NCUA Letter to FCUs Details Financial Literacy Requirements for Directors

Posted by Marissa Anema Tuesday, February 08, 2011 11:25:00 AM

ALEXANDRIA, Va. -  NCUA, in its Letter to Credit Unions No. 11-FCU-02, today, detailed specific financial literacy requirements for federal credit union (FCU) directors. The requirements under NCUA Regulation 701.4 took effect January 27 of this year, as well as general responsibilities expected of FCU leaders under the same rule.

Last December, NCUA established a set of guidelines for FCU directors to ensure that directors have "a base level of financial skills, consistent with the size and complexity of the credit union operation they serve." The rules do not apply to state chartered credit unions.

Additionally, NCUA reinforces in its Letter to Credit Unions that directors should have the ability to examine their credit union's balance sheet and understand specific financial activities that their credit union takes part in. "In particular, a director must understand not only how these activities generate revenue for the credit union but also, and perhaps most importantly, the various risks associated with these activities that could lead to financial loss." Specifically, NCUA cites the need for complete knowledge of risks, including credit risk, liquidity-related risks, and interest rate, compliance, strategic, transaction, and reputation risks.

The Letter also states that "directors who were elected or appointed on or after January 27, 2011, and who come to the position without the requisite financial skills will have six months from the date of election or appointment to acquire the enumerated skills." The Letter goes on to say "sitting directors who already understand their federal credit union's financial statements and risk controls will not have to do anything further to meet the financial requirements of NCUA's directors' duties rule. Sitting directors who were appointed or elected before January 27, 2011, and do not have these skills, have until July 27, 2011 to satisfy the minimum financial standards."

The Letter goes on to say that NCUA examiners will look for evidence of comprehensive financial training during their inspections, and will evaluate whether a given credit union has the policies needed to offer appropriate training to its directors.

The NCUA will offer its own training, but directors may gain the needed financial understanding through the following methods; their own in-house credit union training, on the job experience, or external training such as; League training. NJCUL is offering in-person sessions featuring Bob Fouratt from the accounting firm The Curchin Group. He will present, "Reading and Understanding Your Financial Statements". This special director education session will be available as follows:

  • March 22 - Reality Check Conference, Harrah's in A.C., 5:30-6:30 p.m.*
  • May 9 - Members 1st FCU, Vineland, N.J., 6-7 p.m.
  • May 23 - NJCUL, Hightstown, N.J., 6-7 p.m.
  • June 13 - Garden Savings FCU, Parsippany, N.J., 6-7 p.m.

*Pre-registration for this session is required by March 11, 2011. To register, please contact Yvette Segarra at 800-792-8861, ext. 103 or

For more information on these sessions visit
The full NCUA Letter to FCU's is available at:


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