Standard Metropolitan Statistical Area or within 50 miles of the corporate central, S.73 would exclude its officials from serving as officials in the corporate central. Given the lack of competition between a corporate central and the credit unions which it serves, there appears to be a geographic inequity among the credit unions. Since corporate centrals are chartered to serve their member credit unions and, in turn, the members of those credit unions, it would seem unnecessary to place such restrictions on corporate centrals.

4. Credit union service centers. In many instances, a small credit union which cannot afford certain independent operations will join with other small credit unions to form a service center. This is done pursuant to National Credit Union Administration regulations. Service centers originated in response to the need to provide more economical services to smaller credit unions whose separate fields of membership effectively preclude competition. In this manner, the members of all the credit unions receive services which could not have been provided by the credit union itself. In many instances, a service center employee performs the same or similar functions for two or more participating credit unions. To the extent that managerial decisions are made, however, S.73 would prohibit such service center

activities. Without service center participation, many smaller credit unions would be forced to diminish the services and managerial expertise offered to their members. Service centers will play an even more important role in the future operations of credit unions.

Mr. Chairman, it is, therefore, recommended that onsideration be given to granting exceptions to S.73 to cover the situations I have just outlined.

S.895

S.895 makes certain amendments to the Federal Deposit Insurance Act and the Bank Services Corporation Act. The National Credit Union Administration has no comments on these provisions.

S.1433

S.1433, the Depository Institutions Conflict of Interest Act, would prohibit the Administrator of the National Credit Union Administration from holding any office, position or employment in an insured credit union during his tenure as Administrator and for a period of two years thereafter. I have no objection to this proposal and believe that it

is a constructive step in maintaining the integrity of the regulatory agencies. This proposal effectively prevents situations involving potential conflicts of interests without closing the door on a return to one's field of expertise.

This concludes my prepared statement. I will be glad

to answer any questions you might have.

91-727 O 77-6

Attachment 1

Amendment to the Federal Credit Union Act, proposed
for addition to S.71, as Section 12 thereof.

Section 206 (h) of the Federal Credit Union Act (12 U.S.C.A. 1786 (h)) is amended to read as follows:

"(h) (1)

Whenever any director, officer, or committee member of an insured credit union, or other person participating in the conduct of the affairs of such credit union, is charged in any complaint authorized by a United States attorney or in any information or indictment, with the commission of or participation in a felony involving dishonesty or breach of trust, the Administrator may, if continued service or participation by the individual may pose a threat to the interests of the credit union's members or may threaten to impair member confidence in the credit union, by written notice served upon such director, officer, committee member, or other person, suspend him

from office and/or prohibit him from further participation in any manner in the conduct of the affairs of the credit union. A copy of such notice shall also be served upon Such suspension and/or prohibition

the credit union.

shall remain in effect until such information, indictment,
or complaint is finally disposed of or until terminated
by the Administrator. In the event that a judgment of
conviction with respect to such offense is entered against
such director, officer, committee member, or other person,

A

and at such time as such judgment is not subject to further appellate review, the Administrator may, if continued service or participation by the individual may pose a threat to the interests of the credit union's members or may threaten to impair public confidence in the credit union, issue and serve upon such director, officer, committee member, or other person an order removing him from office and/or prohibiting him from further participation in any manner in the conduct of the affairs of the credit union except with the consent of the Administrator. copy of such order shall also be served upon such credit union, whereupon such director, officer, or committee member shall cease to be a director, officer, or committee member of such institution. A finding of not guilty or other disposition of the charge shall not preclude the Administrator from thereafter instituting proceedings to remove such director, officer, committee member, or other person from office and/or to prohibit further participation in the affairs of the credit union pursuant to paragraph (1) or (2) of subsection (g) of this section.

(2) If at any time, because of the suspension of one or more directors pursuant to this section, there shall be on the board of directors of a Federal credit union less than a quorum of directors not so suspended, all