ATLANTA-Dual chartering must be preserved to prevent the homogenization of corporate credit unions one state regulator says, and the current language in NCUA's proposed rule could jeopardize the system, one regulator is stressing.

"Obviously we need to focus on safety and soundness and there were issues in the corporate system that clearly got out of balance," Senior Deputy Commissioner of the Georgia Dept. of Banking George Reynolds explained. "But I think it is important to avoid overreaction and to make sure we continue to foster innovation in the system. Dual chartering system has proved its worth over the history."

Reynolds maintained that dual chartering keeps corporates from engaging in group-think; a problem that reared its head among many financial institutions when they purchased toxic mortgage-backed securities en masse during the boom years. The commissioner was also concerned that NCUA set down governance rules that "didn't make sense," including provisions that mandated individuals with certain titles and positions be on corporate boards.

"I think we need to encourage individuals to be board members not based on their position or title, but on their experience and what they bring to the table," Reynolds said.

Modified capital requirements and toxic legacy assets will likely lead to forced consolidation in the marketplace, but even healthy corporates could find themselves merged out because of the new environment.

"One of the challenges is that some of the corporates in better shape from a capital standpoint may not have the size and complexity to play a role on a consolidated basis," Reynolds pointed out. "Corporates like that will have to do some self-evaluation and decide. The are either going to develop the competencies to play a more sophisticated role or they are going to have to make strategic alliance with corporates that have those skillsets."

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