S 2957 ISCommentsClose CommentsPermalink

To modernize credit union net worth standards, advance credit union efforts to promote economic growth, and modify credit union regulatory standards and reduce burdens, and for other purposes.CommentsClose CommentsPermalink

May 1, 2008

Mr. LIEBERMAN introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban AffairsCommentsClose CommentsPermalink

To modernize credit union net worth standards, advance credit union efforts to promote economic growth, and modify credit union regulatory standards and reduce burdens, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the `Credit Union Regulatory Improvements Act of 2008'.CommentsClose CommentsPermalink

TITLE I--CAPITAL MODERNIZATION

SEC. 101. AMENDMENTS TO NET WORTH CATEGORIES.

(a) In General- Section 216(c)(1) of the Federal Credit Union Act (12 U.S.C. 1790d(c)(1)) is amended--CommentsClose CommentsPermalink





(1) in subparagraph (A)--CommentsClose CommentsPermalink





(A) in clause (i), by striking `7 percent' and inserting `5.25 percent'; andCommentsClose CommentsPermalink





(B) by striking clause (ii) and inserting the following:CommentsClose CommentsPermalink





`(ii) it has a risk-based net worth ratio of not less than 10 percent.';CommentsClose CommentsPermalink





(2) in subparagraph (B)--CommentsClose CommentsPermalink





(A) in clause (i), by striking `6 percent' and inserting `4.25 percent'; andCommentsClose CommentsPermalink





(B) by striking clause (ii) and inserting the following:CommentsClose CommentsPermalink





`(ii) it has a risk-based net worth ratio of not less than 8 percent.';CommentsClose CommentsPermalink





(3) in subparagraph (C)--CommentsClose CommentsPermalink





(A) in clause (i), by striking `6 percent' and inserting `4.25 percent'; andCommentsClose CommentsPermalink





(B) by striking clause (ii) and inserting the following:CommentsClose CommentsPermalink





`(ii) it has a risk-based net worth ratio of less than 8 percent.'; andCommentsClose CommentsPermalink





(4) by striking subparagraph (D) and inserting the following:CommentsClose CommentsPermalink





`(D) SIGNIFICANTLY UNDERCAPITALIZED- An insured credit union is `significantly undercapitalized' if--CommentsClose CommentsPermalink





`(i) the credit union has a net worth ratio of less than 3.25 percent;CommentsClose CommentsPermalink





`(ii) the credit union has a net worth ratio of less than 4.25 percent and either--CommentsClose CommentsPermalink





`(I) fails to submit an acceptable net worth restoration plan within the time allowed under subsection (f); orCommentsClose CommentsPermalink





`(II) materially fails to implement a net worth restoration plan approved by the Board; orCommentsClose CommentsPermalink





`(iii) the credit union has a risk-based net worth ratio of less than 6 percent.'.CommentsClose CommentsPermalink





(b) Relevant Capital Measures- Section 216(c)(2) of the Federal Credit Union Act (12 U.S.C. 1790d(c)(2)) is amended by striking `leverage limit' each place such term appears and inserting `relevant capital measures'.CommentsClose CommentsPermalink





(c) Adjustment by Federal Deposit Insurance Corporation- Section 216(c)(2)(A) of the Federal Credit Union Act (12 U.S.C. 1790d(c)(2)(A)) is amended--CommentsClose CommentsPermalink





(1) by striking `Federal banking agencies increase or decrease' and inserting `Federal Deposit Insurance Corporation increases or decreases one of'; andCommentsClose CommentsPermalink





(2) by striking `level' the first place such term appears and inserting `levels'.CommentsClose CommentsPermalink





(d) Adjusting Net Worth Levels- Section 216(c)(2)(A) of the Federal Credit Union Act (12 U.S.C. 1790d(c)(2)(A)) is amended by striking `not more than the difference between the required minimum level most recently established by the Federal banking agencies and 4 percent of total assets (with respect to institutions regulated by those agencies)' and inserting `the increase or decrease made by the Federal Deposit Insurance Corporation'.CommentsClose CommentsPermalink





(e) Consultation With Federal Deposit Insurance Corporation- Section 216(c)(2)(B)(i) of the Federal Credit Union Act (12 U.S.C. 1790d(c)(2)(B)(i)) is amended by striking `Federal banking agencies' and inserting `Federal Deposit Insurance Corporation'.CommentsClose CommentsPermalink

SEC. 102. AMENDMENTS RELATING TO RISK-BASED NET WORTH REQUIREMENTS.

Section 216(d) of the Federal Credit Union Act (12 U.S.C. 1790d(d)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (1)--CommentsClose CommentsPermalink





(A) by striking `that are complex, as defined by the Board'; andCommentsClose CommentsPermalink





(B) by inserting `, as defined by the Board' before the period at the end;CommentsClose CommentsPermalink





(2) by striking paragraph (2) and inserting the following:CommentsClose CommentsPermalink





`(2) STANDARD- The Board shall design the risk-based net worth requirement to take account of any material risks, as defined by the Board, applicable to insured credit unions that are taken account of by comparable standards applicable to institutions insured by the Federal Deposit Insurance Corporation.'; andCommentsClose CommentsPermalink





(3) in the subsection heading, by striking `for Complex Credit Unions'.CommentsClose CommentsPermalink

SEC. 103. TREATMENT BASED ON OTHER CRITERIA.

Section 216(h)(2) of the Federal Credit Union Act (12 U.S.C. 1790d(h)(2)) is amended by inserting `, except to reclassify an insured credit union into the next lower net worth category, based on interest rate risk, to the extent that any such reclassification by a delegatee may be reviewed by the Board,' after `to reclassify an insured credit union into a lower net worth category'.CommentsClose CommentsPermalink

SEC. 104. DEFINITIONS RELATING TO NET WORTH.

(a) Secondary Capital Accounts for Purposes of Determining Net Worth- Section 216(o)(2)(B) of the Federal Credit Union Act (12 U.S.C. 1790d(o)(2)(B)) is amended by inserting `, subject to limitations set by the Board to address the safe and sound use of secondary capital to carry out the purpose of this section,' after `secondary capital accounts'.CommentsClose CommentsPermalink





(b) Net Worth Ratio- Section 216(o)(3) of the Federal Credit Union Act (12 U.S.C. 1790d(o)(3)) is amended--CommentsClose CommentsPermalink





(1) by inserting `minus its deposit in the Fund,' after `net worth of the credit union'; andCommentsClose CommentsPermalink





(2) by inserting `minus its deposit in the Fund' after `total assets of the credit union'.CommentsClose CommentsPermalink





(c) Risk-Based Net Worth Ratio- Section 216(o) of the Federal Credit Union Act (12 U.S.C. 1790d)(o)) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(5) RISK-BASED NET WORTH RATIO- The term `risk-based net worth ratio' means, with respect to any credit union, the ratio of the net worth of the credit union, plus any loan loss reserves (subject to limitations established by the Board) and minus the credit union's deposit in the Fund, to the risk assets of the credit union, as defined by the Board.'.CommentsClose CommentsPermalink

SEC. 105. AMENDMENTS RELATING TO NET WORTH RESTORATION PLANS.

(a) Temporary Waiver of Net Worth Restoration Plan Requirement in Response to Disasters- Subsection 216(f)(1) of the Federal Credit Union Act (12 U.S.C. 1790d(f)(1)) is amended by striking `Each insured credit union' and inserting `Except as determined by the Board in the case of a credit union that becomes or remains no less than undercapitalized due to the impact of a major natural or man-made disaster, each insured credit union'.CommentsClose CommentsPermalink





(b) Net Worth Restoration Requirement for Credit Unions That Are Not Well Capitalized- Section 216(e) of the Federal Credit Union Act (12 U.S.C. 1790d(e)) is amended to read as follows:CommentsClose CommentsPermalink





`(e) Net Worth Restoration Plan Requirement Applicable to Credit Unions That Are Not Well Capitalized- The Board may require an insured credit union that is not well capitalized to submit a net worth restoration plan, as required under subsection (f), if--CommentsClose CommentsPermalink





`(1) material safety and soundness concerns caused the credit union to become less than well capitalized; andCommentsClose CommentsPermalink





`(2) the safety and soundness concerns remain unresolved.'.CommentsClose CommentsPermalink





(c) Board Action May Include Order to Credit Union- Section 216(i)(1)(B) of the Federal Credit Union Act (12 U.S.C. 1790d(i)(1)(B)) is amended--CommentsClose CommentsPermalink





(1) by inserting `order the credit union to' before `take such other action'; andCommentsClose CommentsPermalink





(2) by inserting `, in the discretion of the Board,' after `as the Board'.CommentsClose CommentsPermalink





(d) Substitution of 90 Calendar Days- Section 216(i)(3)(A) of the Federal Credit Union Act (12 U.S.C. 1790d(i)(3)(A)) is amended--CommentsClose CommentsPermalink





(1) by striking `calendar quarter' and inserting `90-calendar day period'; andCommentsClose CommentsPermalink





(2) by inserting `first' after `the date on which the credit union'.CommentsClose CommentsPermalink





(e) Clarification of Coordination Requirement- Section 216(l)(3)(A)(ii) of the Federal Credit Union Act (12 U.S.C. 1790d(l)(3)(A)(ii)) is amended by inserting before the semicolon at the end `, if the Board determines that such action by the official will carry out the purpose of this section'.CommentsClose CommentsPermalink

TITLE II--ECONOMIC GROWTH

SEC. 201. LIMITS ON MEMBER BUSINESS LOANS.

Section 107A(a) of the Federal Credit Union Act (12 U.S.C. 1757a(a)) is amended by striking `the lesser of--' and all that follows through the end of the subsection and inserting `20 percent of the total assets of the credit union.'.CommentsClose CommentsPermalink

SEC. 202. DEFINITION OF MEMBER BUSINESS LOAN.

Section 107A(c)(1)(B)(iii) of the Federal Credit Union Act (12 U.S.C. 1757a(c)(1)(B)(iii)) is amended by striking `$50,000' and inserting `an amount, not to exceed $100,000, that the Board shall prescribe by regulation'.CommentsClose CommentsPermalink

SEC. 203. RESTRICTION ON MEMBER BUSINESS LOANS.

Section 216(g)(2) of the Federal Credit Union Act (12 U.S.C. 1790d(g)(2)) is amended by striking `until such time as the credit union becomes adequately capitalized' and inserting `unless otherwise approved by the Board'.CommentsClose CommentsPermalink

SEC. 204. MEMBER BUSINESS LOAN EXCLUSION FOR LOANS TO NONPROFIT RELIGIOUS ORGANIZATIONS.

Section 107A(a) of the Federal Credit Union Act (12 U.S.C. 1757a(a)) is amended by inserting `, excluding loans made to nonprofit religious organizations,' after `total amount of such loans'.CommentsClose CommentsPermalink

SEC. 205. CREDIT UNIONS AUTHORIZED TO LEASE SPACE IN BUILDINGS IN CREDIT UNION OFFICES IN UNDERSERVED AREAS.

Section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is amended--CommentsClose CommentsPermalink





(1) in paragraph (16), by striking `and' at the end;CommentsClose CommentsPermalink





(2) by redesignating paragraph (17) as paragraph (18); andCommentsClose CommentsPermalink





(3) by inserting after paragraph (16) the following:CommentsClose CommentsPermalink





`(17) with regard to any building purchased or constructed by the credit union for a credit union office or credit union operations in an underserved area, to lease office space in such building that is separate and clearly distinct from any office or operation of the credit union to any business enterprise, subject to such regulations as the Board may prescribe, taking into account the safety and soundness of the credit union; and'.CommentsClose CommentsPermalink

SEC. 206. AMENDMENTS RELATING TO CREDIT UNION SERVICE TO UNDERSERVED AREAS.

Section 109(c)(2) of the Federal Credit Union Act (12 U.S.C. 1759(c)(2)) is amended--CommentsClose CommentsPermalink





(1) in the matter preceding subparagraph (A), by striking `the field of membership category of which is described in subsection (b)(2),';CommentsClose CommentsPermalink





(2) by striking subparagraph (A) and inserting the following:CommentsClose CommentsPermalink





`(A) the Board determines, at any time after August 7, 1998, that the local community, neighborhood, or rural district is an underserved area; and'; andCommentsClose CommentsPermalink





(3) in subparagraph (B), by inserting `not later than 2 years after having an underserved area added to the credit union's charter,' before `the credit union'.CommentsClose CommentsPermalink

SEC. 207. UNDERSERVED AREA DEFINED.

Section 101 of the Federal Credit Union Act (12 U.S.C. 1752) is amended--CommentsClose CommentsPermalink





(1) in paragraph (8), by striking `and' at the end;CommentsClose CommentsPermalink





(2) in paragraph (9), by striking the period at the end and inserting `; and'; andCommentsClose CommentsPermalink





(3) by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(10) the term `underserved area' means a geographic area consisting of one or more population census tracts, that encompass or are located within--CommentsClose CommentsPermalink





`(A) an investment area designated under section 103(16) of the Community Development Banking and Financial Institutions Act of 1994; orCommentsClose CommentsPermalink





`(B) a low income community, as defined in section 45D(e) of the Internal Revenue Code of 1986.'.CommentsClose CommentsPermalink

TITLE III--REGULATORY MODIFICATIONS

SEC. 301. INVESTMENTS IN SECURITIES BY FEDERAL CREDIT UNIONS.

(a) In General- Section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is amended--CommentsClose CommentsPermalink





(1) by striking `A Federal credit union' and inserting the following:CommentsClose CommentsPermalink





`(a) In General- A Federal credit union'; andCommentsClose CommentsPermalink





(2) by adding at the end the following:CommentsClose CommentsPermalink





`(b) Investment for the Credit Union's Own Account-CommentsClose CommentsPermalink





`(1) IN GENERAL- In addition to the investments authorized by subsection (a), a Federal credit union may purchase and hold for its own account such investment securities of investment grade as the Board may authorize by regulation, subject to such limitations and restrictions as the Board may prescribe in such regulations.CommentsClose CommentsPermalink





`(2) PERCENTAGE LIMITATIONS-CommentsClose CommentsPermalink





`(A) SINGLE OBLIGOR- In no event may the total amount of investment securities of any single obligor or maker held by a Federal credit union for the credit union's own account exceed at any time an amount equal to 10 percent of the net worth of the credit union.CommentsClose CommentsPermalink





`(B) AGGREGATE INVESTMENTS- In no event may the aggregate amount of investment securities held by a Federal credit union for the credit union's own account exceed at any time an amount equal to 10 percent of the assets of the credit union.CommentsClose CommentsPermalink





`(3) INVESTMENT SECURITY DEFINED-CommentsClose CommentsPermalink





`(A) IN GENERAL- For purposes of this subsection, the term `investment security' means marketable obligations evidencing the indebtedness of any person in the form of bonds, notes, or debentures and other instruments commonly referred to as investment securities.CommentsClose CommentsPermalink





`(B) FURTHER DEFINITION BY BOARD- The Board may, by regulation, further define the term `investment security'.CommentsClose CommentsPermalink





`(4) INVESTMENT GRADE DEFINED- The term `investment grade' means, with respect to an investment security purchased by a credit union for its own account, an investment security that at the time of such purchase is rated in one of the 4 highest rating categories by at least 1 nationally recognized statistical rating organization.CommentsClose CommentsPermalink





`(5) CLARIFICATION OF PROHIBITION ON STOCK OWNERSHIP- No provision of this subsection shall be construed as authorizing a Federal credit union to purchase shares of stock of any corporation for the credit union's own account, except as otherwise permitted by law.'.CommentsClose CommentsPermalink





(b) Clerical Amendments- The Federal Credit Union Act is amended--CommentsClose CommentsPermalink





(1) in section 101(5) (12 U.S.C. 1751(5)), by striking `section 107(13)' and inserting `section 107(a)(13)';CommentsClose CommentsPermalink





(2) in section 114(a) (12 U.S.C. 1764(a)), by striking `section 107(5)' and inserting `section 107(a)(5)'.CommentsClose CommentsPermalink

SEC. 302. AUTHORITY OF NCUA TO ESTABLISH LONGER MATURITIES FOR CERTAIN CREDIT UNION LOANS.

Section 107(a)(5) of the Federal Credit Union Act (12 U.S.C. 1757(5)), as so designated by this Act, is amended in the matter preceding subparagraph (A), by striking `except as otherwise provided herein' and inserting `or any longer maturity as the Board may allow, by regulation'.CommentsClose CommentsPermalink

SEC. 303. INCREASE IN LENDING AND INVESTMENT LIMITS IN CREDIT UNION SERVICE ORGANIZATIONS.

(a) Lending- Section 107(a)(5)(D) of the Federal Credit Union Act (12 U.S.C. 1757(5)(D)), as so designated by this Act, is amended--CommentsClose CommentsPermalink





(1) by striking `shall not exceed 1 per centum of the paid-in' and inserting `shall not exceed 2 percent of the total paid-in'; andCommentsClose CommentsPermalink





(2) by inserting `, except that the percentage limitation on any such loans by any credit union may be reduced by order of the Board when the Board determines such reduction is appropriate to preserve the safety and soundness of the credit union' before the period at the end.CommentsClose CommentsPermalink





(b) Investing- Section 107(a)(7)(I) of the Federal Credit Union Act (12 U.S.C. 1757(7)(I)), as so designated by this Act, is amended--CommentsClose CommentsPermalink





(1) by striking `up to 1 per centum of the total paid' and inserting `up to 2 percent of the total paid'; andCommentsClose CommentsPermalink





(2) by inserting `, and such approval authority includes the authority to reduce the percentage limitation on any such investment by any credit union if the Board determines that such reduction is appropriate to preserve the safety and soundness of the credit union' after `with the approval of the Board'.CommentsClose CommentsPermalink

SEC. 304. VOLUNTARY MERGERS INVOLVING MULTIPLE COMMON-BOND CREDIT UNIONS.

Section 109(d)(2) of the Federal Credit Union Act (12 U.S.C. 1759(d)(2)) is amended by striking subparagraph (C) and inserting the following:CommentsClose CommentsPermalink





`(C) any group transferred in connection with a voluntary merger of any such Federal credit union with another insured credit union, as approved by the Board on or after August 7, 1998, in accordance with guidelines and regulations issued under section 120.'.CommentsClose CommentsPermalink

SEC. 305. CONVERSIONS OF CERTAIN CREDIT UNIONS TO A COMMUNITY CHARTER.

Section 109(g) of the Federal Credit Union Act (12 U.S.C. 1759(g)) is amended by adding at the end the following:CommentsClose CommentsPermalink





`(3) CRITERIA FOR CONTINUED MEMBERSHIP OF CERTAIN MEMBER GROUPS IN COMMUNITY CHARTER CONVERSIONS- In the case of a voluntary conversion of a credit union described in paragraph (1) or (2) of subsection (b) into a community credit union described in subsection (b)(3), the Board shall prescribe, by regulation, the criteria under which the Board may determine that a member group or other portion of a credit union's existing membership, that is located outside of the well-defined local community, neighborhood, or rural district that shall constitute the community charter, can be satisfactorily served by the credit union and remain within the community credit union's field of membership permitting new members to be added from such groups.'.CommentsClose CommentsPermalink

SEC. 306. CREDIT UNION GOVERNANCE.

(a) Expulsion of Members for Just Cause- Section 118(b) of the Federal Credit Union Act (12 U.S.C. 1764(b)) is amended to read as follows:CommentsClose CommentsPermalink





`(b) Policy and Actions of Boards of Directors of Federal Credit Unions-CommentsClose CommentsPermalink





`(1) EXPULSION OF MEMBERS FOR NONPARTICIPATION OR FOR JUST CAUSE- The board of directors of a Federal credit union may, by majority vote of a quorum of directors, adopt and enforce a policy with respect to expulsion from membership, by a majority vote of such board of directors, based on just cause, including disruption of credit union operations, or on nonparticipation by a member in the affairs of the credit union.CommentsClose CommentsPermalink





`(2) WRITTEN NOTICE OF POLICY TO MEMBERS- If a policy described in paragraph (1) is adopted, written notice of the policy as adopted and the effective date of such policy shall be provided to--CommentsClose CommentsPermalink





`(A) each existing member of the credit union, not later than 30 days prior to the effective date of such policy; andCommentsClose CommentsPermalink





`(B) each new member prior to or upon applying for membership.'.CommentsClose CommentsPermalink





(b) Term Limits Authorized for Board Members of Federal Credit Unions- Section 111(a) of the Federal Credit Union Act (12 U.S.C. 1761(a)) is amended by adding at the end the following: `The bylaws of a Federal credit union may limit the number of consecutive terms that any person may serve on the board of directors of such credit union.'.CommentsClose CommentsPermalink

SEC. 307. PROVIDING THE NATIONAL CREDIT UNION ADMINISTRATION WITH GREATER FLEXIBILITY IN RESPONDING TO MARKET CONDITIONS.

Section 107(a)(5)(A)(vi)(I) of the Federal Credit Union Act (12 U.S.C. 1757(5)(A)(vi)(I)), as so designated by this Act, is amended by striking `six-month period and that prevailing interest rate levels' and inserting `6-month period or that prevailing interest rate levels'.CommentsClose CommentsPermalink

SEC. 308. CREDIT UNION CONVERSION VOTING REQUIREMENTS.

Section 205(b)(2) of the Federal Credit Union Act (12 U.S.C. 1785(b)(2)(B)) is amended--CommentsClose CommentsPermalink





(1) by redesignating subparagraphs (E), (F), and (G) as subparagraphs (F), (G), and (H), respectively;CommentsClose CommentsPermalink





(2) by inserting after subparagraph (D) the following:CommentsClose CommentsPermalink





`(E) CONVERSION VOTING REQUIREMENTS-CommentsClose CommentsPermalink





`(i) IN GENERAL- Approval of a proposal for conversion in an election set by a majority of the directors of an insured credit union under subparagraph (B) shall be by the affirmative vote of a majority of the members of the insured credit union who vote on the proposal, in a vote in which at least 30 percent of the credit union membership participates.CommentsClose CommentsPermalink





`(ii) SPECIAL MEMBERSHIP MEETING- An insured credit union which provides notices to its members under subparagraph (C) of a proposed conversion shall--CommentsClose CommentsPermalink





`(I) hold a special meeting of the membership to provide information regarding the proposal at least 30 days before making any ballots available to its members; andCommentsClose CommentsPermalink





`(II) include a notice of such meeting in the notices provided under subparagraph (C).CommentsClose CommentsPermalink





`(iii) PROHIBITION ON INCENTIVES- An insured credit union proposing to convert under subparagraph (A)--CommentsClose CommentsPermalink





`(I) is expressly prohibited from using or providing any incentive in any form of prize raffles, contests, giveaways, or other voting incentives in connection with the member vote on conversion; andCommentsClose CommentsPermalink





`(II) may make no mention of any incentive in the notices to members or in other materials that it sends or otherwise communicates to members pursuant to subparagraph (C).'; andCommentsClose CommentsPermalink





(3) in subparagraph (B), by striking the ultimate sentence.CommentsClose CommentsPermalink

SEC. 309. EXEMPTION FROM PRE-MERGER NOTIFICATION REQUIREMENT OF THE CLAYTON ACT.

Section 7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) is amended by inserting `section 205(b)(3) of the Federal Credit Union Act (12 U.S.C. 1785(b)(3)),' before `or section 3'.CommentsClose CommentsPermalink