The National Credit Union Administration (NCUA) Board approved a final rule clarifying federal credit union directors’ fiduciary duties and providing additional provisions for insured credit union conversions and mergers.
The rule requires directors, newly elected or appointed, to have or gain within six months an understanding of basic finance and accounting principles, “including the ability to read and understand the federal credit union’s balance sheet and income statement and to ask, as appropriate, substantive questions of management and the internal and external auditors.”
Directors’ financial knowledge must be “commensurate with the size and complexity of their credit union,” the agency reports.
In addition, federal credit unions aren’t permitted to indemnify their employees for “grossly negligent, reckless, or willful” misconduct for decisions that affect members’ fundamental rights.
The credit union may provide legal assistance or purchase and maintain insurance on behalf of the board members as permitted by applicable state laws.
The new rules also include provisions intended to protect members’ rights and ownership interests. They include procedures for an independent entity to tally, record, and certify the votes for a credit union conversion into a mutual savings bank, a credit union merger into a bank, or a credit union merger with another credit union.