sometimes formed to address a particular project and get disbanded once the project has been completed. Other committees are formed to address an immediate need and continue to live on despite the need being met. And some committees were formed so long ago no one can remember why they exist. So, what committees are actually required?
Well, it turns out the model bylaws require federal credit unions to have only one committee: the supervisory committee. Under Article IX, the supervisory committee is responsible for ensuring the annual audit is completed and for verifying member accounts. The supervisory committee has the authority to suspend directors, board officers and members of the credit committee. The supervisory committee may also assume the role of the board of directors in the event all director positions become vacant simultaneously.
Other than the supervisory committee, all other committees are optional. Below is a list of other committees referenced in the model bylaws with a brief description of their responsibilities and authority.
Nominating Committee. Under Article V, a nominating may be required but only for the election process; it is not a standing committee that always exists. The nominating committee is responsible for nominating at least one member for each vacancy, including any unexpired term vacancy. It must also determine that the members nominated are agreeable and will accept office if elected. The nominating committee must consist of at least three members.
Credit Committee. According to Article VIII, the credit committee is responsible for reviewing and approving loans. This includes reviewing each application, determining the member's ability to repay the loan and establishing the appropriate security for the loan, if necessary. The credit committee may delegate this responsibility to appointed loan officers. Under Article VI, Section 6, the credit committee may be elected or appointed.
Executive Committee. Article VII, Section 10 explains that the board may appoint an executive committee of three or more directors. The executive committee is responsible for carrying out the specifically delegated functions of the board. When delegating tasks to the executive committee, the board must be specific in stating the committee's authority and limitations with regard to the delegated task. The board may also authorize the executive committee to approve membership applications.
Investment Committee. The board may appoint an investment committee under Article VII, Section 10. It must consist of at least two directors. The investment committee is responsible for making investments in accordance with the rules and procedures established by the board.
While these committees are optional under the model bylaws, your credit union's bylaws may actually require the committee to exist. So, it is important to carefully review the current version of your bylaws before disbanding any committee. As the model bylaws apply only to federal credit unions, state-chartered credit unions will need to look to their state law and bylaws to determine which committees they are required to have.
Earlier this year, NCUA asked credit unions to provide feedback on how to clarify and improve the bylaws. Thank you to those credit unions that provided feedback to NAFCU and directly to NCUA. NAFCU also submitted comments to NCUA on behalf of our members. While the comment period has officially closed, NAFCU continues to advocate for modernization of the bylaws. A summary of NAFCU's comments can be found here.
About the Author
Jennifer Aguilar, NCCO, joined NAFCU as regulatory compliance counsel in February 2017 and was named Senior Regulatory Compliance Counsel in March 2019. In this role, Aguilar helps credit unions with a variety of compliance issues.