Helping Board Members Understand Investments

The Federal Credit Union Act charges a credit union's board of directors with responsibility for the credit union's investments and permits the board to delegate this authority to an investment committee. However, the draft of the new Rule 703 covering investments for natural person credit unions, appeared to require the board to have a thorough knowledge and more direct involvement in investment decisions. This was the intent attributed to phrases in the proposal such as "consistent with NCUA's intent to place more responsibility with credit union boards ..." and requiring that "board of directors fully understand the potential risk characteristics of its investment options." This wording prompted concern among credit union staff and boards. How much knowledge did directors need? Would volunteer directors have to follow the markets daily and master the lingo of bond traders?

 
 
 

 

 

July 1, 1997


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