National Credit Union Share Insurance Fund Premium and One Percent Deposit, 36618-36628 [E9-17310]
Download as PDF
36618
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
srobinson on DSKHWCL6B1PROD with PROPOSALS
interested persons are invited to submit
information on the regulatory and
informational impacts of this action on
small businesses.
This proposed rule would impose no
additional reporting or recordkeeping
requirements on either small or large
Washington-Oregon prune handlers. As
with all Federal marketing order
programs, reports and forms are
periodically reviewed to reduce
information requirements and
duplication by industry and public
sector agencies. Additionally, USDA has
not identified any relevant Federal rules
that duplicate, overlap, or conflict with
this rule.
AMS is committed to complying with
the E-Government Act, to promote the
use of the Internet and other
information technologies to provide
increased opportunities for citizen
access to Government information and
services, and for other purposes.
A small business guide on complying
with fruit, vegetable, and specialty crop
marketing agreements and order may be
viewed at: https://www.ams.usda.gov/
AMSv1.0/ams.fetchTemplateData
.do?template=TemplateN&
page=MarketingOrders
SmallBusinessGuide. Any questions
about the compliance guide should be
sent to Jay Guerber at the previously
mentioned address in the FOR FURTHER
INFORMATION CONTACT section.
A 30-day comment period is provided
to allow interested persons to respond
to this proposed rule. Thirty days is
deemed appropriate because: (1) The
2009–10 fiscal period began on April 1,
2009, and the order requires that the
assessment rate for each fiscal period
apply to all assessable prunes handled
during such fiscal period; (2) the
Washington-Oregon prune harvest and
shipping season is expected to begin in
early August; (3) the Committee needs
to have sufficient funds to pay its
expenses, which are incurred on a
continuous basis; and (4) handlers are
aware of this action, which was
recommended by the Committee at a
public meeting and is similar to other
assessment rate actions issued in past
years.
List of Subjects in 7 CFR Part 924
Prunes, Marketing agreements,
Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, 7 CFR part 924 is proposed to
be amended as follows:
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
RegulationsOpinionsLaws/
proposed_regs/proposed_regs. html.
Follow the instructions for submitting
comments.
1. The authority citation for 7 CFR
• E-mail: Address to
part 924 continues to read as follows:
regcomments@ncua.gov. Include ‘‘[Your
Authority: 7 U.S.C. 601–674.
name] Comments on Insurance
Premium and One Percent Deposit’’ in
2. Section 924.236 is revised to read
the e-mail subject line.
as follows:
• Fax: (703) 518–6319. Use the
§ 924.236 Assessment rate.
subject line described above for e-mail.
• Mail: Address to Mary Rupp,
On or after April 1, 2009, an
Secretary of the Board, National Credit
assessment rate of $2.00 per ton is
Union Administration, 1775 Duke
established for the Washington-Oregon
Street, Alexandria, Virginia 22314–
Fresh Prune Marketing Committee.
3428.
Dated: July 20, 2009.
• Hand Delivery/Courier: Same as
Rayne Pegg,
mail address.
Administrator, Agricultural Marketing
Public inspection: All public
Service.
comments are available on the agency’s
[FR Doc. E9–17601 Filed 7–23–09; 8:45 am]
Web site at https://www.ncua.gov/
BILLING CODE 3410–02–P
RegulationsOpinionsLaws/comments as
submitted, except as may not be
possible for technical reasons. Public
NATIONAL CREDIT UNION
comments will not be edited to remove
ADMINISTRATION
any identifying or contact information.
Paper copies of comments may be
12 CFR Parts 701 and 741
inspected in NCUA’s law library, at
1775 Duke Street, Alexandria, Virginia
RIN 3133–AD63
22314, by appointment weekdays
National Credit Union Share Insurance between 9 a.m. and 3 p.m. To make an
Fund Premium and One Percent
appointment, call (703) 518–6546 or
Deposit
send an e-mail to OGC Mail@ncua.gov.
FOR FURTHER INFORMATION CONTACT:
AGENCY: National Credit Union
Elizabeth Wirick, Staff Attorney, Office
Administration (NCUA).
of General Counsel, National Credit
ACTION: Proposed rule.
Union Administration, 1775 Duke
SUMMARY: Section 741.4 of NCUA’s rules Street, Alexandria, Virginia 22314–3428
or telephone: (703) 518–6540; and Paul
describes the procedures for the
Peterson, Director, Applications
capitalization and maintenance of the
Section, Office of General Counsel,
National Credit Union Share Insurance
National Credit Union Administration,
Fund (NCUSIF). The current rule,
at the same address and telephone
however, does not adequately address
number.
how credit unions that enter or depart
the NCUSIF system in a given calendar
SUPPLEMENTARY INFORMATION:
year are affected by any NCUSIF
A. Background
premium or deposit replenishment
assessments in that same year. Due to
Congress created the National Credit
the unprecedented level of NCUSIF
Union Share Insurance Fund (NCUSIF)
expenses in 2009, which required the
in 1970 to provide share insurance
NCUA to announce both such
coverage to all Federal credit unions
assessments, NCUA is now proposing
and to those State chartered credit
amendments to § 741.4 to clarify these
unions that apply and meet minimum
procedures. The proposal makes other
qualification standards. The NCUSIF
minor changes to 741.4 and conforming provides insurance coverage for each of
changes to § 701.6 relating to the
an insured credit union’s members,
payment of operating fees by Federal
similar to the coverage provided by the
credit unions.
Federal Deposit Insurance Corporation’s
DATES: Comments must be received by
(FDIC’s) Deposit Insurance Fund (DIF).
August 24, 2009.
Unlike the DIF, however, the NCUSIF
was not capitalized at its inception by
ADDRESSES: You may submit comments
by any of the following methods. (Please tax revenues. From 1971 through 1980,
the capital of the NCUSIF was
send comments by one method only):
• Federal eRulemaking Portal: https:// established solely through the annual
insurance premium contributions of
www.regulations.gov. Follow the
insured credit unions. During the period
instructions for submitting comments.
from 1971 through the end of calendar
• NCUA Web Site: https://
year 1980, the capital of the fund (i.e.,
www.ncua.gov/
PART 924—PRUNES GROWN IN
DESIGNATED COUNTIES IN
WASHINGTON
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
E:\FR\FM\24JYP1.SGM
24JYP1
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
equity as a percentage of insured shares)
grew, but the years 1981–1983 saw a
reversal of this trend, due to both record
share growth in insured credit unions
and liquidation and problem credit
union expenses. As an alternative to the
premium approach to establishing a
strong and viable insurance fund, the
NCUA Board developed a legislative
proposal which, with the support of the
entire credit union system, Congress
enacted in 1984. The NCUSIF was then
capitalized with a deposit by each credit
union of an amount equaling one
percent of the credit union’s total
insured shares.
As required by the 1984 legislation,
and subsequent amendments in 1998,
NCUA maintains the NCUSIF’s equity
ratio at a percentage between 1.2% and
1.5%, but no greater than the normal
operating level as established from time
to time by the Board. If the NCUSIF’s
equity ratio exceeds this normal
operating level at the end of any given
year, NCUA will, generally, distribute
any excess funds to insured credit
unions. If the NCUSIF’s equity ratio falls
below 1.2%, the NCUSIF must assess a
premium, and if the ratio falls below
1.0%, depleting the one percent deposit
provided by each credit union, the
NCUSIF must also assess an amount
sufficient to replenish the one percent
deposit.
In 1984, the Board adopted a rule
establishing procedures for the
capitalization and maintenance of the
NCUSIF. 49 FR 40561 (Oct. 17, 1984).
The rule, originally codified at 12 CFR
741.5 but now located in § 741.4, dealt
broadly with five issues: (1) The funding
of the one percent deposit, (2) the return
of the deposit, (3) the use of the deposit
by the NCUSIF and its replenishment by
insured credit unions, (4) the insurance
agreement, and (5) NCUA reports to
Congress.
The content of § 741.4 today is much
the same as its 1984 counterpart, having
been modified only slightly in the past
25 years. For example, while the current
rule addresses some issues associated
with the expense and replenishment of
the one percent deposit, it does not
contain much detail on this issue.1 In
srobinson on DSKHWCL6B1PROD with PROPOSALS
1 The
preamble to the proposed rule in 1984
stated:
The legislation provides that the NCUSIF may
utilize the deposit funds if necessary to meet its
expenses, in which case the amount used is to be
expensed and replenished by insured credit unions
in accordance with procedures established by the
Board. Given the history of the Fund and the
condition of insured credit unions, it seems
unnecessary to anticipate at this time any possible
utilization of the deposit funds to meet the Fund’s
expenses. This authority is clearly intended to meet
a catastrophic economic set of circumstances, as
evidenced by the fact that it can only be exercised
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
36619
addition, the current rule does not
adequately address how credit unions
that enter or depart the NCUSIF system,
such as through insurance or bank
conversions, are affected by NCUSIF
premium or deposit replenishment
assessments in that same calendar year.
Due to the unprecedented level of
NCUSIF expenses in 2009, which
required the NCUA to announce both
premium and deposit replenishment
assessments, NCUA is now proposing
amendments to § 741.4 to clarify these
issues and other related issues.
(B) Relation of premium charge to equity
ratio of fund. The Board may assess a
premium charge only if—
(i) the Fund’s equity ratio is less than 1.3
percent; and
(ii) the premium charge does not exceed
the amount necessary to restore the equity
ratio to 1.3 percent.
(C) Premium charge required if equity ratio
falls below 1.2 percent. If the Fund’s equity
ratio is less than 1.2 percent, the Board shall,
subject to subparagraph (B), assess a
premium charge in such an amount as the
Board determines to be necessary to restore
the equity ratio to, and maintain that ratio at,
1.2 percent.
B. Relevant Statutory Provisions
The Federal Credit Union Act
contains several relevant provisions on
the return and replenishment of the one
percent deposit and the timing and
amount of NCUSIF premiums. These
provisions are set forth below.
With regard to the deposit, Section
202(c)(1)(A) of the Act states:
12 U.S.C. 1782(c)(2). Section 206(d)(3)
of the Act also states:
Each insured credit union shall pay to and
maintain with the National Credit Union
Share Insurance Fund a deposit in an amount
equaling 1 per centum of the credit union’s
insured shares. * * *
12 U.S.C. 1782(c)(1)(A). Section
202(c)(1)(B) of the Act also states:
(i) The deposit shall be returned to an
insured credit union in the event that its
insurance coverage is terminated, it converts
to insurance coverage from another source, or
in the event the operations of the fund are
transferred from the National Credit Union
Administration Board.
(ii) The deposit shall be returned in
accordance with procedures and valuation
methods determined by the Board, but in no
event shall the deposit be returned any later
than one year after the final date on which
no shares of the credit union are insured by
the Board.
(iii) The deposit shall not be returned in
the event of liquidation on account of
bankruptcy or insolvency.
(iv) The deposit funds may be used by the
fund if necessary to meet its expenses, in
which case the amount so used shall be
expensed and shall be replenished by
insured credit unions in accordance with
procedures established by the Board.
12 U.S.C. 1782(c)(1)(B). With regard to
the premium, Section 202(c)(2) of the
Act states:
(A) In general. Each insured credit union
shall, at such times as the Board prescribes
(but not more than twice in any calendar
year), pay to the Fund a premium charge for
insurance in an amount stated as a
percentage of insured shares (which shall be
the same for all insured credit unions).
after the Fund has utilized all investment income
and all of its 0.3% nondeposit equity. Thus, ample
time would exist for development of expense and
replenishment procedures and guidelines.
Accordingly, such procedures are not proposed at
this time.
49 FR 30740 (Aug. 1, 1984).
PO 00000
Frm 00004
Fmt 4702
Sfmt 4702
In the event of a conversion of a credit
union from status as an insured credit union
under this Act under subsection (a)(2) of this
section, premium charges payable under
section 202(c) of this Act shall be reduced by
an amount proportionate to the number of
calendar months for which the converting
credit union will no longer be insured under
this Act . * * *
12 U.S.C. 1786(d)(3). Subsection (a)(2)
in the quotation above refers to the
conversion from a federally-insured
credit union to a nonfederally-insured
credit union.
C. Proposed Amendments to Section
741.4
The proposal includes several
amendments to clarify the NCUSIF
premium and deposit replenishment
obligations and procedures for credit
unions and other entities that enter or
depart from NCUSIF coverage. Most of
these proposed amendments are located
in § 741.4(i), Conversion to Federal
insurance, and § 741.4(j), Conversion
from, or termination of, Federal share
insurance. The Board is, however, also
proposing minor changes to other
paragraphs in § 741.4. A paragraph-byparagraph description and discussion of
all the proposed amendments follows.
Paragraph (a)—Scope
Section 741.4 provides for the
capitalization and maintenance of the
NCUSIF. The proposal does not change
the scope of § 741.4, and the proposal
does not amend this paragraph.
Paragraph (b)—Definitions
The proposal includes three
amendments to the existing definitions.
The proposal amends the definition of
insured shares to include, for a credit
union or other entity that is not
federally insured, the amount of
deposits of shares that would have been
insured by the NCUSIF had the
institution been federally insured on the
date of measurement. This amended
definition is necessary for calculating
E:\FR\FM\24JYP1.SGM
24JYP1
36620
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
NCUSIF premiums, deposit
replenishments, and equity
distributions for entities that enter the
NCUSIF insurance system.
The proposal adds a definition of the
term premium/distribution ratio as the
number of full remaining months in the
calendar year following the date of the
institution’s conversion or merger,
divided by 12. This term is used in the
NCUSIF premium, deposit
replenishment, and equity distribution
calculations involving credit unions and
other entities that enter the NCUSIF
insurance system. The ratio represents
the fraction of the year that an
institution entering the NCUSIF system
was insured by the NCUSIF.
The proposal also adds a definition of
the term modified premium/distribution
ratio as one minus the premium/
distribution ratio. This term is used in
the NCUSIF premium, deposit
replenishment, and equity distribution
calculations involving credit unions that
depart the NCUSIF insurance system.
This ratio represents the fraction of the
year that an institution departing the
NCUSIF system was insured by the
NCUSIF.
Also, the proposal deletes the
paragraph numbers in the current
version, consistent with Office of the
Federal Register drafting
recommendations for definitions
sections that list the terms defined in
alphabetical order.
srobinson on DSKHWCL6B1PROD with PROPOSALS
Paragraph (c)—One Percent Deposit
This paragraph describes the one
percent deposit requirement and the
periodic adjustments based on changes
in insured shares. For credit unions
with less than $50 million in assets, the
adjustments occur after the annual
reporting period ending on December
31. For credit unions with $50 million
or more in assets, the adjustments occur
after the semiannual reporting periods
ending on June 30 and December 31
each year.
The proposal does not amend this
paragraph.
Paragraph (d)—Insurance Premium
Charges
Paragraph (d)(1) provides that the
Board may assess premium charges, in
an amount stated as a percentage of
insured shares, no more than twice
annually. Subparagraph (d)(2)(i) states
the relation of the premium charge to
the equity ratio. The proposal does not
amend these provisions.
Subparagraph (d)(2)(ii) states that if
the ratio of the NCUSIF falls below 1.2
percent, the NCUA Board is required to
assess a premium in an amount it
determines necessary to restore the
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
equity ratio to, and maintain that ratio
at, 1.2 percent. This provision is
confusing because it does not delineate
between premium assessments and
assessments to replenish the one
percent deposit as required by § 202 of
the Federal Credit Union Act.
Accordingly, the proposal amends
subparagraph(d)(2)(ii) to read as follows:
If the equity ratio of the NCUSIF falls to
between 1.0 and 1.2 percent, the NCUA
Board is required to assess a premium in an
amount it determines is necessary to restore
the equity ratio to, and maintain that ratio at,
at least 1.2 percent. If the equity ratio of the
NCUSIF falls below 1.0 percent, the NCUA
Board is required to assess a deposit
replenishment charge in an amount it
determines is necessary to restore the equity
ratio to 1.0 percent and to assess a premium
charge in an amount it determines is
necessary to restore the equity ratio to, and
maintain the ratio at, at least 1.2 percent.
Paragraph (e)—Distribution of NCUSIF
Equity
This paragraph describes the
mandatory year-end distribution of
NCUSIF equity when the NCUSIF
exceeds both its normal operating level
and its available assets ratio as
described in § 202(c)(3) of the Federal
Credit Union Act. The proposal does not
amend this paragraph.
Paragraph (f)—Invoices
This paragraph describes invoices for
premiums and deposit adjustments. For
clarity, the proposal amends this
paragraph to specifically include
invoices for deposit replenishment.
Paragraph (g)—New Charters
This paragraph permits new charters
to delay the funding of their one percent
deposit until the year following their
chartering. The proposal does not
amend this paragraph.
Paragraph (h)—Depletion of One
Percent Deposit
The proposal adds a new paragraph(h)
to read as follows:
Depletion of one percent deposit. All or
part of the one percent deposit may be used
by the NCUSIF if necessary to meet its
expenses, and the fund will expense the
amount so used. The NCUSIF may invoice
credit unions in an amount necessary to
replenish the one percent deposit at any time
following the effective date of the depletion,
but must invoice credit unions no later than
the adjustment described in paragraph (c) of
this section based on insured shares as of
December 31 of the year of the depletion.
The first sentence of this provision
restates the Board’s authority under
§ 202(c)(1)(B)(iv) of the Federal Credit
Union Act. The second sentence
clarifies that NCUA may invoice insured
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
credit unions for the deposit
replenishment at any time after the
deposit has been depleted, but requires
that NCUA send the invoice no later
than the date NCUA first adjusts the
deposit for changes in insured share
levels in the year following the
depletion.
The proposal takes the current
paragraph (h), entitled Conversion to
Federal Insurance, expands on that
paragraph, and incorporates it into the
proposed paragraph (i). This is
discussed further below.
Paragraph (i)—Conversion to Federal
Insurance
The proposal amends paragraph (i) to
address, in detail, how a nonfederally
insured credit union that converts to
Federal insurance is affected by a
NCUSIF declaration of a premium
assessment, deposit replenishment
assessment, or an equity distribution.
Paragraph (i)(1) addresses a direct
conversion to Federal insurance, and
paragraph (i)(2) addresses an indirect
conversion through the merger of a
nonfederally insured credit union or
entity into a federally insured credit
union. The term ‘‘merger’’ includes not
only mergers but also purchase and
assumption transactions in which the
continuing credit union obtains all, or
substantially all, of the assets of the
other entity. The current paragraph (i),
entitled Mergers of nonfederally insured
credit unions, is expanded and
subsumed into the proposed paragraph
(i)(2).
This proposed paragraph (i), along
with the proposed paragraph (j),
constitute the most significant and
complex of the proposed amendments
to § 741.4. Accordingly, the discussion
below is detailed and includes
hypotheticals illustrating each
subparagraph.
Proposed paragraph (i)(1) addresses a
direct conversion to NCUSIF insurance.
Proposed paragraph (i)(1)(i) provides
that:
A credit union or other institution that
converts to insurance coverage with the
NCUSIF will: (i) Immediately fund its one
percent deposit based on the total of its
insured shares as of the last day of the most
recently ended reporting period prior to the
date of conversion. * * *
To illustrate the application of this
provision, consider the following
hypothetical. Assume Main Street
Credit Union completes its conversion
from nonfederal to Federal insurance on
May 15 of Year One. Assume further
that Main Street credit union had 1,000
insured shares for the end of month in
December of the previous year (Year
zero), 1,100 insured shares at the end of
E:\FR\FM\24JYP1.SGM
24JYP1
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
May, the month of conversion, and
1,200 insured shares at the end of June.
36621
This information is presented in this
Table A: 2
TABLE A
End of month,
May, Year One
(month conversion completed)
End of month,
December,
Year Zero
Main Street Credit Union’s Federally Insured Shares .....................................................
Proposed paragraph (i)(1)(i) requires
that on the date of its conversion, Main
Street fund its one percent deposit
based on ‘‘the total of its insured shares
as of the last day of the most recently
ended reporting period prior to the date
of conversion.’’ Since Main Street has
less than $50,000,000 in assets, its
reporting period is annual, and ends on
December 31. 12 CFR 741.4(b)(6)
(definition of ‘‘reporting period’’). Main
Street had $1,000 in insured shares on
that date, and one percent of that is $10,
and so that is the amount Main Street
End of month,
June, Year One
1,100
1,200
1,000
must immediately remit to the NCUSIF
to establish its one percent deposit.
Proposed paragraph (i)(1)(ii) provides
that:
A credit union or other institution that
converts to insurance coverage with the
NCUSIF will: * * * (ii) If the NCUSIF
assesses a premium in the calendar year of
conversion, pay a premium based on the
institution’s insured shares as of the last day
of the most recently ended reporting period
preceding the invoice date times the
institution’s premium/distribution ratio.
* * *
To illustrate the application of
paragraph (i)(1)(ii), take the same facts
in hypothetical A related to the
conversion of Main Street from
nonfederal to Federal insurance. Now,
further assume that on the previous
March 15, NCUA had declared a
premium assessment, and on September
15 following the conversion NCUA sent
out the invoices for the March 15
assessment. Also assume that Main
Street had grown to 1,300 insured
shares at the end of September, the
month the invoices were sent to Main
Street and other credit unions. This
information is presented in this Table B:
TABLE B
End of month,
December,
Year Zero
srobinson on DSKHWCL6B1PROD with PROPOSALS
Main Street Credit Union’s Federally Insured Shares .....................
Paragraph (i)(1)(ii) requires Main
Street pay a premium based on the
institution’s ‘‘insured shares as of the
last day of the most recently ended
reporting period preceding the invoice
date times the institution’s premium/
distribution ratio.’’ Again, because Main
Street is under $50 million in assets, the
most recently ended reporting period
preceding the September 15 invoice
date is all the way back to December of
Year Zero, when Main Street had $1,000
in shares. Main Street’s ‘‘premium/
distribution ratio,’’ as defined in
proposed § 741.4(b)(5), is ‘‘the number
of full remaining months in the calendar
year following the date of the
institution’s conversion or merger
divided by 12.’’ Since Main Street
completed its conversion in May, there
are seven full months remaining in the
calendar year (June through December),
and Main Street’s premium/distribution
ratio is seven divided by 12.
2 Although Main Street Credit Union was not
Federally insured as of December 31 of Year Zero,
proposed 741.4(b)(3) provides that ‘‘For a credit
union or other entity that is not Federally insured,
‘insured shares’ means, for purposes of this section
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
End of month,
May, Year One
(month conversion completed)
End of month,
June, Year One
1,100
1,200
1,000
Accordingly, Main Street’s premium
will be assessed on $1,000 times seven
divided by 12, or about $583.3 Note that
if Main Street’s assets had exceeded $50
million as of June 30, it would have had
semiannual reporting periods under
§ 741.4(b)(6), and its ‘‘insured shares as
of the last day of the most recently
ended reporting period preceding the
invoice date’’ would have been its
insured shares as of June 30, Year One,
and not as of December 31, Year Zero.
Proposed paragraphs (i)(1)(iii) and (iv)
describe the responsibility of a credit
union or other entity converting to
Federal insurance to replenish a
depleted NCUSIF deposit, as follows:
End of month
September,
Year One
(month invoice
sent)
1,300
any time after the date of conversion through
the end of that calendar year, an assessment
to replenish the one-percent deposit, pay a
replenishment amount based on the
institution’s insured shares as of the last day
of the most recently ended reporting period
preceding the invoice date. * * *
A credit union or other institution that
converts to insurance coverage with the
NCUSIF will * * * (iii) If the NCUSIF
declares, in the calendar year of conversion
but on or before the date of conversion, an
assessment to replenish the one-percent
deposit, pay nothing related to that
assessment; (iv) If the NCUSIF declares, at
Paragraph (i)(1)(iii) clarifies that a
converting credit union has no
responsibility to pay anything toward
the replenishment of a depleted deposit
that is declared on or before the date of
conversion, even if NCUA sends out
invoices related to the depletion after
the date of conversion. Paragraph
(i)(1)(iv) requires that a converting
credit union replenish its deposit with
regard to a depletion declared after the
date of conversion through the end of
the calendar year. Again, assume the
same facts for Main Street as in Table B,
but that the deposit depletion was
announced in June, after Main Street
converted, and that NCUA sent the
invoices in September.
only, the amount of deposits or shares that would
have been insured by the NCUSIF under part 745
had the institution been Federally insured on the
date of measurement.’’
3 Main Street’s actual premium charge will be this
$583 divided by the aggregate insured shares of all
Federally insured credit unions times the aggregate
premium for all Federally insured credit unions.
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
E:\FR\FM\24JYP1.SGM
24JYP1
36622
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
TABLE B
End of month,
December,
Year Zero
Main Street Credit Union’s Federally Insured Shares .....................
Main Street would receive an invoice
amount ‘‘based on the [Main Street’s]
insured shares as of the last day of the
most recently ended reporting period
preceding the invoice date.’’ Since Main
Street has less than $50 million in
shares, the most recently ended
reporting period preceding the
September invoice date was December
31, Year Zero, and it would pay for the
replenishment based on $1,000 in
insured shares. If Main Street, however,
had had $50 million or more in assets
on June 30, its most recently ended
reporting period preceding the invoice
date would have been the semiannual
period ending on June 30, and Main
Street would have used its insured
shares as of June 30 to calculate the
replenishment amount due to the
NCUSIF.
Under the Federal Credit Union Act,
distributions, if any, are declared once
a year, early in the year, based on excess
funds in the NCUSIF as of the prior
December 31. Proposed paragraph
(i)(1)(v) describes the right of a credit
union or other entity converting to
Federal insurance to receive a
distribution from the NCUSIF,
specifically:
(1) A credit union or other institution that
converts to insurance coverage with the
NCUSIF will: * * * (v) If the NCUSIF
declares a distribution in the year following
conversion based the NCUSIF’s equity at the
end of the year of conversion, receive a
distribution based on the institution’s
insured shares as of the end of the year of
conversion times the institution’s premium/
End of month,
May, Year One
(month conversion completed)
End of month,
June, Year One
1,100
1,200
1,000
distribution ratio. With regard to
distributions declared in the calendar year of
conversion but based on the NCUSIF’s equity
at the end of the preceding year, the
converting institution will receive no
distribution.
To illustrate how proposed paragraph
(i)(1)(v) works, assume that Main Street
Credit Union converts to Federal
insurance in May of Year One, and that
the NCUA declares a distribution in
January of Year Two based on the
NCUSIF equity as of December 31 of
Year One. Then Main Street will be
entitled to a pro rata portion of the
distribution, calculated on its insured
shares as of December 31 of Year One
times its premium/distribution ratio.
Since it converted in May of Year One,
and there were seven full months
remaining in Year One at on the date of
conversion, Main Street’s premium/
distribution ratio under proposed
§ 741.4(b)(6) equals seven divided by 12.
On the other hand, if the NCUA
declared a distribution a year earlier,
that is, in January of Year One based on
the NCUSIF’s equity ratio as of
December 31 in Year Zero, then under
proposed paragraph (i)(1)(v) Main Street
would receive no part of this
distribution. Main Street is not entitled
to any part of this distribution because
Main Street, which completed its
conversion in Year One, did not
contribute in any way to the excess
funds in the NCUSIF as of the end of
Year Zero.
While proposed paragraph (i)(1), and
the examples given above, involve the
End of month
September,
Year One
(month invoice
sent)
1,300
conversion of a credit union or entity
directly to Federal insurance with the
NCUSIF, such conversions can also
happen indirectly through the merger of
a nonfederally insured credit union or
entity into a federally insured credit
union.
Proposed paragraph (i)(2) addresses
the NCUSIF premiums, deposit
replenishments, and distributions in
this context.
Proposed paragraph (i)(2)(i) provides
that:
(2) A federally insured credit union that
merges with a nonfederally-insured credit
union or other non-federally insured
institution (the ‘‘merging institution’’), where
the federally-insured credit union is the
continuing institution, will: (i) Immediately
on the date of merger increase the amount of
its NCUSIF deposit by an amount equal to
one percent of the merging institution’s
insured shares as of the last day of the
merging institution’s most recently ended
reporting period preceding the date of merger
* * *.
To illustrate this provision, and the
other provisions of paragraph (i)(2)
related to mergers of nonfederally
insured entities into federally-insured
credit unions, consider the following
hypothetical. Nonfederally-insured
Credit Union A merges into federallyinsured Credit Union B on August 15 of
Year One. The relevant insured shares
of Credit Union A and Credit Union B
at various dates before and after the
merger are reflected in Table D:
TABLE D
End of month
December,
Year Zero
srobinson on DSKHWCL6B1PROD with PROPOSALS
Credit Union A insured shares ........................................................
Credit Union B insured shares ........................................................
Proposed paragraph (i)(2)(i) requires
that Credit Union B, the continuing
credit union, immediately increase the
amount of its deposit with the NCUSIF
in an amount ‘‘equal to one percent of
the merging institution’s insured shares
as of the last day of the merging
VerDate Nov<24>2008
16:51 Jul 23, 2009
Jkt 217001
End of month
June, Year One
1,000
9,000
institution’s most recently ended
reporting period preceding the date of
merger.’’ Since Credit Union A, the
merging institution, has less than $50
million in assets, its reporting period is
the calendar year, and its most recently
ended reporting period preceding the
PO 00000
Frm 00007
Fmt 4702
Sfmt 4702
End of month
August,
Year One
(month merger
completed)
1,100
9,900
N/A
12,900
End of month
September,
Year One
(month invoice
sent)
N/A
14,000
August merger date is December 31 in
Year Zero. Credit Union A had $1,000
in insured shares on that date.
Accordingly, Credit Union B, the
continuing credit union, must
immediately increase the amount of its
deposit with the NCUSIF by one percent
E:\FR\FM\24JYP1.SGM
24JYP1
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
of $1,000, or $10. Note that if Credit
Union A had been a larger credit union,
with $50 million or more in assets on
June 30 in Year One, then Credit Union
B would have used Credit Union A’s
insured shares as of June 30 in this
calculation.
Proposed paragraph (i)(2)(ii), relating
to NCUSIF premium assessments,
provides that the continuing institution
will:
srobinson on DSKHWCL6B1PROD with PROPOSALS
(ii) With regard to any NCUSIF premiums
assessed in the calendar year of merger, pay
a two-part premium, with one part calculated
on the merging institution’s insured shares as
described in subparagraph (1)(ii) above, and
the other part calculated on the continuing
institution’s insured shares as of the last day
of its most recently ended reporting period
preceding the date of merger. * * *
Paragraph (i)(2)(ii) provides for a twopart calculation, with the first part
relating to the merging credit union and
the second part relating to the
continuing credit union. If we assume
the facts as in Table D, and assume the
premium is assessed sometime in Year
One, then we calculate the insured
shares of Credit Union A, the merging
credit union, as we did in the example
for paragraph (i)(1)(ii), which would be
$583. Then we calculate the insured
shares of Credit Union B, the continuing
credit union, ‘‘as of the last day of its
most recently ended reporting period
preceding the merger date.’’ Since
Credit Union B is also under $50
million in assets, ‘‘the last day of the
most recently ended reporting period’’
is also December 31 of Year Zero. Credit
Union B’s insured shares on that date
were $9,000, and so the combined
insured shares for purposes of the
premium assessment is $9,583. Note
that if Credit Union B had $50 million
or more in assets on June 30 of Year
One, then Credit Union B’s ‘‘most
recently ended reporting period
preceding the merger date’’ would have
been June 30 of Year One, and not
December 31 of Year Zero. The Board is
aware that the NCUA might declare a
NCUSIF premium, invoice it, and
receive the premiums in Year One from
the continuing institution before the
continuing institution consummates its
merger. In that case, the Board would
invoice the continuing credit union
again after the merger, but only for the
difference between the amount
previously invoiced and the amount
calculated under proposed paragraph
(i)(2)(ii).
Proposed paragraph (i)(2)(iii)
prescribes the procedures for calculating
the NCUSIF distribution when a
nonfederally-insured credit union or
entity merges into a federally insured
credit union. Proposed paragraph
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
(i)(2)(iii) provides that the federallyinsured credit union will:
[i]f the NCUSIF declares a distribution in the
year following the merger based on the
NCUSIF’s equity at the end of the year of
merger, receive a distribution based on the
continuing institution’s insured shares as of
the end of the year of merger. With regard to
distributions declared in the calendar year of
merger but based on the NCUSIF’s equity
from the end of the preceding year, the
institution will receive a distribution based
on its insured shares as of the end of the
preceding year.
This formula recognizes that the
merging institution did not contribute to
the NCUSIF equity as of the end of the
year preceding the merger and so no
distribution is allotted against the
merging institution’s shares. As for
distributions based on the NCUSIF
equity at the end of the year of merger,
this formula does not include any pro
rata reduction for the merging
institution’s contribution. The Board
determined that a pro rata reduction
was unnecessary, given the generally
small relative size of merging
institutions to continuing institutions,
and the fact that the Federal Credit
Union Act does not require any sort of
pro rata reduction or other pro rata
calculation with regard to distributions.
For credit unions converting to
NCUSIF coverage, the proposal changes
the date for calculating the one percent
deposit from insured shares as of the
close of the month before conversion to
insured shares as of the most recently
ended reporting period before
conversion. NCUA is proposing this
change to make the calculation method
for credit unions entering NCUSIF
consistent with the calculation method
for federally-insured credit unions’ one
percent deposit adjustment. Likewise,
for federally-insured credit unions
merging with nonfederally-insured
credit unions, the proposal clarifies that
the date used for calculation of the
merged credit union’s increased one
percent is insured shares of the
nonfederally-insured credit union as of
the most recently ended reporting
period before conversion. Again, this
change makes the calculation method
for credit unions increasing insured
shares by merger consistent with the
calculation method for federally-insured
credit unions’ one percent deposit
adjustment.
Paragraph (j)—Conversion From, or
Termination of, Federal Share
Insurance
The proposal amends paragraph (j) to
address, in detail, how a federally
insured credit union that converts to
insurance other than that provided by
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
36623
the NCUSIF, or that loses or terminates
its NCUSIF insurance, is affected by a
NCUSIF declaration of a premium
assessment, deposit replenishment
assessment, or equity distribution.
Proposed subparagraph (j)(1) addresses
direct insurance conversions and
conversions by merger. Proposed
subparagraph (j)(2) addresses
liquidations and insurance termination.
Proposed paragraph (j)(1)(i) provides
that:
A federally-insured credit union whose
insurance coverage with the NCUSIF
terminates, including through a conversion
to, or merger into, a nonfederally insured
credit union or a non-credit union entity,
will: (i) Receive the full amount of its
NCUSIF deposit, less any announced
depletion, immediately after the final date on
which any shares of the credit union are
NCUSIF-insured. * * *
The current paragraph (j) does not
mention the possibility of deposit
depletion, and this has been clarified in
the proposed paragraph (j). To illustrate
the application of this paragraph
(j)(1)(i), consider the following
hypothetical. Assume Anytown Credit
Union, a credit union with $30 million
in assets, converts from Federal to
nonfederal insurance on November 15.
Also assume Anytown Credit Union had
$20 million in insured shares as of the
previous December 31, the end of its
most recent reporting period. 12 CFR
741.4(b)(5), (c). The NCUSIF would
return one percent of $20 million, or
$200,000 to Anytown Credit Union
immediately following the effective date
of its conversion. Note that, if Anytown
Credit Union had reported $50 million
or more in assets on June 30, then June
30 would have been the end of its most
recent reporting period. Now further
assume that, on July 15 of that same
year, the NCUSIF had announced an
expense that reduced the equity ratio
from 1.3 to .75, which would have
included a write-off (depletion) of 25
percent, or 25 basis points, of the one
percent deposit. The amount of the
deposit returned to Anytown would be
reduced by 25 percent, from $200,000 to
$150,000. If the NCUSIF had announced
expenses reducing the equity ratio to .75
after the November 15 conversion date,
this announcement would have no
effect on Anytown and it would still
receive $200,000 from the NCUSIF.
Proposed paragraph (j)(1)(ii) provides
that:
A federally-insured credit union whose
insurance coverage with the NCUSIF
terminates, including through a conversion
to, or merger into, a nonfederally insured
credit union or a non-credit union entity,
will: * * * (ii) If the NCUSIF declares a
distribution at the end of the calendar year
E:\FR\FM\24JYP1.SGM
24JYP1
36624
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
srobinson on DSKHWCL6B1PROD with PROPOSALS
of conversion, receive a distribution based on
the institution’s insured shares as of the last
day of the most recently ended reporting
period preceding the date of conversion
times the institution’s modified premium/
distribution ratio. * * *
To illustrate the application of this
paragraph (j)(1)(ii), again assume
Anytown Credit Union converts to
nonfederal insurance on November 15,
and in January of the following year, the
NCUSIF declares a distribution based on
the NCUSIF’s equity ratio as of
December 31. Anytown would receive a
pro rata distribution calculated as its
$20 million in insured shares multiplied
by the modified premium/distribution
ratio. Anytown’s modified premium/
distribution ratio, from the definition in
§ 741.4(b)(5), is one minus Anytown’s
premium/distribution ratio, which is
one minus the ratio of the full number
of months remaining in the year divided
by twelve, which is one minus (one
divided by twelve), which is eleven
divided by twelve. So Anytown would
receive a pro rata distribution based on
$20 million of insured shares times
eleven twelfths, or about $18.33 million
in shares.4
The current rule provides credit
unions departing the NCUSIF system
with the option to leave ‘‘a nominal sum
on deposit with NCUSIF until the next
distribution from NCUSIF equity and
will thus qualify for a prorated share of
the distribution.’’ For several reasons,
the proposal eliminates this option.
First, the current rule is ambiguous
because it does not specify how the
requisite nominal sum is calculated or
how the prorated share of future
distributions is calculated. Second, this
option, if exercised, imposes a lengthy
recordkeeping burden on the NCUSIF,
as it can be many years between
NCUSIF equity distributions. Third,
although several credit unions have
departed the NCUSIF system in recent
years, the Board is not aware that any
of these credit unions exercised this
option. Finally, the proposed
amendments will allow credit unions
departing the NCUSIF to receive a pro
rata share of any future distribution
without leaving any sum on deposit
with the NCUSIF, but only for a
dividend declared on NCUSIF equity as
of the close of the year of departure. The
Board believes this simplification is
appropriate, particularly since the
contribution of a departing credit union
to future distributions diminishes with
the passage of time.
4 Anytown’s actual distribution would be $18.33
million times the aggregate amount of the
distribution divided by the aggregate amount of all
insured shares at all federally insured credit unions.
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
Proposed paragraph (j)(1)(iii) provides
that:
determines that immediate repayment would
jeopardize the NCUSIF.
A federally-insured credit union whose
insurance coverage with the NCUSIF
terminates, including through a conversion
to, or merger into, a nonfederally insured
credit union or a non-credit union entity,
will: * * * (iii) If the NCUSIF assesses a
premium in the calendar year of conversion
or merger on or before the day in which the
conversion or merger is completed, pay a
premium based on the institution’s insured
shares as of the last day of the most recently
ended reporting period preceding the
conversion or merger date times the
institution’s modified premium/distribution
ratio. If the institution has previously paid a
premium based on this same assessment that
exceeds this amount, the institution will
receive a refund of the difference following
completion of the conversion or merger.
These provisions are identical to
provisions in the current paragraph (j),
except that the proposal adds the phrase
‘‘less any announced depletion’’ in
paragraph (j)(2)(ii) for clarity.
To illustrate these premium
provisions, again assume Anytown
Credit Union is a credit union with $30
million in assets that converts from
Federal to nonfederal insurance on
November 15 of Year One, and that
Anytown Credit Union had $20 million
in insured shares as of the previous
December 31 (of Year Zero), the end of
its most recent reporting period. Further
assume that NCUA declares a premium
on February 12 of Year One and
invoices the premium on November 15.
Since the premium was declared ‘‘on or
before the day in which [Anytown’s]
conversion [was] completed,’’
§ 741.4(i)(1)(iii) applies. Anytown
would then pay a premium based on
$20 million (its ‘‘insured shares as of the
last day of the most recently ended
reporting period preceding the
conversion or merger date’’) times
eleven twelfths (its ‘‘modified premium/
distribution ratio’’), or about $18.33
million. Note that NCUA might have
already have invoiced Anytown for the
premium sometime between February
12 and Anytown’s merger on November
15. If so, Anytown will likely receive a
refund of some of this earlier premium,
as provided in the last sentence of
§ 741.1(i)(1)(iii), since it may have
overpaid the earlier premium.
Proposed paragraph (j)(2), dealing
with liquidations, states the following:
Notwithstanding the requirements of
paragraph (j)(1) of this section: (i) Any
insolvent credit union that is closed for
involuntary liquidation will not be entitled to
a return of its deposit; (ii) Any solvent credit
union that is closed due to voluntary or
involuntary liquidation will be entitled to a
return of its deposit, less any announced
depletion, prior to final distribution of
member shares; and (iii) The Board reserves
the right to delay return of the deposit to any
credit union converting from or terminating
its Federal insurance, or voluntarily
liquidating, for up to one year if the Board
PO 00000
Frm 00009
Fmt 4702
Sfmt 4702
Paragraph (k)—Assessment of
Administrative Fee and Interest for
Delinquent Payment
This paragraph describes procedures
for assessing fees for delinquent
payments of the capitalization deposit
and insurance premium. The proposal
clarifies that paragraph (k) applies to
delinquent deposit replenishment
payments as well as premium payments.
The proposal also deletes overlapping
provisions for imposing both the ‘‘costs
of collection’’ and an ‘‘administrative
fee’’ in the current rule and changes the
interest rate to a fixed rate of six percent
per year. The delinquency fee will be
calculated based on a 360-day year, that
is, six percent times the unpaid balance
divided by 360 times the number of
days unpaid. The Office of the Chief
Financial Officer has determined that
switching to a fixed rate and imposing
the delinquency fee based on the
number of days the balance is
outstanding will allow NCUA to
automate the billing process, thus
eliminating the need for additional
administrative fees.
Finally, the proposal restates
provisions from the Act that: (a) Give
the Board authority to collect a penalty
of up to $20,000 per day for each day
the balance related to a premium or
deposit remains unpaid; and (b) prohibit
insured credit unions from paying
dividends or distributing assets while in
default on insurance deposits or
premiums, with possible punishment of
fines up to $1,000 or imprisonment of
one year for directors or officers who
knowingly violate this prohibition.
D. Temporary Corporate Credit Union
Stabilization Fund
In the Spring of 2009, Congress
enacted the ‘‘Helping Families Save
Their Homes Act of 2009,’’ Pub. L. 111–
22. Section 204(f) of that Act established
the Temporary Corporate Credit Union
Stabilization Fund (CCSUF).
The CCUSF is separate from the
NCUSIF, and the CCUSF will make
assessments on federally-insured credit
unions separate and apart from any
NCUSIF assessments. The CCUSF,
unlike the NCUSIF, is funded by
Treasury borrowings and not credit
union capitalization deposits.
Accordingly, the CCUSF does not make
assessments to replenish capital
deposits, nor does it make assessments
E:\FR\FM\24JYP1.SGM
24JYP1
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
to reestablish a particular equity ratio.
Instead, the CCUSF only makes
assessments on insured credit unions as
necessary to repay CCUSF borrowings
from the Treasury. Accordingly, much
of § 741.4 of NCUA’s rules is
inapplicable to the CCUSF, and the
CCUSF is not specifically addressed in
the text of this rulemaking.
While the obligation of a particular
credit union to replenish its NCUSIF
deposit or make a NCUSIF premium
payment can be rather complicated, the
obligation for a particular credit union
to pay a particular CCUSF assessment is
straightforward. CCUSF assessments are
effective on the date the NCUA Board
acts to order an assessment as
authorized by Public Law 111–22. Any
credit union whose shares are covered
by Federal insurance on that date must
pay its share of that particular
assessment; but any credit union that is
not covered by Federal insurance on
that date is not obligated to pay any part
of that assessment. The dollar amount of
each credit union’s portion of a CCUSF
assessment is calculated based on that
credit union’s insured shares as of the
end of its last reporting period
preceding the date of the Board action.
srobinson on DSKHWCL6B1PROD with PROPOSALS
E. Proposed Amendment to Section
701.6
Section 701.6(d) of NCUA’s
regulations addresses delinquent
payment of the operating fee paid by
FCUs. The proposal updates this section
to parallel the revised provisions for
delinquent payment of insurance
premium and deposit replenishment
expenses. As in § 741.4(k), the proposed
amendments to § 701.6(d) delete
potentially duplicative provisions
allowing both administrative fees and
costs of collection, and replace the
variable interest rate with a fixed
interest rate of six percent per year. The
delinquency fee will be calculated based
on a 360-day year, that is, six percent
times the unpaid balance divided by
360 times the number of days unpaid.
F. 30-Day Comment Period
NCUA seeks public comment on the
proposed amendments discussed above.
As a matter of agency policy, the
NCUA Board general provides a 60-day
comment period for proposed
regulations. NCUA’s Interpretive Ruling
and Policy Statement (IRPS) 87–2, 52 FR
35231 (Sept. 18, 1987), as amended by
IRPS 03–02, 68 FR 31949 (May 29,
2003). In this case, the NCUA Board
believes a 30-day comment period will
suffice because the proposal clarifies an
existing rule.
NCUA also seeks comment on
whether the examples that appear above
VerDate Nov<24>2008
16:51 Jul 23, 2009
Jkt 217001
illustrating the various proposed
amendments should be placed in a
formal Appendix and be published in
the Code of Federal Regulations with
the rule text.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act
requires NCUA to prepare an analysis to
describe any significant economic
impact a rule may have on a substantial
number of small credit unions, defined
as those under ten million dollars in
assets. This proposed rule clarifies
existing requirements and will not
impose any new regulatory
requirements. The proposed rule will
not have a significant economic impact
on a substantial number of small credit
unions, and, therefore, a regulatory
flexibility analysis is not required.
Paperwork Reduction Act
NCUA has determined that the
proposed rule would not increase
paperwork requirements under the
Paperwork Reduction Act of 1995 and
regulations of the Office of Management
and Budget. 44 U.S.C. 3501 et seq.; 5
CFR part 1320.
Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
State and local interests. In adherence to
fundamental federalism principles,
NCUA, an independent regulatory
agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive
order. The proposed rule would not
have substantial direct effects on the
States, on the connection between the
national government and the States, or
on the distribution of power and
responsibilities among the various
levels of government. NCUA has
determined that this proposed rule does
not constitute a policy that has
federalism implications for purposes of
the executive order.
The Treasury and General Government
Appropriations Act, 1999—Assessment
of Federal Regulations and Policies on
Families
The NCUA has determined that the
proposed rule would not affect family
well-being within the meaning of § 654
of the Treasury and General
Government Appropriations Act, 1999,
Public Law 105–277, 112 Stat. 2681
(1998).
List of Subjects in 12 CFR Part 701
PO 00000
Credit, Credit unions, Operating fee.
Frm 00010
Fmt 4702
Sfmt 4702
36625
List of Subjects in 12 CFR Part 741
Credit unions, insurance.
By the National Credit Union
Administration Board on July 16, 2009.
Mary F. Rupp,
Secretary of the Board.
For the reasons set forth above, NCUA
proposes to amend 12 CFR parts 701
and 741 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, 1758, 1759, 1761a, 1761b, 1766, 1767,
1782, 1784, 1786, 1787, 1789. Section 701.6
is also authorized by 15 U.S.C. 3717. Section
701.31 is also authorized by 15 U.S.C. 1601
et seq.; 42 U.S.C. 1981 and 3601–3610.
Section 701.35 is also authorized by 42
U.S.C. 4311–4312.
2. Revise paragraph (d) of § 701.6 to
read as follows:
§ 701.6
Fees paid by Federal credit unions.
*
*
*
*
*
(d) Assessment of interest for
delinquent payment. Each Federal
credit union must pay to the
Administration interest on any
delinquent payment of its operating fee.
A payment will be considered
delinquent if it is post-marked later than
the date stated in the notice to the credit
union provided under § 701.6(c). The
National Credit Union Administration
may waive the collection of interest if
circumstances warrant.
(1) The interest rate charged on any
delinquent payment is six percent per
annum of the unpaid balance for the
number of days the balance remains
unpaid. The delinquency fee is
calculated based on a 360-day year, that
is, six percent times the unpaid balance
divided by 360 times the number of
days unpaid.
(2) If a credit union makes a combined
payment of its operating fee and its
share insurance deposit and/or
insurance premium as provided in
§ 741.4 of this chapter and such
payment is delinquent, interest will be
charged on the combined amount.
PART 741—REQUIREMENTS FOR
INSURANCE
3. The authority citation for part 741
continues to read as follows:
Authority: 12 U.S.C. 1757, 1766(a), 1781–
1790, and 1790d: 31 U.S.C. 3717.
4. Revise § 741.4 to read as follows:
E:\FR\FM\24JYP1.SGM
24JYP1
36626
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
§ 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 insurance
premium.
(b) Definitions. For purposes of this
section:
Available assets ratio means the ratio
of:
(i) The amount determined by
subtracting all liabilities of the NCUSIF,
including contingent liabilities for
which no provision for losses has been
made, from the sum of cash and the
market value of unencumbered
investments authorized under Section
203(c) of the Act (12 U.S.C. 1783(c)), to:
(ii) The aggregate amount of the
insured shares in all insured credit
unions.
(iii) Shown as an abbreviated
mathematical formula, the available
assets ratio is:
(cash + market value of unencumbered investments) −
(liabilities + contingent liabilities for which no provision for losses has been made)
i
r
aggregate amount of all insured shares from final reporting period of calendar year
Equity ratio means the ratio of:
(i) The amount of NCUSIF’s
capitalization, meaning insured credit
unions’ one percent capitalization
deposits plus the retained earnings
balance of the NCUSIF (less contingent
liabilities for which no provision for
losses has been made) to:
(ii) The aggregate amount of the
insured shares in all insured credit
unions.
(iii) Shown as an abbreviated
mathematical formula, the equity ratio
is:
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
semiannual period for credit union with
total assets of $50,000,000 or more.
(c) One percent deposit. Each insured
credit union must maintain with the
NCUSIF during each reporting period a
deposit in an amount equaling one
percent of the total of the credit union’s
insured shares at the close of the
preceding reporting period. For credit
unions with total assets of less than
$50,000,000, insured shares will be
measured and adjusted annually based
on the insured shares reported in the
credit union’s semiannual 5300 report
due in January of each year. For credit
unions with total assets of $50,000,000
or more, insured shares will be
measured and adjusted semiannually
based on the insured shares reported in
the credit union’s quarterly 5300 reports
due in January and July of each year.
(d) Insurance premium charges. (1) In
general. Each insured credit union will
pay to the NCUSIF, on dates the NCUA
Board determines, but not more than
twice in any calendar year, an insurance
premium in an amount stated as a
percentage of insured shares, which will
be the same percentage for all insured
credit unions.
(2) Relation of premium charge to
equity ratio of NCUSIF. (i) The NCUA
Board may assess a premium charge
only if the NCUSIF’s equity ratio is less
than 1.3 percent and the premium
charge does not exceed the amount
PO 00000
Frm 00011
Fmt 4702
Sfmt 4702
necessary to restore the equity ratio to
1.3 percent.
(ii) If the equity ratio of the NCUSIF
falls to between 1.0 and 1.2 percent, the
NCUA Board is required to assess a
premium in an amount it determines is
necessary to restore the equity ratio to,
and maintain that ratio at, at least 1.2
percent. If the equity ratio of the
NCUSIF falls below 1.0 percent, the
NCUA Board is required to assess a
deposit replenishment charge in an
amount it determines is necessary to
restore the equity ratio to 1.0 percent
and to assess a premium charge in an
amount it determines is necessary to
restore the equity ratio to, and maintain
the ratio at, at least 1.2 percent.
(e) Distribution of NCUSIF equity. If,
as of the end of a calendar year, the
NCUSIF exceeds its normal operating
level and its available assets ratio
exceeds 1.0 percent, the NCUA Board
will make a proportionate distribution
of NCUSIF equity to insured credit
unions. The distribution will be the
maximum amount possible that does
not reduce the NCUSIF’s equity ratio
below its normal operating level and
does not reduce its available assets ratio
below 1.0 percent. The distribution will
be after the calendar year and in the
form determined by the NCUA Board.
The form of the distribution may
include a waiver of insurance
premiums, premium rebates, or
distributions from NCUSIF equity in the
E:\FR\FM\24JYP1.SGM
24JYP1
EP24JY09.002
Insured shares means the total
amount of a federally-insured 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), but does not include
amounts in excess of insurance coverage
as provided in part 745 of this chapter.
For a credit union or other entity that
is not federally insured, ‘‘insured
shares’’ means, for purposes of this
section only, the amount of deposits or
shares that would have been insured by
the NCUSIF under part 745 had the
institution been federally insured on the
date of measurement.
Modified premium/distribution ratio
means one minus the premium/
distribution ratio.
Normal operating level means an
equity ratio not less than 1.2 percent
and not more than 1.5 percent, as
established by action of the NCUA
Board.
Premium/distribution ratio means the
number of full remaining months in the
calendar year following the date of the
institution’s conversion or merger
divided by 12.
Reporting period means calendar year
for credit unions with total assets of less
than $50,000,000 and means
EP24JY09.001
srobinson on DSKHWCL6B1PROD with PROPOSALS
(insured credit unions’ 1.0% capitalization deposits + (NCUSIF’s retained earnings −
U
contingent liabilities for which no provision for losses has been made)
aggregate amount of all insured shares
srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
form of dividends. The NCUA Board
will use the aggregate amount of the
insured shares from all insured credit
unions from the final reporting period of
the calendar year in calculating the
NCUSIF’s equity ratio and available
assets ratio for purposes of this
paragraph.
(f) Invoices. The NCUA provides
invoices to all federally insured credit
unions stating any change in the amount
of a credit union’s one percent deposit
and the computation and funding of any
premium or deposit replenishment
assessments due. Invoices for Federal
credit unions also include any annual
operating fees that are due. Invoices are
calculated based on a credit union’s
insured shares as of the most recently
ended reporting period. The invoices
may also provide for any distribution
the NCUA Board declares in accordance
with paragraph (e) of this section,
resulting in a single net transfer of funds
between a credit union and the NCUA.
(g) New charters. A newly-chartered
credit union that obtains share
insurance coverage from the NCUSIF
during the calendar year in which it has
obtained its charter will not be required
to pay an insurance premium for that
calendar year. The credit union will
fund its one percent deposit on a date
to be determined by the NCUA Board in
the following calendar year, but will not
participate in any distribution from
NCUSIF equity related to the period
prior to the credit union’s funding of its
deposit.
(h) Depletion of one percent deposit.
All or part of the one percent deposit
may be used by the NCUSIF if necessary
to meet its expenses, and the fund will
expense the amount so used. The
NCUSIF may invoice credit unions in an
amount necessary to replenish the one
percent deposit at any time following
the effective date of the depletion, but
must invoice credit unions no later than
the adjustment described in paragraph
(c) of this section based on insured
shares as of December 31 of the year of
the depletion.
(i) Conversion to Federal insurance.
(1) A credit union or other institution
that converts to insurance coverage with
the NCUSIF will:
(i) Immediately fund its one percent
deposit based on the total of its insured
shares as of the last day of the most
recently ended reporting period prior to
the date of conversion;
(ii) If the NCUSIF assesses a premium
in the calendar year of conversion, pay
a premium based on the institution’s
insured shares as of the last day of the
most recently ended reporting period
preceding the invoice date times the
institution’s premium/distribution ratio;
VerDate Nov<24>2008
16:51 Jul 23, 2009
Jkt 217001
(iii) If the NCUSIF declares, in the
calendar year of conversion on or before
the date of conversion, an assessment to
replenish the one-percent deposit, pay
nothing related to that assessment;
(iv) If the NCUSIF declares, at any
time after the date of conversion
through the end of that calendar year, an
assessment to replenish the one-percent
deposit, pay a replenishment amount
based on the institution’s insured shares
as of the last day of the most recently
ended reporting period preceding the
invoice date; and
(v) If the NCUSIF declares a
distribution in the year following
conversion based the NCUSIF’s equity
at the end of the year of conversion,
receive a distribution based on the
institution’s insured shares as of the end
of the year of conversion times the
institution’s premium/distribution ratio.
With regard to distributions declared in
the calendar year of conversion but
based on the NCUSIF’s equity from the
end of the preceding year, the
converting institution will receive no
distribution.
(2) A federally insured credit union
that merges with a nonfederally-insured
credit union or other non-federally
insured institution (the ‘‘merging
institution’’), where the federallyinsured credit union is the continuing
institution, will:
(i) Immediately on the date of merger
increase the amount of its NCUSIF
deposit by an amount equal to one
percent of the merging institution’s
insured shares as of the last day of the
merging institution’s most recently
ended reporting period preceding the
date of merger;
(ii) With regard to any NCUSIF
premiums assessed in the calendar year
of merger, pay a two-part premium, with
one part calculated on the merging
institution’s insured shares as described
in subparagraph (1)(ii) above, and the
other part calculated on the continuing
institution’s insured shares as of the last
day of its most recently ended reporting
period preceding the date of merger; and
(iii) If the NCUSIF declares a
distribution in the year following the
merger based the NCUSIF’s equity at the
end of the year of merger, receive a
distribution based on the continuing
institution’s insured shares as of the end
of the year of merger. With regard to
distributions declared in the calendar
year of merger but based on the
NCUSIF’s equity from the end of the
preceding year, the institution will
receive a distribution based on its
insured shares as of the end of the
preceding year.
(j) Conversion from, or termination of,
Federal share insurance.
PO 00000
Frm 00012
Fmt 4702
Sfmt 4702
36627
(1) A federally insured credit union
whose insurance coverage with the
NCUSIF terminates, including through a
conversion to, or merger into, a
nonfederally insured credit union or a
non-credit union entity, will:
(i) Receive the full amount of its
NCUSIF deposit, less any announced
depletion, immediately after the final
date on which any shares of the credit
union are NCUSIF-insured;
(ii) If the NCUSIF declares a
distribution at the end of the calendar
year of conversion, receive a
distribution based on the institution’s
insured shares as of the last day of the
most recently ended reporting period
preceding the date of conversion times
the institution’s modified premium/
distribution ratio; and
(iii) If the NCUSIF assesses a premium
in the calendar year of conversion or
merger on or before the day in which
the conversion or merger is completed,
pay a premium based on the
institution’s insured shares as of the last
day of the most recently ended reporting
period preceding the conversion or
merger date times the institution’s
modified premium/distribution ratio. If
the institution has previously paid a
premium based on this same assessment
that exceeds this amount, the institution
will receive a refund of the difference
following completion of the conversion
or merger.
(2) Notwithstanding the requirements
of paragraph (j)(1) of this section:
(i) Any insolvent credit union that is
closed for involuntary liquidation will
not be entitled to a return of its deposit;
(ii) Any solvent credit union that is
closed due to voluntary or involuntary
liquidation will be entitled to a return
of its deposit, less any announced
depletion, prior to final distribution of
member shares; and
(iii) The Board reserves the right to
delay return of the deposit to any credit
union converting from or terminating its
Federal insurance, or voluntarily
liquidating, for up to one year if the
Board determines that immediate
repayment would jeopardize the
NCUSIF.
(k) Assessment of interest and
penalties for delinquent payment.
(1) Each federally insured credit
union must pay to the NCUA interest on
any delinquent payment of its
capitalization deposit, including any
delinquent deposit replenishment, and
on any delinquent 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 interest rate
charged on any delinquent payment is
six percent per annum of the unpaid
E:\FR\FM\24JYP1.SGM
24JYP1
36628
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules
balance for the number of days after the
due date the balance remains unpaid.
The delinquency fee is calculated based
on a 360-day year, that is, six percent
times the unpaid balance divided by
360 times the number of days unpaid.
The NCUA may waive or abate
collection of interest, if circumstances
warrant.
(2) The Act contains specific penalties
and other consequences for delinquent
payments, including, but not limited to:
(i) Section 202(d)(2)(B) of the Act (12
U.S.C. 1782(d)(2)(B)) provides that the
Board may assess and collect a penalty
from an insured credit union of not
more than $20,000 for each day the
credit union fails or refuses to pay any
deposit or premium due to the fund;
and
(ii) Section 202(d)(3) of the Act (12
U.S.C. 1782(d)(3)) provides, generally,
that no insured credit union shall pay
any dividends on its insured shares or
distribute any of its assets while it
remains in default in the payment of its
deposit or any premium charge due to
the fund. Section 202(d)(3) further
provides that any director or officer of
any insured credit union who
knowingly participates in the
declaration or payment of any such
dividend or in any such distribution
shall, upon conviction, be fined not
more than $1,000 or imprisoned more
than one year, or both.
[FR Doc. E9–17310 Filed 7–23–09; 8:45 am]
BILLING CODE 7535–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2009–0656; Directorate
Identifier 2009–NM–038–AD]
RIN 2120–AA64
Airworthiness Directives; Bombardier
Model CL–600–2B19 (Regional Jet
Series 100 & 440) Airplanes
srobinson on DSKHWCL6B1PROD with PROPOSALS
AGENCY: Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
SUMMARY: We propose to adopt a new
airworthiness directive (AD) for the
products listed above that would
supersede an existing AD. This
proposed AD results from mandatory
continuing airworthiness information
(MCAI) originated by an aviation
authority of another country to identify
and correct an unsafe condition on an
aviation product. The MCAI describes
VerDate Nov<24>2008
16:00 Jul 23, 2009
Jkt 217001
the unsafe condition as: There have
been several cases of wing leading edge
anti-ice piccolo duct failure reported on
CL–600–2B19 (CRJ) aircraft. Upon
investigation, it was determined that
ducts manufactured since May 2000 are
susceptible to cracking due to the
process used to drill holes in the ducts.
This cracking may cause air leakage,
with a possible adverse effect on the
anti-ice air distribution pattern and antiice capability, without annunciation to
the flight crew [and consequent reduced
controllability of the airplane]. It has
subsequently been determined that
faulty ducts may also have been
installed in a number of leading edge
assemblies built as spares and whose
current locations are not specifically
known.
The proposed AD would require
actions that are intended to address the
unsafe condition described in the MCAI.
DATES: We must receive comments on
this proposed AD by August 24, 2009.
ADDRESSES: You may send comments by
any of the following methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: (202) 493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue, SE.,
Washington, DC 20590.
• Hand Delivery: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue, SE.,
Washington, DC, between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
For service information identified in
this proposed AD, contact Bombardier,
ˆ
Inc., 400 Cote-Vertu Road West, Dorval,
´
Quebec H4S 1Y9, Canada; telephone
514–855–5000; fax 514–855–7401; email thd.crj@aero.bombardier.com;
Internet https://www.bombardier.com.
You may review copies of the
referenced service information at the
FAA, Transport Airplane Directorate,
1601 Lind Avenue, SW., Renton,
Washington. For information on the
availability of this material at the FAA,
call 425–227–1221 or 425–227–1152.
Examining the AD Docket
You may examine the AD docket on
the Internet at https://
www.regulations.gov; or in person at the
Docket Operations office between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket
contains this proposed AD, the
regulatory evaluation, any comments
received, and other information. The
PO 00000
Frm 00013
Fmt 4702
Sfmt 4702
street address for the Docket Operations
office (telephone (800) 647–5527) is in
the ADDRESSES section. Comments will
be available in the AD docket shortly
after receipt.
FOR FURTHER INFORMATION CONTACT:
Fabio Buttitta, Aerospace Engineer,
Airframe and Mechanical Systems
Branch, ANE–171, FAA, New York
Aircraft Certification Office, 1600
Stewart Avenue, Suite 410, Westbury,
New York 11590; telephone (516) 228–
7303; fax (516) 794–5531.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposed AD. Send your comments
to an address listed under the
ADDRESSES section. Include ‘‘Docket No.
FAA–2009–0656; Directorate Identifier
2009–NM–038–AD’’ at the beginning of
your comments. We specifically invite
comments on the overall regulatory,
economic, environmental, and energy
aspects of this proposed AD. We will
consider all comments received by the
closing date and may amend this
proposed AD based on those comments.
We will post all comments we
receive, without change, to https://
www.regulations.gov, including any
personal information you provide. We
will also post a report summarizing each
substantive verbal contact we receive
about this proposed AD.
Discussion
On November 4, 2008, we issued AD
2008–23–16, Amendment 39–15737 (73
FR 67363, November 14, 2008). That AD
required actions intended to address an
unsafe condition on the products listed
above. The preamble to AD 2008–23–16
explains that we consider those
requirements ‘‘interim action’’ and were
considering further rulemaking. We now
have determined that further
rulemaking is indeed necessary to
require the previously optional
terminating action, and this proposed
AD follows from that determination.
Transport Canada Civil Aviation
(TCCA), which is the aviation authority
for Canada, previously issued Canadian
Airworthiness Directive CF–2008–30,
dated October 7, 2008 (referred to after
this as ‘‘the MCAI’’), to correct an unsafe
condition for the specified products.
The unsafe condition is cracked
piccolo ducts, which could result in air
leakage, a possible adverse effect on the
anti-ice distribution pattern and anti-ice
capability without annunciation to the
flight crew, and consequent reduced
controllability of the airplane. Required
actions include revising the airplane
E:\FR\FM\24JYP1.SGM
24JYP1
Agencies
[Federal Register Volume 74, Number 141 (Friday, July 24, 2009)]
[Proposed Rules]
[Pages 36618-36628]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17310]
=======================================================================
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701 and 741
RIN 3133-AD63
National Credit Union Share Insurance Fund Premium and One
Percent Deposit
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: Section 741.4 of NCUA's rules describes the procedures for the
capitalization and maintenance of the National Credit Union Share
Insurance Fund (NCUSIF). The current rule, however, does not adequately
address how credit unions that enter or depart the NCUSIF system in a
given calendar year are affected by any NCUSIF premium or deposit
replenishment assessments in that same year. Due to the unprecedented
level of NCUSIF expenses in 2009, which required the NCUA to announce
both such assessments, NCUA is now proposing amendments to Sec. 741.4
to clarify these procedures. The proposal makes other minor changes to
741.4 and conforming changes to Sec. 701.6 relating to the payment of
operating fees by Federal credit unions.
DATES: Comments must be received by August 24, 2009.
ADDRESSES: You may submit comments by any of the following methods.
(Please send comments by one method only):
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web Site: https://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs. html. Follow the
instructions for submitting comments.
E-mail: Address to regcomments@ncua.gov. Include ``[Your
name] Comments on Insurance Premium and One Percent Deposit'' in the e-
mail subject line.
Fax: (703) 518-6319. Use the subject line described above
for e-mail.
Mail: Address to Mary Rupp, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
Public inspection: All public comments are available on the
agency's Web site at https://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical
reasons. Public comments will not be edited to remove any identifying
or contact information. Paper copies of comments may be inspected in
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment,
call (703) 518-6546 or send an e-mail to OGC Mail@ncua.gov.
FOR FURTHER INFORMATION CONTACT: Elizabeth Wirick, Staff Attorney,
Office of General Counsel, National Credit Union Administration, 1775
Duke Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518-
6540; and Paul Peterson, Director, Applications Section, Office of
General Counsel, National Credit Union Administration, at the same
address and telephone number.
SUPPLEMENTARY INFORMATION:
A. Background
Congress created the National Credit Union Share Insurance Fund
(NCUSIF) in 1970 to provide share insurance coverage to all Federal
credit unions and to those State chartered credit unions that apply and
meet minimum qualification standards. The NCUSIF provides insurance
coverage for each of an insured credit union's members, similar to the
coverage provided by the Federal Deposit Insurance Corporation's
(FDIC's) Deposit Insurance Fund (DIF).
Unlike the DIF, however, the NCUSIF was not capitalized at its
inception by tax revenues. From 1971 through 1980, the capital of the
NCUSIF was established solely through the annual insurance premium
contributions of insured credit unions. During the period from 1971
through the end of calendar year 1980, the capital of the fund (i.e.,
[[Page 36619]]
equity as a percentage of insured shares) grew, but the years 1981-1983
saw a reversal of this trend, due to both record share growth in
insured credit unions and liquidation and problem credit union
expenses. As an alternative to the premium approach to establishing a
strong and viable insurance fund, the NCUA Board developed a
legislative proposal which, with the support of the entire credit union
system, Congress enacted in 1984. The NCUSIF was then capitalized with
a deposit by each credit union of an amount equaling one percent of the
credit union's total insured shares.
As required by the 1984 legislation, and subsequent amendments in
1998, NCUA maintains the NCUSIF's equity ratio at a percentage between
1.2% and 1.5%, but no greater than the normal operating level as
established from time to time by the Board. If the NCUSIF's equity
ratio exceeds this normal operating level at the end of any given year,
NCUA will, generally, distribute any excess funds to insured credit
unions. If the NCUSIF's equity ratio falls below 1.2%, the NCUSIF must
assess a premium, and if the ratio falls below 1.0%, depleting the one
percent deposit provided by each credit union, the NCUSIF must also
assess an amount sufficient to replenish the one percent deposit.
In 1984, the Board adopted a rule establishing procedures for the
capitalization and maintenance of the NCUSIF. 49 FR 40561 (Oct. 17,
1984). The rule, originally codified at 12 CFR 741.5 but now located in
Sec. 741.4, dealt broadly with five issues: (1) The funding of the one
percent deposit, (2) the return of the deposit, (3) the use of the
deposit by the NCUSIF and its replenishment by insured credit unions,
(4) the insurance agreement, and (5) NCUA reports to Congress.
The content of Sec. 741.4 today is much the same as its 1984
counterpart, having been modified only slightly in the past 25 years.
For example, while the current rule addresses some issues associated
with the expense and replenishment of the one percent deposit, it does
not contain much detail on this issue.\1\ In addition, the current rule
does not adequately address how credit unions that enter or depart the
NCUSIF system, such as through insurance or bank conversions, are
affected by NCUSIF premium or deposit replenishment assessments in that
same calendar year. Due to the unprecedented level of NCUSIF expenses
in 2009, which required the NCUA to announce both premium and deposit
replenishment assessments, NCUA is now proposing amendments to Sec.
741.4 to clarify these issues and other related issues.
---------------------------------------------------------------------------
\1\ The preamble to the proposed rule in 1984 stated:
The legislation provides that the NCUSIF may utilize the deposit
funds if necessary to meet its expenses, in which case the amount
used is to be expensed and replenished by insured credit unions in
accordance with procedures established by the Board. Given the
history of the Fund and the condition of insured credit unions, it
seems unnecessary to anticipate at this time any possible
utilization of the deposit funds to meet the Fund's expenses. This
authority is clearly intended to meet a catastrophic economic set of
circumstances, as evidenced by the fact that it can only be
exercised after the Fund has utilized all investment income and all
of its 0.3% nondeposit equity. Thus, ample time would exist for
development of expense and replenishment procedures and guidelines.
Accordingly, such procedures are not proposed at this time.
49 FR 30740 (Aug. 1, 1984).
---------------------------------------------------------------------------
B. Relevant Statutory Provisions
The Federal Credit Union Act contains several relevant provisions
on the return and replenishment of the one percent deposit and the
timing and amount of NCUSIF premiums. These provisions are set forth
below.
With regard to the deposit, Section 202(c)(1)(A) of the Act states:
Each insured credit union shall pay to and maintain with the
National Credit Union Share Insurance Fund a deposit in an amount
equaling 1 per centum of the credit union's insured shares. * * *
12 U.S.C. 1782(c)(1)(A). Section 202(c)(1)(B) of the Act also states:
(i) The deposit shall be returned to an insured credit union in
the event that its insurance coverage is terminated, it converts to
insurance coverage from another source, or in the event the
operations of the fund are transferred from the National Credit
Union Administration Board.
(ii) The deposit shall be returned in accordance with procedures
and valuation methods determined by the Board, but in no event shall
the deposit be returned any later than one year after the final date
on which no shares of the credit union are insured by the Board.
(iii) The deposit shall not be returned in the event of
liquidation on account of bankruptcy or insolvency.
(iv) The deposit funds may be used by the fund if necessary to
meet its expenses, in which case the amount so used shall be
expensed and shall be replenished by insured credit unions in
accordance with procedures established by the Board.
12 U.S.C. 1782(c)(1)(B). With regard to the premium, Section 202(c)(2)
of the Act states:
(A) In general. Each insured credit union shall, at such times
as the Board prescribes (but not more than twice in any calendar
year), pay to the Fund a premium charge for insurance in an amount
stated as a percentage of insured shares (which shall be the same
for all insured credit unions).
(B) Relation of premium charge to equity ratio of fund. The
Board may assess a premium charge only if--
(i) the Fund's equity ratio is less than 1.3 percent; and
(ii) the premium charge does not exceed the amount necessary to
restore the equity ratio to 1.3 percent.
(C) Premium charge required if equity ratio falls below 1.2
percent. If the Fund's equity ratio is less than 1.2 percent, the
Board shall, subject to subparagraph (B), assess a premium charge in
such an amount as the Board determines to be necessary to restore
the equity ratio to, and maintain that ratio at, 1.2 percent.
12 U.S.C. 1782(c)(2). Section 206(d)(3) of the Act also states:
In the event of a conversion of a credit union from status as an
insured credit union under this Act under subsection (a)(2) of this
section, premium charges payable under section 202(c) of this Act
shall be reduced by an amount proportionate to the number of
calendar months for which the converting credit union will no longer
be insured under this Act . * * *
12 U.S.C. 1786(d)(3). Subsection (a)(2) in the quotation above refers
to the conversion from a federally-insured credit union to a
nonfederally-insured credit union.
C. Proposed Amendments to Section 741.4
The proposal includes several amendments to clarify the NCUSIF
premium and deposit replenishment obligations and procedures for credit
unions and other entities that enter or depart from NCUSIF coverage.
Most of these proposed amendments are located in Sec. 741.4(i),
Conversion to Federal insurance, and Sec. 741.4(j), Conversion from,
or termination of, Federal share insurance. The Board is, however, also
proposing minor changes to other paragraphs in Sec. 741.4. A
paragraph-by-paragraph description and discussion of all the proposed
amendments follows.
Paragraph (a)--Scope
Section 741.4 provides for the capitalization and maintenance of
the NCUSIF. The proposal does not change the scope of Sec. 741.4, and
the proposal does not amend this paragraph.
Paragraph (b)--Definitions
The proposal includes three amendments to the existing definitions.
The proposal amends the definition of insured shares to include,
for a credit union or other entity that is not federally insured, the
amount of deposits of shares that would have been insured by the NCUSIF
had the institution been federally insured on the date of measurement.
This amended definition is necessary for calculating
[[Page 36620]]
NCUSIF premiums, deposit replenishments, and equity distributions for
entities that enter the NCUSIF insurance system.
The proposal adds a definition of the term premium/distribution
ratio as the number of full remaining months in the calendar year
following the date of the institution's conversion or merger, divided
by 12. This term is used in the NCUSIF premium, deposit replenishment,
and equity distribution calculations involving credit unions and other
entities that enter the NCUSIF insurance system. The ratio represents
the fraction of the year that an institution entering the NCUSIF system
was insured by the NCUSIF.
The proposal also adds a definition of the term modified premium/
distribution ratio as one minus the premium/distribution ratio. This
term is used in the NCUSIF premium, deposit replenishment, and equity
distribution calculations involving credit unions that depart the
NCUSIF insurance system. This ratio represents the fraction of the year
that an institution departing the NCUSIF system was insured by the
NCUSIF.
Also, the proposal deletes the paragraph numbers in the current
version, consistent with Office of the Federal Register drafting
recommendations for definitions sections that list the terms defined in
alphabetical order.
Paragraph (c)--One Percent Deposit
This paragraph describes the one percent deposit requirement and
the periodic adjustments based on changes in insured shares. For credit
unions with less than $50 million in assets, the adjustments occur
after the annual reporting period ending on December 31. For credit
unions with $50 million or more in assets, the adjustments occur after
the semiannual reporting periods ending on June 30 and December 31 each
year.
The proposal does not amend this paragraph.
Paragraph (d)--Insurance Premium Charges
Paragraph (d)(1) provides that the Board may assess premium
charges, in an amount stated as a percentage of insured shares, no more
than twice annually. Subparagraph (d)(2)(i) states the relation of the
premium charge to the equity ratio. The proposal does not amend these
provisions.
Subparagraph (d)(2)(ii) states that if the ratio of the NCUSIF
falls below 1.2 percent, the NCUA Board is required to assess a premium
in an amount it determines necessary to restore the equity ratio to,
and maintain that ratio at, 1.2 percent. This provision is confusing
because it does not delineate between premium assessments and
assessments to replenish the one percent deposit as required by Sec.
202 of the Federal Credit Union Act. Accordingly, the proposal amends
subparagraph(d)(2)(ii) to read as follows:
If the equity ratio of the NCUSIF falls to between 1.0 and 1.2
percent, the NCUA Board is required to assess a premium in an amount
it determines is necessary to restore the equity ratio to, and
maintain that ratio at, at least 1.2 percent. If the equity ratio of
the NCUSIF falls below 1.0 percent, the NCUA Board is required to
assess a deposit replenishment charge in an amount it determines is
necessary to restore the equity ratio to 1.0 percent and to assess a
premium charge in an amount it determines is necessary to restore
the equity ratio to, and maintain the ratio at, at least 1.2
percent.
Paragraph (e)--Distribution of NCUSIF Equity
This paragraph describes the mandatory year-end distribution of
NCUSIF equity when the NCUSIF exceeds both its normal operating level
and its available assets ratio as described in Sec. 202(c)(3) of the
Federal Credit Union Act. The proposal does not amend this paragraph.
Paragraph (f)--Invoices
This paragraph describes invoices for premiums and deposit
adjustments. For clarity, the proposal amends this paragraph to
specifically include invoices for deposit replenishment.
Paragraph (g)--New Charters
This paragraph permits new charters to delay the funding of their
one percent deposit until the year following their chartering. The
proposal does not amend this paragraph.
Paragraph (h)--Depletion of One Percent Deposit
The proposal adds a new paragraph(h) to read as follows:
Depletion of one percent deposit. All or part of the one percent
deposit may be used by the NCUSIF if necessary to meet its expenses,
and the fund will expense the amount so used. The NCUSIF may invoice
credit unions in an amount necessary to replenish the one percent
deposit at any time following the effective date of the depletion,
but must invoice credit unions no later than the adjustment
described in paragraph (c) of this section based on insured shares
as of December 31 of the year of the depletion.
The first sentence of this provision restates the Board's authority
under Sec. 202(c)(1)(B)(iv) of the Federal Credit Union Act. The
second sentence clarifies that NCUA may invoice insured credit unions
for the deposit replenishment at any time after the deposit has been
depleted, but requires that NCUA send the invoice no later than the
date NCUA first adjusts the deposit for changes in insured share levels
in the year following the depletion.
The proposal takes the current paragraph (h), entitled Conversion
to Federal Insurance, expands on that paragraph, and incorporates it
into the proposed paragraph (i). This is discussed further below.
Paragraph (i)--Conversion to Federal Insurance
The proposal amends paragraph (i) to address, in detail, how a
nonfederally insured credit union that converts to Federal insurance is
affected by a NCUSIF declaration of a premium assessment, deposit
replenishment assessment, or an equity distribution. Paragraph (i)(1)
addresses a direct conversion to Federal insurance, and paragraph
(i)(2) addresses an indirect conversion through the merger of a
nonfederally insured credit union or entity into a federally insured
credit union. The term ``merger'' includes not only mergers but also
purchase and assumption transactions in which the continuing credit
union obtains all, or substantially all, of the assets of the other
entity. The current paragraph (i), entitled Mergers of nonfederally
insured credit unions, is expanded and subsumed into the proposed
paragraph (i)(2).
This proposed paragraph (i), along with the proposed paragraph (j),
constitute the most significant and complex of the proposed amendments
to Sec. 741.4. Accordingly, the discussion below is detailed and
includes hypotheticals illustrating each subparagraph.
Proposed paragraph (i)(1) addresses a direct conversion to NCUSIF
insurance. Proposed paragraph (i)(1)(i) provides that:
A credit union or other institution that converts to insurance
coverage with the NCUSIF will: (i) Immediately fund its one percent
deposit based on the total of its insured shares as of the last day
of the most recently ended reporting period prior to the date of
conversion. * * *
To illustrate the application of this provision, consider the
following hypothetical. Assume Main Street Credit Union completes its
conversion from nonfederal to Federal insurance on May 15 of Year One.
Assume further that Main Street credit union had 1,000 insured shares
for the end of month in December of the previous year (Year zero),
1,100 insured shares at the end of
[[Page 36621]]
May, the month of conversion, and 1,200 insured shares at the end of
June. This information is presented in this Table A: \2\
---------------------------------------------------------------------------
\2\ Although Main Street Credit Union was not Federally insured
as of December 31 of Year Zero, proposed 741.4(b)(3) provides that
``For a credit union or other entity that is not Federally insured,
`insured shares' means, for purposes of this section only, the
amount of deposits or shares that would have been insured by the
NCUSIF under part 745 had the institution been Federally insured on
the date of measurement.''
Table A
----------------------------------------------------------------------------------------------------------------
End of month,
End of month, May, Year One
December, Year (month End of month,
Zero conversion June, Year One
completed)
----------------------------------------------------------------------------------------------------------------
Main Street Credit Union's Federally Insured Shares....... 1,000 1,100 1,200
----------------------------------------------------------------------------------------------------------------
Proposed paragraph (i)(1)(i) requires that on the date of its
conversion, Main Street fund its one percent deposit based on ``the
total of its insured shares as of the last day of the most recently
ended reporting period prior to the date of conversion.'' Since Main
Street has less than $50,000,000 in assets, its reporting period is
annual, and ends on December 31. 12 CFR 741.4(b)(6) (definition of
``reporting period''). Main Street had $1,000 in insured shares on that
date, and one percent of that is $10, and so that is the amount Main
Street must immediately remit to the NCUSIF to establish its one
percent deposit.
Proposed paragraph (i)(1)(ii) provides that:
A credit union or other institution that converts to insurance
coverage with the NCUSIF will: * * * (ii) If the NCUSIF assesses a
premium in the calendar year of conversion, pay a premium based on
the institution's insured shares as of the last day of the most
recently ended reporting period preceding the invoice date times the
institution's premium/distribution ratio. * * *
To illustrate the application of paragraph (i)(1)(ii), take the
same facts in hypothetical A related to the conversion of Main Street
from nonfederal to Federal insurance. Now, further assume that on the
previous March 15, NCUA had declared a premium assessment, and on
September 15 following the conversion NCUA sent out the invoices for
the March 15 assessment. Also assume that Main Street had grown to
1,300 insured shares at the end of September, the month the invoices
were sent to Main Street and other credit unions. This information is
presented in this Table B:
Table B
----------------------------------------------------------------------------------------------------------------
End of month,
End of month, May, Year One End of month
December, Year (month End of month, September, Year
Zero conversion June, Year One One (month
completed) invoice sent)
----------------------------------------------------------------------------------------------------------------
Main Street Credit Union's Federally 1,000 1,100 1,200 1,300
Insured Shares.........................
----------------------------------------------------------------------------------------------------------------
Paragraph (i)(1)(ii) requires Main Street pay a premium based on
the institution's ``insured shares as of the last day of the most
recently ended reporting period preceding the invoice date times the
institution's premium/distribution ratio.'' Again, because Main Street
is under $50 million in assets, the most recently ended reporting
period preceding the September 15 invoice date is all the way back to
December of Year Zero, when Main Street had $1,000 in shares. Main
Street's ``premium/distribution ratio,'' as defined in proposed Sec.
741.4(b)(5), is ``the number of full remaining months in the calendar
year following the date of the institution's conversion or merger
divided by 12.'' Since Main Street completed its conversion in May,
there are seven full months remaining in the calendar year (June
through December), and Main Street's premium/distribution ratio is
seven divided by 12. Accordingly, Main Street's premium will be
assessed on $1,000 times seven divided by 12, or about $583.\3\ Note
that if Main Street's assets had exceeded $50 million as of June 30, it
would have had semiannual reporting periods under Sec. 741.4(b)(6),
and its ``insured shares as of the last day of the most recently ended
reporting period preceding the invoice date'' would have been its
insured shares as of June 30, Year One, and not as of December 31, Year
Zero.
---------------------------------------------------------------------------
\3\ Main Street's actual premium charge will be this $583
divided by the aggregate insured shares of all Federally insured
credit unions times the aggregate premium for all Federally insured
credit unions.
---------------------------------------------------------------------------
Proposed paragraphs (i)(1)(iii) and (iv) describe the
responsibility of a credit union or other entity converting to Federal
insurance to replenish a depleted NCUSIF deposit, as follows:
A credit union or other institution that converts to insurance
coverage with the NCUSIF will * * * (iii) If the NCUSIF declares, in
the calendar year of conversion but on or before the date of
conversion, an assessment to replenish the one-percent deposit, pay
nothing related to that assessment; (iv) If the NCUSIF declares, at
any time after the date of conversion through the end of that
calendar year, an assessment to replenish the one-percent deposit,
pay a replenishment amount based on the institution's insured shares
as of the last day of the most recently ended reporting period
preceding the invoice date. * * *
Paragraph (i)(1)(iii) clarifies that a converting credit union has
no responsibility to pay anything toward the replenishment of a
depleted deposit that is declared on or before the date of conversion,
even if NCUA sends out invoices related to the depletion after the date
of conversion. Paragraph (i)(1)(iv) requires that a converting credit
union replenish its deposit with regard to a depletion declared after
the date of conversion through the end of the calendar year. Again,
assume the same facts for Main Street as in Table B, but that the
deposit depletion was announced in June, after Main Street converted,
and that NCUA sent the invoices in September.
[[Page 36622]]
Table B
----------------------------------------------------------------------------------------------------------------
End of month,
End of month, May, Year One End of month
December, Year (month End of month, September, Year
Zero conversion June, Year One One (month
completed) invoice sent)
----------------------------------------------------------------------------------------------------------------
Main Street Credit Union's Federally 1,000 1,100 1,200 1,300
Insured Shares.........................
----------------------------------------------------------------------------------------------------------------
Main Street would receive an invoice amount ``based on the [Main
Street's] insured shares as of the last day of the most recently ended
reporting period preceding the invoice date.'' Since Main Street has
less than $50 million in shares, the most recently ended reporting
period preceding the September invoice date was December 31, Year Zero,
and it would pay for the replenishment based on $1,000 in insured
shares. If Main Street, however, had had $50 million or more in assets
on June 30, its most recently ended reporting period preceding the
invoice date would have been the semiannual period ending on June 30,
and Main Street would have used its insured shares as of June 30 to
calculate the replenishment amount due to the NCUSIF.
Under the Federal Credit Union Act, distributions, if any, are
declared once a year, early in the year, based on excess funds in the
NCUSIF as of the prior December 31. Proposed paragraph (i)(1)(v)
describes the right of a credit union or other entity converting to
Federal insurance to receive a distribution from the NCUSIF,
specifically:
(1) A credit union or other institution that converts to
insurance coverage with the NCUSIF will: * * * (v) If the NCUSIF
declares a distribution in the year following conversion based the
NCUSIF's equity at the end of the year of conversion, receive a
distribution based on the institution's insured shares as of the end
of the year of conversion times the institution's premium/
distribution ratio. With regard to distributions declared in the
calendar year of conversion but based on the NCUSIF's equity at the
end of the preceding year, the converting institution will receive
no distribution.
To illustrate how proposed paragraph (i)(1)(v) works, assume that
Main Street Credit Union converts to Federal insurance in May of Year
One, and that the NCUA declares a distribution in January of Year Two
based on the NCUSIF equity as of December 31 of Year One. Then Main
Street will be entitled to a pro rata portion of the distribution,
calculated on its insured shares as of December 31 of Year One times
its premium/distribution ratio. Since it converted in May of Year One,
and there were seven full months remaining in Year One at on the date
of conversion, Main Street's premium/distribution ratio under proposed
Sec. 741.4(b)(6) equals seven divided by 12.
On the other hand, if the NCUA declared a distribution a year
earlier, that is, in January of Year One based on the NCUSIF's equity
ratio as of December 31 in Year Zero, then under proposed paragraph
(i)(1)(v) Main Street would receive no part of this distribution. Main
Street is not entitled to any part of this distribution because Main
Street, which completed its conversion in Year One, did not contribute
in any way to the excess funds in the NCUSIF as of the end of Year
Zero.
While proposed paragraph (i)(1), and the examples given above,
involve the conversion of a credit union or entity directly to Federal
insurance with the NCUSIF, such conversions can also happen indirectly
through the merger of a nonfederally insured credit union or entity
into a federally insured credit union.
Proposed paragraph (i)(2) addresses the NCUSIF premiums, deposit
replenishments, and distributions in this context.
Proposed paragraph (i)(2)(i) provides that:
(2) A federally insured credit union that merges with a
nonfederally-insured credit union or other non-federally insured
institution (the ``merging institution''), where the federally-
insured credit union is the continuing institution, will: (i)
Immediately on the date of merger increase the amount of its NCUSIF
deposit by an amount equal to one percent of the merging
institution's insured shares as of the last day of the merging
institution's most recently ended reporting period preceding the
date of merger * * *.
To illustrate this provision, and the other provisions of paragraph
(i)(2) related to mergers of nonfederally insured entities into
federally-insured credit unions, consider the following hypothetical.
Nonfederally-insured Credit Union A merges into federally-insured
Credit Union B on August 15 of Year One. The relevant insured shares of
Credit Union A and Credit Union B at various dates before and after the
merger are reflected in Table D:
Table D
----------------------------------------------------------------------------------------------------------------
End of month End of month
End of month End of month August, Year One September, Year
December, Year June, Year One (month merger One (month
Zero completed) invoice sent)
----------------------------------------------------------------------------------------------------------------
Credit Union A insured shares........... 1,000 1,100 N/A N/A
Credit Union B insured shares........... 9,000 9,900 12,900 14,000
----------------------------------------------------------------------------------------------------------------
Proposed paragraph (i)(2)(i) requires that Credit Union B, the
continuing credit union, immediately increase the amount of its deposit
with the NCUSIF in an amount ``equal to one percent of the merging
institution's insured shares as of the last day of the merging
institution's most recently ended reporting period preceding the date
of merger.'' Since Credit Union A, the merging institution, has less
than $50 million in assets, its reporting period is the calendar year,
and its most recently ended reporting period preceding the August
merger date is December 31 in Year Zero. Credit Union A had $1,000 in
insured shares on that date. Accordingly, Credit Union B, the
continuing credit union, must immediately increase the amount of its
deposit with the NCUSIF by one percent
[[Page 36623]]
of $1,000, or $10. Note that if Credit Union A had been a larger credit
union, with $50 million or more in assets on June 30 in Year One, then
Credit Union B would have used Credit Union A's insured shares as of
June 30 in this calculation.
Proposed paragraph (i)(2)(ii), relating to NCUSIF premium
assessments, provides that the continuing institution will:
(ii) With regard to any NCUSIF premiums assessed in the calendar
year of merger, pay a two-part premium, with one part calculated on
the merging institution's insured shares as described in
subparagraph (1)(ii) above, and the other part calculated on the
continuing institution's insured shares as of the last day of its
most recently ended reporting period preceding the date of merger. *
* *
Paragraph (i)(2)(ii) provides for a two-part calculation, with the
first part relating to the merging credit union and the second part
relating to the continuing credit union. If we assume the facts as in
Table D, and assume the premium is assessed sometime in Year One, then
we calculate the insured shares of Credit Union A, the merging credit
union, as we did in the example for paragraph (i)(1)(ii), which would
be $583. Then we calculate the insured shares of Credit Union B, the
continuing credit union, ``as of the last day of its most recently
ended reporting period preceding the merger date.'' Since Credit Union
B is also under $50 million in assets, ``the last day of the most
recently ended reporting period'' is also December 31 of Year Zero.
Credit Union B's insured shares on that date were $9,000, and so the
combined insured shares for purposes of the premium assessment is
$9,583. Note that if Credit Union B had $50 million or more in assets
on June 30 of Year One, then Credit Union B's ``most recently ended
reporting period preceding the merger date'' would have been June 30 of
Year One, and not December 31 of Year Zero. The Board is aware that the
NCUA might declare a NCUSIF premium, invoice it, and receive the
premiums in Year One from the continuing institution before the
continuing institution consummates its merger. In that case, the Board
would invoice the continuing credit union again after the merger, but
only for the difference between the amount previously invoiced and the
amount calculated under proposed paragraph (i)(2)(ii).
Proposed paragraph (i)(2)(iii) prescribes the procedures for
calculating the NCUSIF distribution when a nonfederally-insured credit
union or entity merges into a federally insured credit union. Proposed
paragraph (i)(2)(iii) provides that the federally-insured credit union
will:
[i]f the NCUSIF declares a distribution in the year following the
merger based on the NCUSIF's equity at the end of the year of
merger, receive a distribution based on the continuing institution's
insured shares as of the end of the year of merger. With regard to
distributions declared in the calendar year of merger but based on
the NCUSIF's equity from the end of the preceding year, the
institution will receive a distribution based on its insured shares
as of the end of the preceding year.
This formula recognizes that the merging institution did not
contribute to the NCUSIF equity as of the end of the year preceding the
merger and so no distribution is allotted against the merging
institution's shares. As for distributions based on the NCUSIF equity
at the end of the year of merger, this formula does not include any pro
rata reduction for the merging institution's contribution. The Board
determined that a pro rata reduction was unnecessary, given the
generally small relative size of merging institutions to continuing
institutions, and the fact that the Federal Credit Union Act does not
require any sort of pro rata reduction or other pro rata calculation
with regard to distributions.
For credit unions converting to NCUSIF coverage, the proposal
changes the date for calculating the one percent deposit from insured
shares as of the close of the month before conversion to insured shares
as of the most recently ended reporting period before conversion. NCUA
is proposing this change to make the calculation method for credit
unions entering NCUSIF consistent with the calculation method for
federally-insured credit unions' one percent deposit adjustment.
Likewise, for federally-insured credit unions merging with
nonfederally-insured credit unions, the proposal clarifies that the
date used for calculation of the merged credit union's increased one
percent is insured shares of the nonfederally-insured credit union as
of the most recently ended reporting period before conversion. Again,
this change makes the calculation method for credit unions increasing
insured shares by merger consistent with the calculation method for
federally-insured credit unions' one percent deposit adjustment.
Paragraph (j)--Conversion From, or Termination of, Federal Share
Insurance
The proposal amends paragraph (j) to address, in detail, how a
federally insured credit union that converts to insurance other than
that provided by the NCUSIF, or that loses or terminates its NCUSIF
insurance, is affected by a NCUSIF declaration of a premium assessment,
deposit replenishment assessment, or equity distribution. Proposed
subparagraph (j)(1) addresses direct insurance conversions and
conversions by merger. Proposed subparagraph (j)(2) addresses
liquidations and insurance termination.
Proposed paragraph (j)(1)(i) provides that:
A federally-insured credit union whose insurance coverage with
the NCUSIF terminates, including through a conversion to, or merger
into, a nonfederally insured credit union or a non-credit union
entity, will: (i) Receive the full amount of its NCUSIF deposit,
less any announced depletion, immediately after the final date on
which any shares of the credit union are NCUSIF-insured. * * *
The current paragraph (j) does not mention the possibility of
deposit depletion, and this has been clarified in the proposed
paragraph (j). To illustrate the application of this paragraph
(j)(1)(i), consider the following hypothetical. Assume Anytown Credit
Union, a credit union with $30 million in assets, converts from Federal
to nonfederal insurance on November 15. Also assume Anytown Credit
Union had $20 million in insured shares as of the previous December 31,
the end of its most recent reporting period. 12 CFR 741.4(b)(5), (c).
The NCUSIF would return one percent of $20 million, or $200,000 to
Anytown Credit Union immediately following the effective date of its
conversion. Note that, if Anytown Credit Union had reported $50 million
or more in assets on June 30, then June 30 would have been the end of
its most recent reporting period. Now further assume that, on July 15
of that same year, the NCUSIF had announced an expense that reduced the
equity ratio from 1.3 to .75, which would have included a write-off
(depletion) of 25 percent, or 25 basis points, of the one percent
deposit. The amount of the deposit returned to Anytown would be reduced
by 25 percent, from $200,000 to $150,000. If the NCUSIF had announced
expenses reducing the equity ratio to .75 after the November 15
conversion date, this announcement would have no effect on Anytown and
it would still receive $200,000 from the NCUSIF.
Proposed paragraph (j)(1)(ii) provides that:
A federally-insured credit union whose insurance coverage with
the NCUSIF terminates, including through a conversion to, or merger
into, a nonfederally insured credit union or a non-credit union
entity, will: * * * (ii) If the NCUSIF declares a distribution at
the end of the calendar year
[[Page 36624]]
of conversion, receive a distribution based on the institution's
insured shares as of the last day of the most recently ended
reporting period preceding the date of conversion times the
institution's modified premium/distribution ratio. * * *
To illustrate the application of this paragraph (j)(1)(ii), again
assume Anytown Credit Union converts to nonfederal insurance on
November 15, and in January of the following year, the NCUSIF declares
a distribution based on the NCUSIF's equity ratio as of December 31.
Anytown would receive a pro rata distribution calculated as its $20
million in insured shares multiplied by the modified premium/
distribution ratio. Anytown's modified premium/distribution ratio, from
the definition in Sec. 741.4(b)(5), is one minus Anytown's premium/
distribution ratio, which is one minus the ratio of the full number of
months remaining in the year divided by twelve, which is one minus (one
divided by twelve), which is eleven divided by twelve. So Anytown would
receive a pro rata distribution based on $20 million of insured shares
times eleven twelfths, or about $18.33 million in shares.\4\
---------------------------------------------------------------------------
\4\ Anytown's actual distribution would be $18.33 million times
the aggregate amount of the distribution divided by the aggregate
amount of all insured shares at all federally insured credit unions.
---------------------------------------------------------------------------
The current rule provides credit unions departing the NCUSIF system
with the option to leave ``a nominal sum on deposit with NCUSIF until
the next distribution from NCUSIF equity and will thus qualify for a
prorated share of the distribution.'' For several reasons, the proposal
eliminates this option. First, the current rule is ambiguous because it
does not specify how the requisite nominal sum is calculated or how the
prorated share of future distributions is calculated. Second, this
option, if exercised, imposes a lengthy recordkeeping burden on the
NCUSIF, as it can be many years between NCUSIF equity distributions.
Third, although several credit unions have departed the NCUSIF system
in recent years, the Board is not aware that any of these credit unions
exercised this option. Finally, the proposed amendments will allow
credit unions departing the NCUSIF to receive a pro rata share of any
future distribution without leaving any sum on deposit with the NCUSIF,
but only for a dividend declared on NCUSIF equity as of the close of
the year of departure. The Board believes this simplification is
appropriate, particularly since the contribution of a departing credit
union to future distributions diminishes with the passage of time.
Proposed paragraph (j)(1)(iii) provides that:
A federally-insured credit union whose insurance coverage with
the NCUSIF terminates, including through a conversion to, or merger
into, a nonfederally insured credit union or a non-credit union
entity, will: * * * (iii) If the NCUSIF assesses a premium in the
calendar year of conversion or merger on or before the day in which
the conversion or merger is completed, pay a premium based on the
institution's insured shares as of the last day of the most recently
ended reporting period preceding the conversion or merger date times
the institution's modified premium/distribution ratio. If the
institution has previously paid a premium based on this same
assessment that exceeds this amount, the institution will receive a
refund of the difference following completion of the conversion or
merger.
To illustrate these premium provisions, again assume Anytown Credit
Union is a credit union with $30 million in assets that converts from
Federal to nonfederal insurance on November 15 of Year One, and that
Anytown Credit Union had $20 million in insured shares as of the
previous December 31 (of Year Zero), the end of its most recent
reporting period. Further assume that NCUA declares a premium on
February 12 of Year One and invoices the premium on November 15. Since
the premium was declared ``on or before the day in which [Anytown's]
conversion [was] completed,'' Sec. 741.4(i)(1)(iii) applies. Anytown
would then pay a premium based on $20 million (its ``insured shares as
of the last day of the most recently ended reporting period preceding
the conversion or merger date'') times eleven twelfths (its ``modified
premium/distribution ratio''), or about $18.33 million. Note that NCUA
might have already have invoiced Anytown for the premium sometime
between February 12 and Anytown's merger on November 15. If so, Anytown
will likely receive a refund of some of this earlier premium, as
provided in the last sentence of Sec. 741.1(i)(1)(iii), since it may
have overpaid the earlier premium.
Proposed paragraph (j)(2), dealing with liquidations, states the
following:
Notwithstanding the requirements of paragraph (j)(1) of this
section: (i) Any insolvent credit union that is closed for
involuntary liquidation will not be entitled to a return of its
deposit; (ii) Any solvent credit union that is closed due to
voluntary or involuntary liquidation will be entitled to a return of
its deposit, less any announced depletion, prior to final
distribution of member shares; and (iii) The Board reserves the
right to delay return of the deposit to any credit union converting
from or terminating its Federal insurance, or voluntarily
liquidating, for up to one year if the Board determines that
immediate repayment would jeopardize the NCUSIF.
These provisions are identical to provisions in the current
paragraph (j), except that the proposal adds the phrase ``less any
announced depletion'' in paragraph (j)(2)(ii) for clarity.
Paragraph (k)--Assessment of Administrative Fee and Interest for
Delinquent Payment
This paragraph describes procedures for assessing fees for
delinquent payments of the capitalization deposit and insurance
premium. The proposal clarifies that paragraph (k) applies to
delinquent deposit replenishment payments as well as premium payments.
The proposal also deletes overlapping provisions for imposing both the
``costs of collection'' and an ``administrative fee'' in the current
rule and changes the interest rate to a fixed rate of six percent per
year. The delinquency fee will be calculated based on a 360-day year,
that is, six percent times the unpaid balance divided by 360 times the
number of days unpaid. The Office of the Chief Financial Officer has
determined that switching to a fixed rate and imposing the delinquency
fee based on the number of days the balance is outstanding will allow
NCUA to automate the billing process, thus eliminating the need for
additional administrative fees.
Finally, the proposal restates provisions from the Act that: (a)
Give the Board authority to collect a penalty of up to $20,000 per day
for each day the balance related to a premium or deposit remains
unpaid; and (b) prohibit insured credit unions from paying dividends or
distributing assets while in default on insurance deposits or premiums,
with possible punishment of fines up to $1,000 or imprisonment of one
year for directors or officers who knowingly violate this prohibition.
D. Temporary Corporate Credit Union Stabilization Fund
In the Spring of 2009, Congress enacted the ``Helping Families Save
Their Homes Act of 2009,'' Pub. L. 111-22. Section 204(f) of that Act
established the Temporary Corporate Credit Union Stabilization Fund
(CCSUF).
The CCUSF is separate from the NCUSIF, and the CCUSF will make
assessments on federally-insured credit unions separate and apart from
any NCUSIF assessments. The CCUSF, unlike the NCUSIF, is funded by
Treasury borrowings and not credit union capitalization deposits.
Accordingly, the CCUSF does not make assessments to replenish capital
deposits, nor does it make assessments
[[Page 36625]]
to reestablish a particular equity ratio. Instead, the CCUSF only makes
assessments on insured credit unions as necessary to repay CCUSF
borrowings from the Treasury. Accordingly, much of Sec. 741.4 of
NCUA's rules is inapplicable to the CCUSF, and the CCUSF is not
specifically addressed in the text of this rulemaking.
While the obligation of a particular credit union to replenish its
NCUSIF deposit or make a NCUSIF premium payment can be rather
complicated, the obligation for a particular credit union to pay a
particular CCUSF assessment is straightforward. CCUSF assessments are
effective on the date the NCUA Board acts to order an assessment as
authorized by Public Law 111-22. Any credit union whose shares are
covered by Federal insurance on that date must pay its share of that
particular assessment; but any credit union that is not covered by
Federal insurance on that date is not obligated to pay any part of that
assessment. The dollar amount of each credit union's portion of a CCUSF
assessment is calculated based on that credit union's insured shares as
of the end of its last reporting period preceding the date of the Board
action.
E. Proposed Amendment to Section 701.6
Section 701.6(d) of NCUA's regulations addresses delinquent payment
of the operating fee paid by FCUs. The proposal updates this section to
parallel the revised provisions for delinquent payment of insurance
premium and deposit replenishment expenses. As in Sec. 741.4(k), the
proposed amendments to Sec. 701.6(d) delete potentially duplicative
provisions allowing both administrative fees and costs of collection,
and replace the variable interest rate with a fixed interest rate of
six percent per year. The delinquency fee will be calculated based on a
360-day year, that is, six percent times the unpaid balance divided by
360 times the number of days unpaid.
F. 30-Day Comment Period
NCUA seeks public comment on the proposed amendments discussed
above.
As a matter of agency policy, the NCUA Board general provides a 60-
day comment period for proposed regulations. NCUA's Interpretive Ruling
and Policy Statement (IRPS) 87-2, 52 FR 35231 (Sept. 18, 1987), as
amended by IRPS 03-02, 68 FR 31949 (May 29, 2003). In this case, the
NCUA Board believes a 30-day comment period will suffice because the
proposal clarifies an existing rule.
NCUA also seeks comment on whether the examples that appear above
illustrating the various proposed amendments should be placed in a
formal Appendix and be published in the Code of Federal Regulations
with the rule text.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact a rule may have on a
substantial number of small credit unions, defined as those under ten
million dollars in assets. This proposed rule clarifies existing
requirements and will not impose any new regulatory requirements. The
proposed rule will not have a significant economic impact on a
substantial number of small credit unions, and, therefore, a regulatory
flexibility analysis is not required.
Paperwork Reduction Act
NCUA has determined that the proposed rule would not increase
paperwork requirements under the Paperwork Reduction Act of 1995 and
regulations of the Office of Management and Budget. 44 U.S.C. 3501 et
seq.; 5 CFR part 1320.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on State and local interests. In
adherence to fundamental federalism principles, NCUA, an independent
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order. The proposed rule would not have substantial
direct effects on the States, on the connection between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. NCUA has
determined that this proposed rule does not constitute a policy that
has federalism implications for purposes of the executive order.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that the proposed rule would not affect
family well-being within the meaning of Sec. 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Operating fee.
List of Subjects in 12 CFR Part 741
Credit unions, insurance.
By the National Credit Union Administration Board on July 16,
2009.
Mary F. Rupp,
Secretary of the Board.
For the reasons set forth above, NCUA proposes to amend 12 CFR
parts 701 and 741 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, 1758, 1759,
1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 1787, 1789. Section
701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also
authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601-3610.
Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
2. Revise paragraph (d) of Sec. 701.6 to read as follows:
Sec. 701.6 Fees paid by Federal credit unions.
* * * * *
(d) Assessment of interest for delinquent payment. Each Federal
credit union must pay to the Administration interest on any delinquent
payment of its operating fee. A payment will be considered delinquent
if it is post-marked later than the date stated in the notice to the
credit union provided under Sec. 701.6(c). The National Credit Union
Administration may waive the collection of interest if circumstances
warrant.
(1) The interest rate charged on any delinquent payment is six
percent per annum of the unpaid balance for the number of days the
balance remains unpaid. The delinquency fee is calculated based on a
360-day year, that is, six percent times the unpaid balance divided by
360 times the number of days unpaid.
(2) If a credit union makes a combined payment of its operating fee
and its share insurance deposit and/or insurance premium as provided in
Sec. 741.4 of this chapter and such payment is delinquent, interest
will be charged on the combined amount.
PART 741--REQUIREMENTS FOR INSURANCE
3. The authority citation for part 741 continues to read as
follows:
Authority: 12 U.S.C. 1757, 1766(a), 1781-1790, and 1790d: 31
U.S.C. 3717.
4. Revise Sec. 741.4 to read as follows:
[[Page 36626]]
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
insurance premium.
(b) Definitions. For purposes of this section:
Available assets ratio means the ratio of:
(i) The amount determined by subtracting all liabilities of the
NCUSIF, including contingent liabilities for which no provision for
losses has been made, from the sum of cash and the market value of
unencumbered investments authorized under Section 203(c) of the Act (12
U.S.C. 1783(c)), to:
(ii) The aggregate amount of the insured shares in all insured
credit unions.
(iii) Shown as an abbreviated mathematical formula, the available
assets ratio is:
[GRAPHIC] [TIFF OMITTED] TP24JY09.001
Equity ratio means the ratio of:
(i) The amount of NCUSIF's capitalization, meaning insured credit
unions' one percent capitalization deposits plus the retained earnings
balance of the NCUSIF (less contingent liabilities for which no
provision for losses has been made) to:
(ii) The aggregate amount of the insured shares in all insured
credit unions.
(iii) Shown as an abbreviated mathematical formula, the equity
ratio is:
[GRAPHIC] [TIFF OMITTED] TP24JY09.002
Insured shares means the total amount of a federally-insured 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),
but does not include amounts in excess of insurance coverage as
provided in part 745 of this chapter. For a credit union or other
entity that is not federally insured, ``insured shares'' means, for
purposes of this section only, the amount of deposits or shares that
would have been insured by the NCUSIF under part 745 had the
institution been federally insured on the date of measurement.
Modified premium/distribution ratio means one minus the premium/
distribution ratio.
Normal operating level means an equity ratio not less than 1.2
percent and not more than 1.5 percent, as established by action of the
NCUA Board.
Premium/distribution ratio means the number of full remaining
months in the calendar year following the date of the institution's
conversion or merger divided by 12.
Reporting period means calendar year for credit unions with total
assets of less than $50,000,000 and means semiannual period for credit
union with total assets of $50,000,000 or more.
(c) One percent deposit. Each insured credit union must maintain
with the NCUSIF during each reporting period a deposit in an amount
equaling one percent of the total of the credit union's insured shares
at the close of the preceding reporting period. For credit unions with
total assets of less than $50,000,000, insured shares will be measured
and adjusted annually based on the insured shares reported in the
credit union's semiannual 5300 report due in January of each year. For
credit unions with total assets of $50,000,000 or more, insured shares
will be measured and adjusted semiannually based on the insured shares
reported in the credit union's quarterly 5300 reports due in January
and July of each year.
(d) Insurance premium charges. (1) In general. Each insured credit
union will pay to the NCUSIF, on dates the NCUA Board determines, but
not more than twice in any calendar year, an insurance premium in an
amount stated as a percentage of insured shares, which will be the same
percentage for all insured credit unions.
(2) Relation of premium charge to equity ratio of NCUSIF. (i) The
NCUA Board may assess a premium charge only if the NCUSIF's equity
ratio is less than 1.3 percent and the premium charge does not exceed
the amount necessary to restore the equity ratio to 1.3 percent.
(ii) If the equity ratio of the NCUSIF falls to between 1.0 and 1.2
percent, the NCUA Board is required to assess a premium in an amount it
determines is necessary to restore the equity ratio to, and maintain
that ratio at, at least 1.2 percent. If the equity ratio of the NCUSIF
falls below 1.0 percent, the NCUA Board is required to assess a deposit
replenishment charge in an amount it determines is necessary to restore
the equity ratio to 1.0 percent and to assess a premium charge in an
amount it determines is necessary to restore the equity ratio to, and
maintain the ratio at, at least 1.2 percent.
(e) Distribution of NCUSIF equity. If, as of the end of a calendar
year, the NCUSIF exceeds its normal operating level and its available
assets ratio exceeds 1.0 percent, the NCUA Board will make a
proportionate distribution of NCUSIF equity to insured credit unions.
The distribution will be the maximum amount possible that does not
reduce the NCUSIF's equity ratio below its normal operating level and
does not reduce its available assets ratio below 1.0 percent. The
distribution will be after the calendar year and in the form determined
by the NCUA Board. The form of the distribution may include a waiver of
insurance premiums, premium rebates, or distributions from NCUSIF
equity in the
[[Page 36627]]
form of dividends. The NCUA Board will use the aggregate amount of the
insured shares from all insured credit unions from the final reporting
period of the calendar year in calculating the NCUSIF's equity ratio
and available assets ratio for purposes of this paragraph.
(f) Invoices. The NCUA provides invoices to all federally insured
credit unions stating any change in the amount of a credit union's one
percent deposit and the computation and funding of any premium or
deposit replenishment assessments due. Invoices for Federal credit
unions also include any annual operating fees that are due. Invoices
are calculated based on a credit union's insured shares as of the most
recently ended reporting period. The invoices may also provide for any
distribution the NCUA Board declares in accordance with paragraph (e)
of this section, resulting in a single net transfer of funds between a
credit union and the NCUA.
(g) New charters. A newly-chartered credit union that obtains share
insurance coverage from the NCUSIF during the calendar year in which it
has obtained its charter will not be required to pay an insurance
premium for that calendar year. The credit union will fund its one
percent deposit on a date to be determined by the NCUA Board in the
following calendar year, but will not participate in any distribution
from NCUSIF equity related to the period prior to the credit union's
funding of its deposit.
(h) Depletion of one percent deposit. All or part of the one
percent deposit may be used by the NCUSIF if necessary to meet its
expenses, and the fund will expense the amount so used. The NCUSIF may
invoice credit unions in an amount necessary to replenish the one
percent deposit at any time following the effective date of the
depletion, but must invoice credit unions no later than the adjustment
described in paragraph (c) of this section based on insured shares as
of December 31 of the year of the depletion.
(i) Conversion to Federal insurance.
(1) A credit union or other institution that converts to insurance
coverage with the NCUSIF will:
(i) Immediately fund its one percent deposit based on the total of
its insured shares as of the last day of the most recently ended
reporting period prior to the date of conversion;
(ii) If the NCUSIF assesses a premium in the calendar year of
conversion, pay a premium based on the institution's insured shares as
of the last day of the most recently ended reporting period preceding
the invoice date times the instituti