[Federal Register Volume 60, Number 228 (Tuesday, November 28, 1995)]
[Rules and Regulations]
[Pages 58502-58508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28703]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701, 705 and 741
Requirements for Insurance and Technical Amendments
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: The final rule consolidates all current regulations and
requirements that apply to federally insured state-chartered credit
unions (FISCUs) in one place, the regulations on requirements for
insurance. The rule does not impose any new requirements on FISCUs.
This rule will aid FISCUs by simplfying the process of determining
which regulations they must follow.
[[Page 58503]]
EFFECTIVE DATE: January 29, 1996.
FOR FURTHER INFORMATION CONTACT: Linda Groth, State Program Officer,
Office of Examination and Insurance, at the above address or telephone
(703) 518-6360 or Mary Rupp, Staff Attorney, Office of General Counsel,
at the above address or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION:
Background
In August 1995, the NCUA requested comments on proposed changes to
part 741 of its regulations. 60 FR 39274 (August 2, 1995). Part 741
applies to all credit unions whose accounts are insured by the National
Credit Union Share Insurance Fund (NCUSIF). It applies to federal
credit unions (FCUs), FISCUs and credit unions making application for
insurance of accounts. Part 741 also serves as a reference for FISCUs
in determining which NCUA rules apply to them. Some regulations that
apply to FISCUs, however, are not currently included or referenced in
part 741. Additionally, the Agreement for Insurance of Accounts, which
outlines conditions for state-chartered credit unions obtaining and
maintaining federal insurance, contains requirements that are not
included in part 741. This final rule corrects those shortcomings by
addressing, in part 741, all regulations and requirements that apply to
FISCUs. This revision will aid FISCUs by simplifying the process of
determining which regulations they must follow. The revision does not
impose any additional requirements or new burdens on FISCUs.
Additionally, the revision reorganizes part 741 into subparts A and
B. Subpart A contains requirements that apply to all insured credit
unions and are not codified elsewhere in NCUA's regulations. Subpart B
contains requirements that are set forth in various other parts of
NCUA's regulations affecting FCUs and that are, by incorporation in
part 741, applicable to FISCUs as well.
Summary of Comments
Two FISCUs, four trade groups and two credit union leagues
responded to the proposal. Five of the commenters expressed total
support for the amendments, one expressed qualified support and two
objected. The supportive commenters praised the proposal because it
simplifies the process for determining which regulations apply, it
clarifies items not mentioned elsewhere and it deletes repetitious
material. The revised index was cited by one commenter as a
particularly useful tool.
One commenter took exception to the following sections of the
proposal: Criteria Sec. 741.3, Maximum Public Unit and Nonmember
Accounts and Low Income Designation Sec. 741.204, Corporate Credit
Unions Sec. 741.206, Management Official Interlocks Sec. 741.209,
Administrative Actions, Adjudicative Hearings, Rules of Practice and
Procedure Sec. 741.213, Records Preservation Program Sec. 741.215,
Truth in Savings Sec. 741.217 and Involuntary Liquidation and Creditor
Claims Sec. 741.218. The commenter did not object to the substance of
the sections. The objection was based on the misperception that NCUA is
``taking more and more authority over state chartered credit unions.''
The NCUA Board notes that all of these provisions currently apply to
FISCUs.
Two commenters took exception to the provision in proposed
Sec. 741.3 which requires FISCUs to establish an Investment Valuation
Reserve Account for those investments owned by FISCUs that do not
conform to NCUA's investment regulation for federal credit unions (12
CFR part 703). The reserve must equal the net excess of book value over
current market value. If the market value cannot be determined, a
reserve equal to the full book value must be reserved. One commenter
maintained that this places an undue burden on state-chartered credit
unions that are following state law. Further, the commenter argued it
will be costly, difficult and time consuming. The commenters also
questioned the practice of ``incorporating contractual terms and
conditions into a regulation.'' The commenters are apparently under the
misimpression that this is a new requirement being imposed on FISCUs.
For safety and soundness reasons, this requirement is and for many
years has been, imposed on FISCUs by the Agreement for Insurance of
Accounts signed and agreed to all insured state chartered credit unions
as a condition of federal insurance.
Final Rule
The NCUA Board adopts without change the proposed rule published on
August 2, 1995, as the final rule. 60 FR 39274. Further, the Board is
making technical corrections to Sections 701.6, 701.21(a),
701.23(b)(2)(iii) and 705.3. These sections reference part 741 and must
be revised to reflect the redesignated section numbers in part 741.
Since these changes are housekeeping and do not have any substantive
effect on credit unions, the Board finds it unnecessary to either issue
a proposed rule or delay the rule's effective date.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe the significant economic impact any proposed regulation may
have on a substantial number of small credit unions (primarily those
under $1 million in assets). The final rule is a compilation of
existing regulations and requirements already in place for FISCUs. It
does not add any additional requirements or burden. Accordingly, the
NCUA Board has determined and certifies under the authority granted in
5 U.S.C. 605(b) that the final rule, if adopted, will not have a
significant economic impact on a significant number of small credit
unions and that a Regulatory Flexibility Act analysis is not required.
Paperwork Reduction Act
The final rule does not impose any new paperwork requirements.
Executive Order 12612
The final rule does not make any substantive changes. Therefore, no
new analysis of part 741's effect on state interests is required.
List of Subjects in 12 CFR Parts 701, 705 and 741
Bank deposit insurance, Credit unions, and Reporting and
recordkeeping requirements.
By the National Credit Union Administration Board on November
16, 1995.
Becky Baker,
Secretary of the Board.
Accordingly, NCUA amends 12 CFR chapter VII as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, 1789 and Public Law 101-73.
Section 701.6 is also authorized by 31 U.S.C. 3717. Section 701.31
is also authorized by 12 U.S.C. 1601, et seq., 42 U.S.C. 1981 and 42
U.S.C. 3601-1610. Section 701.35 is also authorized by 12 U.S.C.
4311-4312.
2. Section 701.6 is amended by revising paragraph (d)(4) to read as
follows:
Sec. 701.6 Fees paid by Federal credit unions.
* * * * *
(d) * * *
(4) If a credit union makes a combined payment of its operating fee
and its share insurance deposit as provided in
[[Page 58504]]
Sec. 741.4 of this chapter and such payment is delinquent, only one
administrative fee will be charged and interest will be charged on the
total combined payment.
3. Section 701.21(a) is amended by revising the fourth sentence to
read as follows:
Sec. 701.21 Loans to members and lines of credit to members.
(a) * * * Also, while Sec. 701.21 generally applies to Federal
credit unions only, its provisions may be used by state-chartered
credit unions with respect to alternative mortgage transactions in
accordance with 12 U.S.C. 3801 et seq., and certain provisions apply to
loans made by federally insured state-chartered credit unions as
specified in Sec. 741.203 of this chapter. * * *
* * * * *
4. Section 701.23 is amended by revising paragraph (b)(2)(iii) to
read as follows:
Sec. 701.23 Purchase, sale, and pledge of eligible obligations.
* * * * *
(b) * * *
(2) * * *
(iii) for purchases under paragraph (b)(1)(ii) of this section, any
advance written approval required by Sec. 741.8 of this chapter is
obtained before consummation of such purchase.
* * * * *
PART 705--COMMUNITY DEVELOPMENT REVOLVING LOAN PROGRAM FOR CREDIT
UNIONS
5. The authority citation for part 705 continues to read as
follows:
Authority: Public Law 97-35, 42 U.S.C. 9822; Public Law 99-609,
note to 42 U.S.C. 9822; Public Law 101-144, 12 U.S.C 1766(k).
6. Section 705.3 is amended by revising paragraph (b) to read as
follows:
Sec. 705.3 Definitions.
* * * * *
(b) For purposes of this part, a ``participating credit union''
means a state- or federally-chartered credit union that is specifically
involved in stimulation of economic development activities and
community revitalization efforts aimed at benefiting the community it
serves; whose membership consists of predominantly low-income members
as defined in paragraph (a) of this section or applicable state
standards as reflected by a current low-income designation pursuant to
Sec. 701.32(d)(1) or Sec. 741.204(b) of this chapter or, in the case of
a state-chartered nonfederally insured credit union, under applicable
state standards; and has submitted an application for a loan and/or
technical assistance and has been selected for participation in the
Program in accordance with this part.
7. Part 741 is revised to read as follows:
PART 741--REQUIREMENTS FOR INSURANCE
Sec.
741.0 Scope.
Subpart A--Regulations That Apply to Both Federal Credit Unions and
Federally Insured State-Chartered Credit Unions and That Are Not
Codified Elsewhere in NCUA's Regulations
741.1 Examination.
741.2 Maximum borrowing authority.
741.3 Criteria.
741.4 Insurance premium and one percent deposit.
741.5 Notice of termination of excess insurance coverage.
741.6 Financial and statistical and other reports.
741.7 Conversion to a state-chartered credit union.
741.8 Purchase of assets and assumption of liabilities.
741.9 Uninsured membership shares.
741.10 Disclosure of share insurance.
Subpart B--Regulations Codified Elsewhere in NCUA's Regulations as
Applying to Federal Credit Unions That Also Apply to Federally Insured
State-Chartered Credit Unions
741.201 Minimum fidelity bond requirements.
741.202 Audit and verification requirements.
741.203 Minimum loan policy requirements.
741.204 Maximum public unit and nonmember accounts, and -low-income
designation.
741.205 Reporting requirements for credit unions that are -newly
chartered or in troubled condition.
741.206 Corporate credit unions.
741.207 Community development revolving loan program for -credit
unions.
741.208 Mergers of federally insured credit unions: -voluntary
termination or conversion of insured status.
741.209 Management official interlocks.
741.210 Central liquidity facility.
741.211 Advertising.
741.212 Share insurance.
741.213 Administrative actions, adjudicative hearings, rules -of
practice and procedure.
741.214 Report of crime or catastrophic act and Bank Secrecy -Act
compliance.
741.215 Records preservation program.
741.216 Flood Insurance.
741.217 Truth in savings.
741.218 Involuntary liquidation and creditor claims.
Authority: 12 U.S.C. 1757, 1766, and 1781-1790.
Section 741.4 is also authorized by 31 U.S.C. 3717.
Sec. 741.0 Scope.
The provisions of this part apply to federal credit unions,
federally insured state-chartered credit unions, and credit unions
making application for insurance of accounts pursuant to Title II of
the Act, unless the context of a provision indicates its application is
otherwise limited. This part prescribes various requirements for
obtaining and maintaining federal insurance and the payment of
insurance premiums and capitalization deposit. Subpart A of this part
contains substantive requirements that are not codified elsewhere in
this chapter. Subpart B of this part lists additional regulations, set
forth elsewhere in this chapter as applying to federal credit unions,
that also apply to federally insured state-chartered credit unions. As
used in this part, ``insured credit union'' means a credit union whose
accounts are insured by the National Credit Union Share Insurance Fund
(NCUSIF).
Subpart A--Regulations that Apply to Both Federal Credit Unions and
Federally Insured State-Chartered Credit Unions and That are not
Codified Elsewhere in NCUA's Regulations
Sec. 741.1 Examination.
As provided in Sections 201 and 204 of the Act (12 U.S.C. 1781 and
1784), the NCUA Board is authorized to examine any insured credit union
or any credit union making application for insurance of its accounts.
Such examination may require access to all records, reports, contracts
to which the credit union is a party, and information concerning the
affairs of the credit union. Upon request, such documentation must be
provided to the NCUA Board or its representative. Any credit union
which makes application for insurance will be required to pay the cost
of such examination and processing. To the maximum extent feasible, the
NCUA Board will utilize examinations conducted by state regulatory
agencies.
Sec. 741.2 Maximum borrowing authority.
Any credit union which makes application for insurance of its
accounts pursuant to Title II of the Act, or any insured credit union,
must not borrow, from any source, an aggregate amount in excess of 50
per centum of its paid-in and unimpaired capital and surplus (shares
and undivided earnings, plus net income or minus net loss).
[[Page 58505]]
Sec. 741.3 Criteria.
In determining the insurability of a credit union which makes
application for insurance and in continuing the insurability of its
accounts pursuant to Title II of the Act, the following criteria shall
be applied:
(a) Adequacy of reserves (1) General rule. State-chartered credit
unions must meet, at a minimum, the statutory reserve and full and fair
disclosure requirements imposed on federal credit unions by Section 116
of the Act and part 702 of this chapter.
(2) Charges against reserves. State-chartered credit unions may
charge losses, including losses other than loan losses, against the
statutory reserve in accordance with either state law or procedures
established by the state supervisory authority. However, charges for
losses other than loan losses shall be made only after notification to
the Re- gional Director, unless the credit union's ratio of capital to
assets is greater than 6 percent and the charge reduces the ratio by no
more than \1/2\ percent. For purposes of this section, capital is
defined as the total of the Regular Reserve, the Allowance for Loan
Losses, the Allowance for Investment Losses, Undivided Earnings, and
other reserves.-
(3) Special reserve for nonconforming investments. State-chartered
credit unions (except state-chartered corporate credit unions) are
required to establish an additional special reserve for investments if
those credit unions are permitted by their respective state laws to
make investments beyond those authorized in the Act or the NCUA Rules
and Regulations. For any investment other than loans to members and
obligations or securities expressly authorized in Title I of the Act
and part 703 of this chapter, as amended, state-chartered credit unions
(except state-chartered corporate credit unions) are required to
establish and maintain at the end of each accounting period and prior
to payment of any dividend, an Investment Valuation Reserve Account in
an amount at least equal to the net excess of book value over current
market value of the investments. If the market value cannot be
determined, an amount equal to the full book value will be established.
When at the end of any dividend period, the amount in the Investment
Valuation Reserve exceeds the difference between book value and market
value, the board of directors may authorize the transfer of the excess
to Undivided Earnings.
(b) Financial condition and policies. The following factors are to
be considered in determining whether the credit union's financial
condition and policies are both safe and sound:
(1) The existence of unfavorable trends which may include excessive
losses on loans (i.e., losses which exceed the regular reserve or its
equivalent [in the case of state-chartered credit unions] plus other
irrevocable reserves established as a contingency against losses on
loans), the presence of special reserve accounts used specifically for
charging off loan balances of deceased borrowers, and an expense ratio
so high that the required transfers to reserves create a net operating
loss for the period or that the net gain after these transfers is not
sufficient to permit the payment of a nominal dividend;
(2) The existence of written lending policies, including adequate
documentation of secured loans and the protection of security interests
by recording, bond, insurance, or other adequate means, adequate
determination of the financial capacity of borrowers and co-makers for
repayment of the loan, and adequate determination of value of security
on loans to ascertain that said security is adequate to repay the loan
in the event of default;
(3) Investment policies which are within the provisions of
applicable law and regulations, i.e., the Act and part 703 of this
chapter for federal credit unions and the laws of the state in which
the credit union operates for state-chartered credit unions, except
state-chartered corporate credit unions. State-chartered corporate
credit unions are permitted to make only those investments that are in
conformance with part 704 of this chapter and applicable state laws and
regulations;
(4) The presence of any account or security, the form of which has
not been approved by the Board, except for accounts authorized by state
law for state-chartered credit unions.
(c) Fitness of management. The officers, directors, and committee
members of the credit union must have conducted its operations in
accordance with provisions of applicable law, regulations, its charter
and bylaws. No person shall serve as a director, officer, committee
member, or employee of an insured credit union who has been convicted
of any criminal offense involving dishonesty or breach of trust, except
with the written consent of the Board.
(d) Insurance of member accounts would not otherwise involve undue
risk to the NCUSIF. The credit union must maintain adequate fidelity
bond coverage as specified in Sec. 741.201. Any circumstances which may
be unique to the particular credit union concerned shall also be
considered in arriving at the determination of whether or not an undue
risk to the NCUSIF is or may be present. For purposes of this section,
the term ``undue risk to the NCUSIF'' is defined as a condition which
creates a probability of loss in excess of that normally found in a
credit union and which indicates a reasonably foreseeable probability
of the credit union becoming insolvent because of such condition, with
a resultant claim against the NCUSIF.
(e) Powers and purposes. The credit union must not perform services
other than those which are consistent with the promotion of thrift and
the creation of a source of credit for its members, except as otherwise
permitted by law or regulation.
(f) Letter of disapproval. A credit union whose application for
share insurance is disapproved shall receive a letter indicating the
reasons for such disapproval, a citation of the authority for such
disapproval, and suggested methods by which the applying credit union
may correct its deficiencies and thereby qualify for share insurance.
(g) Nothing in this section shall preclude the NCUA Board from
imposing additional terms or conditions pursuant to the insurance
agreement.
Sec. 741.4 Insurance premium and one percent deposit.
(a) Scope. This section implements the requirements of Section 202
of the Act (12 U.S.C. 1782) providing for capitalization of the NCUSIF
through the maintenance of a deposit by each insured credit union in an
amount equaling one percent of its insured shares and payment of an
annual insurance premium.
(b) Definitions. For purposes of this section:
(1) Insurance year means the period from January 1 through December
31;
(2) Insured shares means the total amount of a credit union's
share, share draft and share certificate accounts, or their equivalent
under state law (which may include deposit accounts), authorized to be
issued to members, other credit unions, public units, or nonmembers
(where permitted under the Act or equivalent state law). ``Insured
shares'' does not include amounts in excess of insurance coverage as
provided in part 745 of this chapter; and
(3) Normal operating level means a total value of the NCUSIF equity
equaling 1.3 percent of the aggregate of all insured shares in insured
credit unions as of the end of the preceding insurance year, or such
lower value as
[[Page 58506]]
established by action of the NCUA Board.
(c) One percent deposit. Each insured credit union shall maintain
with the NCUSIF during each insurance year a deposit in an amount
equaling one percent of the total of the credit union's insured shares
as of the close of the preceding insurance year. The deposit amount
shall be adjusted annually on a date to be determined by the NCUA
Board.
(d) Premium. Unless waived by the NCUA Board, each insured credit
union shall pay to the NCUSIF, on a date to be determined by the NCUA
Board, an insurance premium for that insurance year in an amount
equaling one-twelfth of one percent of the credit union's total insured
shares as of the close of the preceding insurance year.
(e) Redistribution of NCUSIF equity. When the NCUSIF exceeds its
normal operating level, the NCUA Board will, at least annually, make a
proportionate adjustment for insured credit unions of the amount
necessary to reduce the NCUSIF to its normal operating level. Such
adjustment will be in the form determined by the NCUA Board and may
include a waiver of insurance premiums, premium rebates, and/or
distributions from NCUSIF equity.
(f) Forms 1304 and 1305. A certified copy of Form 1304 will be
provided to all federally insured state-chartered credit unions and
Form 1305 to all federally chartered credit unions in connection with
the computation and funding of their annual premium payment and any
change in their one percent deposit. Form 1305 also includes the annual
operating fee. Forms 1304 and 1305 are invoices and are precalculated
based on the credit union's previous year's insured shares. The forms
provide for any adjustments declared by the NCUA Board, resulting in a
single net transfer of funds between the credit union and the NCUA.
Additional copies of each credit union's Form 1304 and 1305 may be
obtained from the appropriate NCUA Regional Office.
(g) New charters. A newly-chartered credit union that obtains share
insurance coverage from the NCUSIF during the insurance year in which
it has obtained its charter shall not be required to pay an insurance
premium for that insurance year. The credit union shall fund its one
percent deposit on a date to be determined by the NCUA Board in the
following insurance year, but shall not participate in any distribution
from NCUSIF equity related to the period prior to the credit union's
funding of its deposit.
(h) Conversion to Federal insurance. An existing credit union that
converts to insurance coverage with the NCUSIF during an insurance year
shall immediately fund its one percent deposit based on the total of
its shares as of the close of the month prior to conversion and shall
pay a premium (unless waived in whole or in part for all insured credit
unions during that year) in an amount that is prorated to reflect the
remaining number of months in the insurance year. The credit union will
be entitled to a prorated share of any distribution from NCUSIF equity
declared subsequent to the credit union's conversion.
(i) Mergers of nonfederally insured credit unions. Where a
nonfederally insured credit union merges into a federally insured
credit union, the continuing federally insured credit union shall
immediately pay to the NCUSIF a prorated insurance premium (unless
waived in whole or in part for all federally insured credit unions),
and an additional one percent deposit based upon the increase in
insured shares resulting from the merger.
(j) Return of deposit. Any insolvent credit union that is closed
for involuntary liquidation will not be entitled to a return of its
deposit. Any solvent credit union that is closed due to involuntary
liquidation shall be entitled to a return of its deposit prior to final
distribution of member shares. Any other credit union whose insurance
coverage with the NCUSIF terminates will be entitled to a return of the
full amount of its deposit immediately after the final date on which
any shares of the credit union are insured, except that the NCUA Board
reserves the right to delay payment by up to one year if it determines
that immediate payment would jeopardize the financial condition of the
NCUSIF. This includes termination of insurance due to mergers and
consolidations. A credit union that receives a return of its deposit
during an insurance year shall have the option of leaving a nominal sum
on deposit with the NCUSIF until the next distribution from NCUSIF
equity and will thus qualify for a prorated share of the distribution.
(k) Assessment of administrative fee and interest for delinquent
payment. Each federally insured credit union shall pay to the NCUA an
administrative fee, the costs of collection, and interest on any
delinquent payment of its capitalization deposit or insurance premium.
A payment will be considered delinquent if it is postmarked later than
the date stated in the invoice provided to the credit union. The NCUA
may waive or abate charges or collection of interest, if circumstances
warrant.
(1) The administrative fee for a delinquent payment shall be an
amount as fixed from time to time by the NCUA Board based upon the
administrative costs of such delinquent payments to the NCUA in the
preceding year.
(2) The costs of collection shall be calculated as the actual hours
expended by NCUA personnel multiplied by the average hourly cost of the
salaries and benefits of such personnel.
(3) The interest rate charged on any delinquent payment shall be
the U.S. Department of the Treasury Tax and Loan Rate in effect on the
date when the payment is due as provided in 31 U.S.C. 3717.
Sec. 741.5 Notice of termination of excess insurance coverage.
In the event of a credit union's termination of share insurance
coverage other than that provided by the NCUSIF, the credit union must
notify all members in writing of such termination at least thirty days
prior to the effective date of termination.
Sec. 741.6 Financial and statistical and other reports.
(a) Each operating insured credit union with assets in excess of
$50,000,000 shall file with the NCUA a quarterly Financial and
Statistical Report on Form NCUA 5300, on or before January 22 (as of
the previous December 31), April 22 (as of the previous March 31), July
22 (as of the previous June 30) and October 22 (as of the previous
September 30) of each year. All other operating insured credit unions
shall file with the NCUA on or before January 31 and on or before July
31 of each year a semiannual Financial and Statistical Report on Form
NCUA 5300, as of the previous December 31 (in the case of the January
filing) or June 30 (in the case of the July filing).
(b) Insured credit unions shall, upon written notice from the NCUA
Board or Regional Director, file such financial or other reports in
accordance with instructions contained in such notice.
Sec. 741.7 Conversion to a state-chartered credit union.
Any federal credit union that petitions to convert to a state-
chartered federally insured credit union is required to apply to the
Regional Director for continued insurance of its accounts and meet the
requirements as stated in the Act and this part. If the application for
continued insurance is not approved, such insurance will terminate
subject to the conditions set forth in section 206(d) of the Act.
[[Page 58507]]
Sec. 741.8 Purchase of assets and assumption of liabilities.
(a) Any credit union insured pursuant to Title II of the Act must
apply for and receive approval from the NCUA Board before either
purchasing or acquiring loans or assuming or receiving an assignment of
deposits, shares, or liabilities from:
(1) Any credit union that is not insured pursuant to Title II of
the Act;
(2) Any other financial-type institution (including depository
institutions, mortgage banks, consumer finance companies, insurance
companies, loan brokers, and other loan sellers or liability traders);
or
(3) Any successor in interest to any institution identified in
paragraph (a)(1) or (a)(2) of this section.
(b) Approval is not required for:
(1) Purchases of student loans or real estate secured loans to
facilitate the packaging of a pool of loans to be sold or pledged on
the secondary market under Sec. 701.23(b)(1) (iii) or (iv) of this
chapter or comparable state law for state-chartered credit unions, or
purchases of member loans under Sec. 701.23(b)(1)(i) of this chapter or
comparable state law for state-chartered credit unions; or
(2) Assumptions or receipt of deposits, shares or liabilities as
rollovers or transfers of member retirement accounts or in which an
NCUSIF-insured credit union perfects a security interest in connection
with an extension of credit to any member.
Sec. 741.9 Uninsured membership shares.
Any credit union that is insured pursuant to Title II of the Act
may not offer membership shares that, due to the terms and conditions
of the account, are not eligible for insurance coverage. This
prohibition does not apply to shares that are uninsured solely because
the amount is in excess of the maximum insurance coverage provided
pursuant to part 745 of this chapter.
Sec. 741.10 Disclosure of share insurance.
Any credit union which is insured pursuant to Title II of the Act
and is permitted by state law to accept nonmember shares or deposits
from sources other than other credit unions and public units (or, for
low-income designated credit unions, any nonmembers), shall identify
such nonmember accounts as nonmember shares or deposits on any
statement or report required by the NCUA Board for insurance purposes.
Immediately after a state-chartered credit union receives notice from
NCUA that its member accounts are federally insured, the credit union
shall advise any present nonmember share and deposit holders by letter
that their accounts are not insured by the NCUSIF. Also, future
nonmember share and deposit fund holders will be so advised by letter
as they open accounts.
Subpart B--Regulations Codified Elsewhere in NCUA's Regulations as
Applying to Federal Credit Unions That Also Apply to Federally
Insured State-Chartered Credit Unions
Sec. 741.201 Minimum fidelity bond requirements.
(a) Any credit union which makes application for insurance of its
accounts pursuant to Title II of the Act must possess the minimum
fidelity bond coverage stated in Sec. 701.20 of this chapter in order
for its application for such insurance to be approved and for such
insurance coverage to continue. A federally insured credit union whose
fidelity bond coverage is terminated shall mail notice of such
termination to the Regional Director not less than 35 days prior to the
effective date of such termination.
(b) Corporate credit unions must comply with Sec. 704.17 of this
chapter in lieu of Sec. 701.20 of this chapter.
Sec. 741.202 Audit and verification requirements.
(a) The supervisory committee of each credit union insured pursuant
to Title II of the Act shall make or cause to be made an audit of the
credit union at least once every calendar year covering the period
elapsed since the last audit. The audit must fully meet the
requirements set forth in Secs. 701.12 and 701.13 of this chapter.
(b) Each credit union which is insured pursuant to Title II of the
Act shall verify or cause to be verified, under controlled conditions,
all passbooks and accounts with the records of the financial officer
not less frequently than once every 2 years. The verification must
fully meet the requirements set forth in Secs. 701.12(e) and 701.13 of
this chapter.
Sec. 741.203 Minimum loan policy requirements.
Any credit union which is insured pursuant to Title II of the Act
must:
(a) Adhere to the requirements stated in Sec. 701.21(h) of this
chapter concerning member business loans, Sec. 701.21(c)(8) of this
chapter concerning prohibited fees, and Sec. 701.21(d)(5) of this
chapter concerning nonpreferential loans. State-chartered, NCUSIF-
insured credit unions in a given state are exempt from these
requirements if the state regulatory authority for that state adopts
substantially equivalent regulations as determined by the NCUA Board.
In nonexempt states, all required NCUA reviews and approvals will be
handled in coordination with the state credit union supervisory
authority; and
(b) Adhere to the requirements stated in part 722 of this chapter
concerning appraisals.
Sec. 741.204 Maximum public unit and nonmember accounts, and low-
income designation.
Any credit union that is insured, or that makes application for
insurance, pursuant to Title II of the Act must:
(a) Adhere to the requirements of Sec. 701.32 of this chapter
regarding public unit and nonmember accounts, provided it has the
authority to accept such accounts. Requests by federally insured state-
chartered credit unions for an exemption from the limitation of
Sec. 701.32 of this chapter will be made and reviewed on the same basis
as that provided in Sec. 701.32 of this chapter for federal credit
unions, provided, however that NCUA will not grant an exemption without
the concurrence of the appropriate state regulator.
(b) Obtain a low-income designation in order to accept nonmember
accounts, other than from public units or other credit unions, provided
it has the authority to accept such accounts under state law. The state
regulator shall make the low-income designation with the concurrence of
the appropriate regional director. The designation will be made and
reviewed by the state regulator on the same basis as that provided in
Sec. 701.32(d) of this chapter for federal credit unions. Removal of
the designation by the state regulator for such credit unions shall be
with the concurrence of NCUA.
Sec. 741.205 Reporting requirements for credit unions that are newly
chartered or in troubled condition.
Any federally insured credit union chartered for less than 2 years
or any credit union defined to be in troubled condition as set forth in
Sec. 701.14(b)(3) of this chapter must adhere to the requirements
stated in Sec. 701.14(c) of this chapter concerning the prior notice
and NCUA review. Federally insured state-chartered credit unions must
submit required information to both the appropriate NCUA Regional
Director and their state supervisor. NCUA will consult with the state
supervisor before making its determination pursuant to Sec. 701.14
(d)(2) and (f) of this chapter. NCUA will notify the state supervisor
of its approval/disapproval no later than the time that it notifies the
affected individual pursuant to Sec. 701.14(d)(1) of this chapter.
[[Page 58508]]
Sec. 741.206 Corporate credit unions.
Any corporate credit union insured pursuant to Title II of the Act
shall adhere to the requirements of part 704 of this chapter.
Sec. 741.207 Community development revolving loan program for credit
unions.
Any credit union which is insured pursuant to Title II of the Act
and is a ``participating credit union,'' as defined in Sec. 705.3 of
this chapter, shall adhere to the requirements stated in part 705 of
this chapter.
Sec. 741.208 Mergers of federally insured credit unions: voluntary
termination or conversion of insured status.
Any credit union which is insured pursuant to Title II of the Act
and which merges with another credit union or non-credit union
institution, and any state-chartered credit union which voluntarily
terminates its status as a federally-insured credit union, or converts
from federal insurance to other insurance from a government or private
source authorized to insure member accounts, shall adhere to the
applicable requirements stated in section 206 of the Act and parts 708a
and 708b of this chapter concerning mergers and voluntary termination
or conversion of insured status.
Sec. 741.209 Management official interlocks.
Any credit union which is insured pursuant to Title II of the Act
shall adhere to the requirements stated in part 711 of this chapter
concerning management official interlocks, issued under the provisions
of the Depository Institution Management Interlocks Act (12 U.S.C. 3201
et seq.).
Sec. 741.210 Central liquidity facility.
Any credit union which is insured pursuant to Title II of the Act
and is a member of the Central Liquidity Facility, shall adhere to the
requirements stated in part 725 of this chapter.
Sec. 741.211 Advertising.
Any credit union which is insured pursuant to Title II of the Act
shall adhere to the requirements prescribed by part 740 of this
chapter.
Sec. 741.212 Share insurance.
(a) Member share accounts received by any credit union which is
insured pursuant to Title II of the Act in its usual course of
business, including regular shares, share certificates, and share draft
accounts, are insured subject to the limitations and rules in subpart A
of part 745 of this chapter.
(b) The payment of share insurance and the appeal process
applicable to any credit union which is insured pursuant to Title II of
the Act are addressed in subpart B of part 745 of this chapter.
Sec. 741.213 Administrative actions, adjudicative hearings, rules of
practice and procedure.
Any credit union which is insured pursuant to Title II of the Act
shall adhere to the applicable rules of practice and procedures for
administrative actions and adjudicative hearings prescribed by part 747
of this chapter. Subpart E of part 747 of this chapter applies only to
federal credit unions.
Sec. 741.214 Report of crime or catastrophic act and Bank Secrecy Act
compliance.
Any credit union which is insured pursuant to Title II of the Act
shall adhere to the requirements stated in part 748 of this chapter.
Sec. 741.215 Records preservation program.
Any credit union which is insured pursuant to Title II of the Act
shall maintain a records preservation program as prescribed by part 749
of this chapter.
Sec. 741.216 Flood insurance.
Any credit union which is insured pursuant to Title II of the Act
shall adhere to the requirements stated in part 760 of this chapter.
Sec. 741.217 Truth in savings.
Any credit union which is insured pursuant to Title II of the Act
shall adhere to the requirements stated in part 707 of this chapter.
Sec. 741.218 Involuntary liquidation and creditor claims.
Any credit union which is insured pursuant to Title II of the Act
shall adhere to the applicable provisions in part 709 of this chapter.
Section 709.3 of this chapter applies only to federal credit unions.
[FR Doc. 95-28703 Filed 11-27-95; 8:45 am]
BILLING CODE 7535-01-U
