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"NAFCU suggests that the NCUA re-evaluate the additional oversight requirements to achieve an operationally efficient and cost-effective solution," wrote Kaley Schafer, NAFCU's regulatory affairs counsel, in response to the agency's fidelity bond proposal. NAFCU believes the proposed changes will actually increase credit unions' regulatory burden and costs, rather than reduce them.

The NCUA Board during its November meeting issued a proposed rule related to fidelity bonds that aimed to address four objectives:

• strengthen a board of directors' oversight of a credit union's fidelity bond coverage;

• ensure an adequate period of time to discover and file covered claims following a credit union's liquidation;

• formalize a legal opinion that permits a natural person credit union's fidelity bond to include coverage for certain credit union service organizations (CUSOs); and

• clarify the documents subject to the NCUA Board's approval and require all bond forms receive the NCUA Board's approval every 10 years.

In comments to the agency Tuesday, Schafer commended some provisions of the proposal, such as allowing "fidelity bond insurance to include majority owned CUSOs and those CUSOs organized by the federal credit union for the purpose of handling its business transactions and composed exclusively of its employees." However, she also encouraged the agency to:

• maintain the current regulation requiring board approval only and to not require supervisory committee review as it would create a two-tiered review structure, duplicating existing review requirements and creating the potential for power struggles between the board and supervisory committee;

• conduct an impact study to ensure the proposed bond contract requirement does not adversely affect federal credit unions by creating a tighter bond insurance market that forces insurers to charge higher premiums; and

• clarify the process for re-approval of bond forms to prevent a potentially time-consuming, arduous process that could increase compliance burdens.

The full letter is available here.