Current through Register Vol. 51, No. 3, September 1, 2024
RELATES TO:
KRS
286.6-095,
286.6-100,
286.6-225,
286.6-585,
286.6-715,
12 C.F.R. Part 704,
20
U.S.C. 1071
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
286.6-070 authorizes the Department of
Financial Institutions to promulgate administrative regulations necessary for
the proper conduct and regulation of credit unions. This administrative
regulation establishes requirements to ensure the proper conduct of credit
unions.
Section 1. Definition. A
"corporate credit union" means a credit union that:
(1) Is operated primarily for the purpose of
serving other credit unions;
(2) Is
designated by the National Credit Union Administration as a corporate credit
union; and
(3) Limits natural
person members to the minimum required by state or federal law to charter and
operate the credit union.
Section
2. Refund of Interest. When an interest refund is authorized by
the board of directors under
KRS
286.6-225(3), it shall be
recorded in the books of the credit union as a reduction of interest income
from loans for that year or period.
Section
3. Fidelity Bond.
(1) The minimum
blanket fidelity bond required by
KRS
286.6-225(2) shall be as
follows:
|
Assets
|
Minimum Bond
|
|
$0 to $10,000
|
Amount equal to the credit union's assets
|
|
$10,001 to $1,000,000
|
$10,000 for each $100,000 or fraction thereof
|
|
$1,000,001 to $50,000,000
|
$100,000 plus $50,000 for each million or fraction
thereof over $1,000,000
|
|
$50,000,001
to
$295,000,000
|
$2,550,000 plus $10,000 for each million or fraction
thereof over $50,000,000
|
|
Over $295,000,000
|
$5,000,000
|
(2) The
board of directors of every credit union shall review their blanket fidelity
bond coverage at least once each year to ascertain its adequacy.
Section 4. Stocks and Bonds. A
credit union may invest a maximum of five (5) percent of members' shares in:
(1) Stock of a corporation rated A+ by
Standard and Poor's at the date of acquisition of the stock; and
(2) A corporate bond rated AAA or higher by
Standard and Poor's, or rated AAA by Moody's at the date of acquisition of the
bond.
Section 5.
State-chartered credit unions may invest their funds in any investment that is
permissible for a federally chartered credit union under 12 C.F.R. Part
703.
Section 6. Risk Asset. For the
purpose of establishing the regular reserve, an asset shall be a risk asset
except for the following:
(1) Cash on
hand;
(2) A share or deposit in a
federally or state-insured bank, savings and loan association, or credit union
that has a remaining maturity of five (5) years or less;
(3) An asset, including a collateralized
mortgage obligation that is comprised of government guaranteed mortgage loans,
that has a remaining maturity of five (5) years or less and is insured by, is
fully guaranteed as to principal and interest by, or is due from the U.S.
Government, its agencies, the Federal National Mortgage Association, Federal
Home Loan Mortgage Corporation, or the Government National Mortgage
Association;
(4) A loan to another
credit union that has a remaining maturity of five (5) years or less;
(5) A student loan that has a remaining
maturity of five (5) years or less and that is insured under the provisions of
Title IV, Part B of the Higher Education Act of 1965 (20
U.S.C. 1071, et seq.) or similar state
insurance programs;
(6) A loan that
has a remaining maturity of five (5) years or less and that is fully insured or
guaranteed by the federal or a state government or any agency of
either;
(7) A share or deposit in a
corporate credit union that has a remaining maturity of five (5) years or less,
other than a Membership Capital Share Deposit account as defined in 12 C.F.R.
Part 704;
(8) A common trust
investment, including a mutual fund, which deals exclusively in investments
authorized by the Federal Credit Union Act,
12
U.S.C. 1751 et seq., that are either carried
at the lower cost or market, or are marked to market value monthly;
(9) A prepaid expense;
(10) Accrued interest on a non-risk
investment;
(11) A loan fully
secured by a pledge of shares in the lending credit union, equal to and
maintained to at least the amount of the loan outstanding;
(12) A loan purchased from a liquidating
credit union and guaranteed by the National Credit Union
Administration;
(13) A National
Credit Union Share Insurance Fund Guaranty Account established with the
authorization of the National Credit Union Administration under the authority
of Section 203(a)(1) of the Federal Credit Union Act;
(14) An investment in shares of the National
Credit Union Administration Central Liquidity Facility;
(15) An asset included in subsections (2),
(3), (4), (5), (6), and (7) of this section with a maturity greater than five
(5) years, is not a risk asset if the asset is being carried on the credit
union's records at the lower of cost or market, or is being marked to market
value monthly;
(16) An asset
included in subsections (2), (3), (4), (5), (6), and (7) of this section, with
a remaining maturity of greater than five (5) years, is not a risk asset,
whether or not the asset is being carried on the credit union's records at the
lower of cost or market or is being marked to market value monthly, provided
the asset meets the criteria established in paragraphs (a) through (c) of this
subsection.
(a) The interest rate shall be
reset at least annually.
(b) The
interest rate of the instrument shall be less than the maximum allowable
interest rate for the instrument on the date of the required reserve
transfer.
(c) The interest rate of
the instrument varies directly (not inversely) with the index upon which it is
based and is not reset as a multiple of the change in the related
index;
(17) A fixed
asset that includes an office, branch office, suboffice, service center,
parking lot, or real estate in which the credit union transacts or will
transact business; and office furnishing, office machine, computer hardware and
software, automated terminal, and heating and cooling equipment; and
(18) A deposit in the National Credit Union
Share Insurance Fund representing a federally insured credit union's
capitalization account balance of one (1) percent of insured shares.
Section 7. Charitable
Contribution. Only the board of directors shall have the power to authorize a
contribution to a civic, charitable, or service organization.
Section 8. Conversion. A state-chartered
credit union may convert to another charter.
(1) The board of directors shall first put
the question of conversion to a vote of the members. Written notice of the
proposed conversion shall be given to all members, which shall include a
statement including the reasons for the proposed conversion. The notice shall
be mailed to the last known address or hand delivered to the members. The
notice shall state the date and place for the meeting called to vote on the
proposed conversion, which shall be at least fifteen (15) days after the date
of the notice.
(2) Approval of the
proposed conversion shall be by a vote of the majority of the members who vote
on the proposed conversion, in person or by absentee ballot if the bylaws of
the credit union allow voting by absentee ballot.
(3) A statement of the results of the vote,
verified by the president and secretary, shall be filed with the
commissioner.
(4) The commissioner
shall issue an order to the effect that, on the effective date of the
conversion, the credit union is no longer incorporated under the laws of
Kentucky. A copy of the order shall be forwarded to the Secretary of
State.
STATUTORY AUTHORITY:
KRS
286.1-020,
286.6-070,
286.6-100
