Nearly half of the items contained in the MCUA update attempt to provide regulatory relief for credit unions. Member-owned financial institutions are already faced with an overwhelming compliance burden that—according to a recent CUNA study—has cost Michigan CUs millions of dollars since 2010. By implementing regulatory relief measures in the updated state act, MCUL aims to help credit unions grow and prosper, while not being bogged down by red tape so that they can put their focus where it belongs—on member service.
The following are specific updates made to the MCUA that are effective September 7, 2016:
- No cap on fixed assets for strongly capitalized CUs
To remain on par with the federal charter and provide regulatory relief, a strongly capitalized credit union will have no fixed asset cap if the following requirements are met. The credit union provides a three year pro-forma projection displaying the ability of the credit union to meet its short and long term liquidity obligations, showing profitability. The credit union is well capitalized, with a net-worth ratio of 7% or greater, and must not have been placed under a cease and desist order, conservatorship or receivership by the director within the previous three years. And the credit union has earned a CAMELS rating of 1 or 2 in its last examination, meaning the credit union has been rated “sound” or “fundamentally sound” by the director.
- New authority for boards to delegate routine matters to the CEO
A credit union’s CEO will now have the ability to set max shareholdings, buy and sell property and more completely manage borrowing, surety bonds and membership applications.
- Allow for wholly digital CU with written notice to director
- New definition of branch
School branches, mobile branches and loan production offices are no longer considered official branches.
- Frequency of Board meetings
Boards will now be able to meet at least 6 times per year, at least every other month. Each Board can decide if it wants to meet more frequently.
- Allow use of “credit union” in assumed name
- Streamlines IT vendor contract authority and allows board to delegate contract approval to key senior manager
- Allow CEO to immediately suspend or terminate services/membership to abusive members
- New aggregate lending authority for DIFS
DIFS obtained new authority to classify interrelated borrowers as a single unit for purposes of aggregate loan limits. However, two new important concessions were negotiated: CUs allowed reasonable time to divest excess amounts (at least 180 days) and, if well capitalized, DIFS can allow a CU to set up a loan loss reserve for excess amounts over loan limits, rather than divesting.