For more than 15 years, the rules governing mergers of federally insured credit unions into banks have remained largely untouched.

On April 22, the National Credit Union Administration published a proposed rule that would modernize and streamline that framework for the first time.

The proposed amendments to Title 12 of the Code of Federal Regulations, Part 708a, Subpart C, are narrow in scope, but they carry a broader signal: The NCUA is willing to revisit regulations that have long been considered settled, and this may be only the beginning.

A Regulation Born of Controversy

Subpart C was established in 2010 under the Federal Credit Union Act to protect credit union members during transactions that fundamentally alter a credit union's charter.

The rules imposed detailed requirements — mandatory merger value determinations, multistage disclosure packages and structured voting processes — all under the NCUA's direct oversight.

The context matters: A series of conversions had triggered industry concern that some transactions were driven more by executive and board enrichment than by member interests.

The resulting regulations were designed to slow the process down. They succeeded — perhaps too well. The conversion pathway went effectively dormant, and the first such transaction in nearly two decades did not close until March 2025, when Thrivent Federal Credit Union merged into Thrivent Bank.

That deal required a four-year process and approvals from three federal and state agencies. The fact that the NCUA is now revisiting Subpart C suggests the agency recognizes that the existing framework had become outdated.

What the Proposed Rule Would Change

The proposed amendments fall into three categories. Importantly, none eliminates the substantive protections for credit union members — member voting, merger value determinations, Notice of Intent to Merge and Request for NCUA Authorization submissions, and due diligence all remain intact.

Instead, the NCUA is targeting procedural requirements it views as overly prescriptive or outdated.

Streamlining Board Duties and Prevote Procedures

The proposed rule would remove the rigid definition of "clear and conspicuous" from Section 708a.301, which currently mandates bold type no smaller than 12 points, giving credit unions flexibility to design disclosures that work across both print and digital formats.

It would also replace the requirement to publish prevote notices in a general circulation newspaper with a requirement to post on the member home banking landing page, while retaining lobby and website posting.

And the proposal would remove the requirement in Section 708a.304(d) that the board describe how it located and negotiated with its merger partner — a requirement the NCUA characterizes as "overly intrusive."

The focus going forward would be on whether the board's conclusion — that the merger serves member interests — is supported, not on the negotiation play by play.

Modernizing Member Communications and Disclosures

The proposed rule would remove Section 708a.305(e)(2), which dictates that certain text be boxed on the front of a single blank page and positioned at a specific point in the notice package.

It would also clean up redundant plain-language requirements in Section 708a.305(f), while retaining the substantive "simple and easy to understand" standard.

Eliminating Nonbinding Voting Guidelines

The proposed rule would remove Section 708a.312 in its entirety — a set of nonbinding suggestions on conducting member votes. The NCUA stated that its concern is that advisory guidance embedded within mandatory rules "can create confusion for regulated entities, blurring the line between what is required and what is merely recommended."

The Bigger Picture

Much to the consternation of some in the credit union industry, including to a certain extent the NCUA, there has been a steady increase in consolidation over the last several years. There has also been a marked increase in credit unions pursuing growth strategies that include purchasing banks.

This consolidation is a sign of a maturing industry and was driven by factors such as the rising costs of compliance and technologies that are essential in providing service to credit union members.

Standing alone, the amendments to Title 12 of the Code of Federal Regulations, Part 708a, Subpart C, are incremental — the Office of Management and Budget has confirmed this is not a "significant regulatory action," and the NCUA itself characterizes it as "narrow in scope and purely deregulatory."

But the significance may lie less in what the rule changes and more in what it signals.

For years, the NCUA showed no appetite for revisiting Subpart C. The willingness to loosen these requirements now — consistent with the broader deregulatory posture reflected in Executive Order No. 14192 — suggests additional regulatory modernization may follow.

The proposed changes may also prompt renewed interest in the conversion pathway itself.

For credit unions facing capital constraints, being separated from sponsoring organizations or exploring strategic alternatives, a bank charter offers capabilities — like raising capital through equity issuance — that are not available under a credit union structure.

A more streamlined regulatory process could make that option viable for boards that might otherwise have dismissed it.

This change does not eliminate other requirements under NCUA regulations that are designed to protect the interests of credit union members.

Credit unions that wish to merge into a bank will still be required to obtain an independent valuation for the purpose of determining the amount of any merger dividend that will be payable to members in conjunction with such a merger.

The purpose of that dividend is to return to the members the value that has been built through their membership in the credit union and utilization of its services.

Credit unions pursuing a merger into a bank will continue to be required to disclose any merger-related compensation, which is described in Sections 708a.305 (c) and (d) as "any post-merger employment or consulting relationships offered by the bank to any of the credit union's directors and senior management officials and the amount of the associated compensation."

What Should You Do Now?

The comment period runs for 60 days from publication, and comments may be submitted at regulations.gov under docket number NCUA-2026-0982. Notably, the NCUA has invited input on whether the supervisory committee should play a supplemental role in reviewing mergers — a question that could result in a new requirement if commenters push for it.

Credit unions contemplating strategic transactions should monitor this rulemaking closely. The proposed rule would reduce procedural friction, but a merger involving a bank and credit union remains a complex, multiagency undertaking.

The Thrivent transaction — which required approvals from three agencies and a 3,000-page regulatory application — is a reminder that even under a modernized framework, these deals demand careful planning and sustained engagement with regulators.

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