How Has the Recent NCUA Rule Affected Board Liability (Credit Union Conference Presentation)

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From the 2011 NAFCU Annual Conference, presented by Patrick Touhey, SVP, Allied Solutions.

The financial climate and recent regulatory changes from NCUA have affected the liability of credit union boards. Learn the details of this new regulation and what the potential is for an increase in lawsuits in the future. Should directors increase their D&O insurance limits? What kinds of suits are being filed against credit union boards? Find out the important questions all boards should be asking.

More information at http://www.nafcu.org/allied

Published in: Business, Economy & Finance
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How Has the Recent NCUA Rule Affected Board Liability (Credit Union Conference Presentation)

  1. 1. Recent NCUA Rules AndEffect On Board Liability Presented by Patrick Touhey, SVP Allied Solutions, LLC National Association of Federal Credit Unions l www.nafcu.org
  2. 2. NCUA Rules Issued 12/11•BOD is responsible for the general directionand control of the affairs of the FCU.•Ordinary prudent person conduct.•Understand balance sheet and incomestatement National Association of Federal Credit Unions l www.nafcu.org
  3. 3. NCUA Rules Issued 12/11 Continued•Direct management’s operations conformingwith FCU Act.•Director may rely one or more officers/emp.that are reliable and competent in the functionsperformed or the information, opinions, reportsor statements provided…. National Association of Federal Credit Unions l www.nafcu.org
  4. 4. Why In Writing?• Clarification• Members, Members, Members!!!!!!!!!!!• Credit Unions are changing more complexity National Association of Federal Credit Unions l www.nafcu.org
  5. 5. D&O Insurance Contract/Indemnification• Purchasing insurance.• Indemnification. (Unintentional/Gross Negligence)• Be aware of how your D&O contract is structured. Watering down limits. National Association of Federal Credit Unions l www.nafcu.org
  6. 6. What Is Meant By Financial Literacy?• Can you add 1 plus 1?• Meaning of BS and income statement line items.• General risks within the institution. Internal controls to control the risk. National Association of Federal Credit Unions l www.nafcu.org
  7. 7. Directors Duties• Act in good faith, best interest of members, prudent person rule.• Administer affairs fairly and without discrimination against a member.• Balance Sheets/Income Statements. National Association of Federal Credit Unions l www.nafcu.org
  8. 8. Directors Duties• Comply with laws and regulations National Association of Federal Credit Unions l www.nafcu.org
  9. 9. Good Ideas• Directors can delegate. Not the responsibility.• Know the policies, procedures and controls you have set and make sure there is oversight and training. (Faithful Performance)• Do your homework before a decision is made. (Commercial Loans) National Association of Federal Credit Unions l www.nafcu.org
  10. 10. Beware• Not meant to create additional exposure.• Do we need higher D&O limits?• Should we implement Indemnification in by- laws?• Regulators? National Association of Federal Credit Unions l www.nafcu.org
  11. 11. Suits As Result Of These Changes?• No change at this juncture. Distressed market. May be looked at harder in the future when the next distressed market comes.• Volunteers as opposed to paid directors• Failures normally bring more exposure. Not so far when compared to banks.• Regulators attitude? Time will tell. National Association of Federal Credit Unions l www.nafcu.org

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