July 28, 1992

Leonard Pugatch, Esq.
Tassan & Pugatch
255 Glen Cove Road
Carle Place, New York 11514-1237

Re: Delegations to the Executive Committee (Your July 15, 1992, Letter)

Dear Mr. Pugatch:

You have asked whether the board of directors of a credit union may delegate its authority to approve loans to credit union officials to the Executive Committee of the credit union. This authority may not legally be delegated by a fed- eral credit union's (FCU's) board of directors.

In your letter, you did not state whether the credit union was federally-chartered or state-chartered. The following analysis only applies to FCUs. You should consult with the state supervisory authority for a state-chartered credit union. The FCU Act requires that:

(iv) a loan or aggregate of loans to a director or member of the supervisory or credit committee of the credit union making the loan which exceeds $10,000 plus pledged shares, be approved by the board of directors; [and]

(v) loans to other members for which directors or members of the supervisory or credit committee act as guarantor or endorser be approved by the board of directors when such loans standing alone or when added to any outstanding loan or loans of the guarantor or endorser exceeds $10,000. . . . 12 U.S.C. ~1757(5)(A)(iv and v).

The regulation issued under this authority is specific in re- quiring board of director's review and approval of such loans. It reads:

(d)(4) Board of director's review. The board of directors shall, in any case, review and approve or deny any application on which an official is a direct obligor, or endorser, cosignor or guarantor if the following computation produces a total in excess of $10,000.... 12 C.F.R. 701.21(d)(4).

Neither the language in the FCU Act nor the NCUA Rules and Regulations lends itself to any delegation of authority. Furthermore, it is the intent of these provisions to guard against insider abuses and to ensure that the directors know about and approve of any lending to officials. "Officials" are defined as any member of the board of directors, credit committee or supervisory committee. 12 C.F.R. 701.21(d)(2). Therefore, a FCU's board of directors may not delegate to an executive committee its loan approval functions with respect to loans to FCU officials. This result is also in accord with the plain meaning of the FCU Act and the NCUA Rules and Regulations.