NCUA Increases Requirements for FCU Directors (Misc News: January 5, 2011)
CUNA and the MCUL are stepping up to provide training to credit unions to help their board members meet new financial literacy requirements recently approved by the NCUA.
The NCUA issued its Final Rule on the issue on Dec. 28. It requires that FCU directors “have at least a working familiarity with basic finance and accounting practices, 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…”
The new regulation does not mandate training, but it does mandate a level of knowledge.
Though the final rule does not specify the types of training that could achieve this objective, the rule provides that “there are a multiple of sources of training in finance and accounting, including training provided by credit unions, outside sources, or, for small credit unions, NCUA’s Office of Small Credit Union Initiatives.” Each credit union’s size and complexity will dictate the level of knowledge each director needs to meets its fiduciary responsibilities in the best interests of the credit union’s membership.
According to a recent NCUA Media Release, “Directors elected or appointed on or before January 27, 2011, including those directors serving prior to NCUA finalization of the rule, must be in compliance with the financial literacy requirements by July 27, 2011. Directors elected or appointed after January 27, 2011, must satisfy the financial literacy requirements within six months following seating.”
CUNA has developed a Financial Literacy Certification composed of six Volunteer Achievement Program (VAP) topics to educate and train volunteers in this important area. Three of these topics will be presented at the MCUL & Affiliates Spring Leadership Development Conference and will include: “Financial Reports for Volunteers (V02),” “Financial Management (V409),” and “Managing Risk (V03).” The three other VAP modules that make up the certification will be offered at the MCUL & Affiliates Fall Leadership Development Conference being held Sept. 16-18 in Traverse City.
This final rule applies to federally chartered credit unions. State chartered credit unions have a similar level of knowledge expectation which was presented in OFIR Bulletin No. 2005-07-CU and more recently in its Board of Directors Guide.
To obtain more information about this new rule, CUNA is hosting a free audio conference regarding the “Implications of the New NCUA Requirements for Directors” on Jan. 13 from 3 p.m. - 4:30 p.m. (EST).