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CREDIT UNION MEMBERSHIP ACCESS ACT
(Senate - July 24, 1998)
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CREDIT UNION MEMBERSHIP ACCESS ACT
The PRESIDING OFFICER. Under the previous order, the Senate will
proceed to the consideration of
H.R. 1151, which the clerk will report.
A bill (
H.R. 1151) to amend the Federal Credit Union Act to
clarify existing law with regard to the field of membership
of Federal credit unions, to preserve the integrity and
purpose of Federal credit unions, to enhance supervisory
oversight of insured credit unions, and for other purposes.
The Senate proceeded to consider the bill, which had been reported
from the Committee on Banking, Housing, and Urban Affairs, with an
amendment to strike all after the enacting clause and inserting in lieu
thereof the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Credit
Union Membership Access Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.
TITLE I--CREDIT UNION MEMBERSHIP
Sec. 101. Fields of membership.
Sec. 102. Criteria for approval of expansion of membership of multiple
common-bond credit unions.
Sec. 103. Geographical guidelines for community credit unions.
TITLE II--REGULATION OF CREDIT UNIONS
Sec. 201. Financial statement and audit requirements.
Sec. 202. Conversion of insured credit unions.
Sec. 203. Limitation on member business loans.
Sec. 204. Serving persons of modest means within the field of
membership of credit unions.
Sec. 205. National Credit Union Administration Board membership.
Sec. 206. Report and congressional review requirement for certain
regulations.
TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS
Sec. 301. Prompt corrective action.
Sec. 302. National credit union share insurance fund equity ratio,
available assets ratio, and standby premium charge.
Sec. 303. Access to liquidity.
TITLE IV--MISCELLANEOUS PROVISIONS
Sec. 401. Study and report on differing regulatory treatment.
Sec. 402. Review of regulations and paperwork reduction.
Sec. 403. Treasury report on reduced taxation and viability of small
banks.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The American credit union movement began as a
cooperative effort to serve the productive and provident
credit needs of individuals of modest means.
(2) Credit unions continue to fulfill this public purpose,
and current members and membership groups should not face
divestiture from the financial services institution of their
choice as a result of recent court action.
(3) To promote thrift and credit extension, a meaningful
affinity and bond among members, manifested by a commonality
of routine interaction, shared and related work experiences,
interests, or activities, or the maintenance of an otherwise
well-understood sense of cohesion or identity is essential to
the fulfillment of the public mission of credit unions.
(4) Credit unions, unlike many other participants in the
financial services market, are exempt from Federal and most
State taxes because they are member-owned, democratically
operated, not-for-profit organizations generally managed by
volunteer boards of directors and because they have the
specified mission of meeting the credit and savings needs of
consumers, especially persons of modest means.
(5) Improved credit union safety and soundness provisions
will enhance the public benefit that citizens receive from
these cooperative financial services institutions.
SEC. 3. DEFINITIONS.
As used in this Act--
(1) the term ``Administration'' means the National Credit
Union Administration;
(2) the term ``Board'' means the National Credit Union
Administration Board;
(3) the term ``Federal banking agencies'' has the same
meaning as in section 3 of the Federal Deposit Insurance Act;
(4) the terms ``insured credit union'' and ``State-
chartered insured credit union'' have the same meanings as in
section 101 of the Federal Credit Union Act; and
(5) the term ``Secretary'' means the Secretary of the
Treasury.
TITLE I--CREDIT UNION MEMBERSHIP
SEC. 101. FIELDS OF MEMBERSHIP.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended--
(1) in the first sentence--
(A) by striking ``Federal credit union membership shall
consist of'' and inserting ``(a) In General.--Subject to
subsection (b), Federal credit union membership shall consist
of''; and
(B) by striking ``, except that'' and all that follows
through ``rural district''; and
(2) by adding at the end the following new subsections:
``(b) Membership Field.--Subject to the other provisions of
this section, the membership of any Federal credit union
shall be limited to the membership described in 1 of the
following categories:
``(1) Single common-bond credit union.--1 group that has a
common bond of occupation or association.
``(2) Multiple common-bond credit union.--More than 1
group--
``(A) each of which has (within the group) a common bond of
occupation or association; and
``(B) the number of members of each of which (at the time
the group is first included within the field of membership of
a credit union described in this paragraph) does not exceed
any numerical limitation applicable under subsection (d).
``(3) Community credit union.--Persons or organizations
within a well-defined local community, neighborhood, or rural
district.
``(c) Exceptions.--
``(1) Grandfathered members and groups.--
``(A) In general.--Notwithstanding subsection (b)--
``(i) any person or organization that is a member of any
Federal credit union as of the date of enactment of the
Credit Union Membership Access Act may remain a member of the
credit union after that date of enactment; and
``(ii) a member of any group whose members constituted a
portion of the membership of any Federal credit union as of
that date of enactment shall continue to be eligible to
become a member of that credit union, by virtue of membership
in that group, after that date of enactment.
``(B) Successors.--If the common bond of any group referred
to in subparagraph (A) is defined by any particular
organization or business entity, subparagraph (A) shall
continue to apply with respect to any successor to the
organization or entity.
``(2) Exception for underserved areas.--Notwithstanding
subsection (b), in the case of a Federal credit union, the
field of membership category of which is described in
subsection (b)(2), the Board may allow the membership of the
credit union to include any person or organization within a
local community, neighborhood, or rural district if--
``(A) the Board determines that the local community,
neighborhood, or rural district--
``(i) meets the requirements of paragraph (3) and
subparagraphs (A) and (B) of paragraph (4) of section 233(b)
of the Bank Enterprise Act of 1991, and such additional
requirements as the Board may impose; and
``(ii) is underserved, based on data of the Board and the
Federal banking agencies (as defined in section 3 of the
Federal Deposit Insurance Act), by other depository
institutions (as defined in section 19(b)(1)(A) of the
Federal Reserve Act); and
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``(B) the credit union establishes and maintains an office
or facility in the local community, neighborhood, or rural
district at which credit union services are available.
``(d) Multiple Common-Bond Credit Union Group
Requirements.--
``(1) Numerical limitation.--Except as provided in
paragraph (2), only a group with fewer than 3,000 members
shall be eligible to be included in the field of membership
category of a credit union described in subsection (b)(2).
``(2) Exceptions.--In the case of any Federal credit union,
the field of membership category of which is described in
subsection (b)(2), the numerical limitation in paragraph (1)
of this subsection shall not apply with respect to--
``(A) any group that the Board determines, in writing and
in accordance with the guidelines and regulations issued
under paragraph (3), could not feasibly or reasonably
establish a new single common-bond credit union, the field of
membership category of which is described in subsection
(b)(1) because--
``(i) the group lacks sufficient volunteer and other
resources to support the efficient and effective operation of
a credit union;
``(ii) the group does not meet the criteria that the Board
has determined to be important for the likelihood of success
in establishing and managing a new credit union, including
demographic characteristics such as geographical location of
members, diversity of ages and income levels, and other
factors that may affect the financial viability and stability
of a credit union; or
``(iii) the group would be unlikely to operate a safe and
sound credit union;
``(B) any group transferred from another credit union--
``(i) in connection with a merger or consolidation
recommended by the Board or any appropriate State credit
union supervisor based on safety and soundness concerns with
respect to that other credit union; or
``(ii) by the Board in the Board's capacity as conservator
or liquidating agent with respect to that other credit union;
or
``(C) any group transferred in connection with a voluntary
merger, having received conditional approval by the
Administration of the merger application prior to October 25,
1996, but not having consummated the merger prior to October
25, 1996, if the merger is consummated not later than 180
days after the date of enactment of the Credit Union
Membership Access Act.
``(3) Regulations and guidelines.--The Board shall issue
guidelines or regulations, after notice and opportunity for
comment, setting forth the criteria that the Board will apply
in determining under this subsection whether or not an
additional group may be included within the field of
membership category of an existing credit union described in
subsection (b)(2).
``(e) Additional Membership Eligibility Provisions.--
``(1) Membership eligibility limited to immediate family or
household members.--No individual shall be eligible for
membership in a credit union on the basis of the relationship
of the individual to another person who is eligible for
membership in the credit union, unless the individual is a
member of the immediate family or household (as those terms
are defined by the Board, by regulation) of the other person.
``(2) Retention of membership.--Except as provided in
section 118, once a person becomes a member of a credit union
in accordance with this title, that person or organization
may remain a member of that credit union until the person or
organization chooses to withdraw from the membership of the
credit union.''.
SEC. 102. CRITERIA FOR APPROVAL OF EXPANSION OF MEMBERSHIP OF
MULTIPLE COMMON-BOND CREDIT UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended by adding at the end the following new
subsection:
``(f) Criteria for Approval of Expansion of Multiple
Common-Bond Credit Unions.--
``(1) In general.--The Board shall--
``(A) encourage the formation of separately chartered
credit unions instead of approving an application to include
an additional group within the field of membership of an
existing credit union whenever practicable and consistent
with reasonable standards for the safe and sound operation of
the credit union; and
``(B) if the formation of a separate credit union by the
group is not practicable or consistent with the standards
referred to in subparagraph (A), require the inclusion of the
group in the field of membership of a credit union that is
within reasonable proximity to the location of the group
whenever practicable and consistent with reasonable standards
for the safe and sound operation of the credit union.
``(2) Approval criteria.--The Board may not approve any
application by a Federal credit union, the field of
membership category of which is described in subsection
(b)(2) to include any additional group within the field of
membership of the credit union (or an application by a
Federal credit union described in subsection (b)(1) to
include an additional group and become a credit union
described in subsection (b)(2)), unless the Board determines,
in writing, that--
``(A) the credit union has not engaged in any unsafe or
unsound practice (as defined in section 206(b)) that is
material during the 1-year period preceding the date of
filing of the application;
``(B) the credit union is adequately capitalized;
``(C) the credit union has the administrative capability to
serve the proposed membership group and the financial
resources to meet the need for additional staff and assets to
serve the new membership group;
``(D) pursuant to the most recent evaluation of the credit
union under section 215, the credit union is satisfactorily
providing affordable credit union services to all individuals
of modest means within the field of membership of the credit
union;
``(E) any potential harm that the expansion of the field of
membership of the credit union may have on any other insured
credit union and its members is clearly outweighed in the
public interest by the probable beneficial effect of the
expansion in meeting the convenience and needs of the members
of the group proposed to be included in the field of
membership; and
``(F) the credit union has met such additional requirements
as the Board may prescribe, by regulation.''.
SEC. 103. GEOGRAPHICAL GUIDELINES FOR COMMUNITY CREDIT
UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended by adding at the end the following new
subsection:
``(g) Regulations Required for Community Credit Unions.--
``(1) Definition of well-defined local community,
neighborhood, or rural district.--The Board shall prescribe,
by regulation, a definition for the term `well-defined local
community, neighborhood, or rural district' for purposes of--
``(A) making any determination with regard to the field of
membership of a credit union described in subsection (b)(3);
and
``(B) establishing the criteria applicable with respect to
any such determination.
``(2) Scope of application.--The definition prescribed by
the Board under paragraph (1) shall apply with respect to any
application to form a new credit union, or to alter or expand
the field of membership of an existing credit union, that is
filed with the Board after the date of enactment of the
Credit Union Membership Access Act.''.
TITLE II--REGULATION OF CREDIT UNIONS
SEC. 201. FINANCIAL STATEMENT AND AUDIT REQUIREMENTS.
(a) In General.--Section 202(a)(6) of the Federal Credit
Union Act (12 U.S.C. 1782(a)(6)) is amended by adding at the
end the following new subparagraphs:
``(C) Accounting principles.--
``(i) In general.--Accounting principles applicable to
reports or statements required to be filed with the Board by
each insured credit union shall be uniform and consistent
with generally accepted accounting principles.
``(ii) Board determination.--If the Board determines that
the application of any generally accepted accounting
principle to any insured credit union is not appropriate, the
Board may prescribe an accounting principle for application
to the credit union that is no less stringent than generally
accepted accounting principles.
``(iii) De minimus exception.--This subparagraph shall not
apply to any insured credit union, the total assets of which
are less than $10,000,000, unless prescribed by the Board or
an appropriate State credit union supervisor.
``(D) Large credit union audit requirement.--
``(i) In general.--Each insured credit union having total
assets of $500,000,000 or more shall have an annual
independent audit of the financial statements of the credit
union, performed in accordance with generally accepted
auditing standards by an independent certified public
accountant or public accountant licensed by the appropriate
State or jurisdiction to perform those services.
``(ii) Voluntary audits.--If a Federal credit union that is
not required to conduct an audit under clause (i), and that
has total assets of more than $10,000,000 conducts such an
audit for any purpose, using an independent auditor who is
compensated for his or her audit services with respect to
that audit, the audit shall be performed consistent with the
accountancy laws of the appropriate State or jurisdiction,
including licensing requirements.''.
(b) Technical and Conforming Amendment.--Section
202(a)(6)(B) of the Federal Credit Union Act (12 U.S.C.
1782(a)(6)(B)) is amended by striking ``subparagraph (A)''
and inserting ``subparagraph (A) or (D)''.
SEC. 202. CONVERSION OF INSURED CREDIT UNIONS.
Section 205(b) of the Federal Credit Union Act (12 U.S.C.
1785(b)) is amended--
(1) in paragraph (1), by striking ``Except with the prior
written approval of the Board, no insured credit union
shall'' and inserting ``Except as provided in paragraph (2),
no insured credit union shall, without the prior approval of
the Board'';
(2) by redesignating paragraph (2) as paragraph (3); and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) Conversion of insured credit unions to mutual savings
banks.--
``(A) In general.--Notwithstanding paragraph (1), an
insured credit union may convert to a mutual savings bank or
savings association (if the savings association is in mutual
form), as those terms are defined in section 3 of the Federal
Deposit Insurance Act, without the prior approval of the
Board, subject to the requirements and procedures set forth
in the laws and regulations governing mutual savings banks
and savings associations.
``(B) Conversion proposal.--A proposal for a conversion
described in subparagraph (A) shall first be approved, and a
date set for a vote thereon by the members (either at a
meeting to be held on that date or by written ballot to be
filed on or before that date), by a majority of the directors
of the insured credit union. Approval of the proposal for
conversion shall be by the affirmative vote of a majority of
the members of the insured credit union who vote on the
proposal.
``(C) Notice of proposal to members.--An insured credit
union that proposes to convert to a mutual savings bank or
savings association under subparagraph (A) shall submit
notice to each of its members who is eligible to vote on the
matter of its intent to convert--
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``(i) 90 days before the date of the member vote on the
conversion;
``(ii) 60 days before the date of the member vote on the
conversion; and
``(iii) 30 days before the date of the member vote on the
conversion.
``(D) Notice of proposal to board.--The Board may require
an insured credit union that proposes to convert to a mutual
savings bank or savings association under subparagraph (A) to
submit a notice to the Board of its intent to convert during
the 90-day period preceding the date of the completion of the
conversion.
``(E) Inapplicability of act upon conversion.--Upon
completion of a conversion described in subparagraph (A), the
credit union shall no longer be subject to any of the
provisions of this Act.
``(F) Limit on compensation of officials.--
``(i) In general.--No director or senior management
official of an insured credit union may receive any economic
benefit in connection with a conversion of the credit union
as described in subparagraph (A), other than--
``(I) director fees; and
``(II) compensation and other benefits paid to directors or
senior management officials of the converted institution in
the ordinary course of business.
``(ii) Senior management official.--For purposes of this
subparagraph, the term `senior management official' means a
chief executive officer, an assistant chief executive
officer, a chief financial officer, and any other senior
executive officer (as defined by the appropriate Federal
banking agency pursuant to section 32(f) of the Federal
Deposit Insurance Act).
``(G) Consistent rules.--
``(i) In general.--Not later than 6 months after the date
of enactment of the Credit Union Membership Access Act, the
Administration shall promulgate final rules applicable to
charter conversions described in this paragraph that are
consistent with rules promulgated by other financial
regulators, including the Office of Thrift Supervision and
the Office of the Comptroller of the Currency. The rules
required by this clause shall provide that charter conversion
by an insured credit union shall be subject to regulation
that is no more or less restrictive than that applicable to
charter conversions by other financial institutions.
``(ii) Oversight of member vote.--The member vote
concerning charter conversion under this paragraph shall be
administered by the Administration, and shall be verified by
the Federal or State regulatory agency that would have
jurisdiction over the institution after the conversion. If
either the Administration or that regulatory agency
disapproves of the methods by which the member vote was taken
or procedures applicable to the member vote, the member vote
shall be taken again, as directed by the Administration or
the agency.''.
SEC. 203. LIMITATION ON MEMBER BUSINESS LOANS.
The Federal Credit Union Act (12 U.S.C. 1701 et seq.) is
amended by inserting after section 107 the following new
section:
``SEC. 107A. LIMITATION ON MEMBER BUSINESS LOANS.
``(a) In General.--On and after the date of enactment of
this section, no insured credit union may make any member
business loan that would result in a total amount of such
loans outstanding at that credit union at any one time equal
to more than the lesser of--
``(1) 1.75 times the actual net worth of the credit union;
or
``(2) 1.75 times the minimum net worth required under
section 216(c)(1)(A) for a credit union to be well
capitalized.
``(b) Exceptions.--Subsection (a) does not apply in the
case of--
``(1) an insured credit union chartered for the purpose of
making, or that has a history of primarily making, member
business loans to its members, as determined by the Board; or
``(2) an insured credit union that--
``(A) serves predominantly low-income members, as defined
by the Board; or
``(B) is a community development financial institution, as
defined in section 103 of the Community Development Banking
and Financial Institutions Act of 1994.
``(c) Definitions.--As used in this section--
``(1) the term `member business loan'--
``(A) means any loan, line of credit, or letter of credit,
the proceeds of which will be used for a commercial,
corporate or other business investment property or venture,
or agricultural purpose; and
``(B) does not include an extension of credit--
``(i) that is fully secured by a lien on a 1- to 4-family
dwelling that is the primary residence of a member;
``(ii) that is fully secured by shares in the credit union
making the extension of credit or deposits in other financial
institutions;
``(iii) that is described in subparagraph (A), if it was
made to a borrower or an associated member that has a total
of all such extensions of credit in an amount equal to less
than $50,000;
``(iv) the repayment of which is fully insured or fully
guaranteed by, or where there is an advance commitment to
purchase in full by, any agency of the Federal Government or
of a State, or any political subdivision thereof; or
``(v) that is granted by a corporate credit union (as that
term is defined by the Board) to another credit union.
``(2) the term `net worth'--
``(A) with respect to any insured credit union, means the
credit union's retained earnings balance, as determined under
generally accepted accounting principles; and
``(B) with respect to a credit union that serves
predominantly low-income members, as defined by the Board,
includes secondary capital accounts that are--
``(i) uninsured; and
``(ii) subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and
the Fund; and
``(3) the term `associated member' means any member having
a shared ownership, investment, or other pecuniary interest
in a business or commercial endeavor with the borrower.
``(d) Effect on Existing Loans.--An insured credit union
that has, on the date of enactment of this section, a total
amount of outstanding member business loans that exceeds the
amount permitted under subsection (a) shall, not later than 3
years after that date of enactment, reduce the total amount
of outstanding member business loans to an amount that is not
greater than the amount permitted under subsection (a).''.
SEC. 204. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD OF
MEMBERSHIP OF CREDIT UNIONS.
(a) In General.--Title II of the Federal Credit Union Act
(12 U.S.C. 1781 et seq.) is amended by adding at the end the
following new section:
``SEC. 215. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD
OF MEMBERSHIP OF CREDIT UNIONS.
``(a) Continuing and Affirmative Obligation.--The purpose
of this section is to reaffirm that insured credit unions
have a continuing and affirmative obligation to meet the
financial services needs of persons of modest means,
consistent with safe and sound operation.
``(b) Evaluation by the Board.--The Board shall, before the
end of the 12-month period beginning on the date of enactment
of the Credit Union Membership Access Act--
``(1) prescribe criteria for periodically reviewing the
record of each insured credit union in providing affordable
credit union services to all individuals of modest means
(including low- and moderate-income individuals) within the
field of membership of the credit union; and
``(2) provide for making the results of the reviews
publicly available.
``(c) Additional Criteria for Community Credit Unions
Required.--The Board shall, by regulation--
``(1) prescribe additional criteria for annually evaluating
the record of any insured credit union that is organized to
serve a well-defined local community, neighborhood, or rural
district in meeting the credit needs and credit union service
needs of the entire field of membership of the credit union;
and
``(2) prescribe procedures for remedying the failure of any
insured credit union described in paragraph (1) to meet the
criteria established pursuant to paragraph (1), including the
disapproval of any application by the credit union to expand
the field of membership of the credit union.
``(d) Emphasis on Performance, Not Paperwork.--In
evaluating any insured credit union under this section, the
Board--
``(1) shall focus on the actual performance of the insured
credit union; and
``(2) may not impose burdensome paperwork or recordkeeping
requirements.''.
(b) Annual Reports.--With respect to each of the first 5
years that begin after the date of enactment of this Act, the
Board shall include in the annual report to the Congress
under section 102(d) of the Federal Credit Union Act, a
report on the progress of the Board in implementing section
215 of that Act (as added by subsection (a) of this section).
SEC. 205. NATIONAL CREDIT UNION ADMINISTRATION BOARD
MEMBERSHIP.
Section 102(b) of the Federal Credit Union Act (12 U.S.C.
1752a(b)) is amended--
(1) by striking ``(b) The Board'' and inserting ``(b)
Membership and Appointment of Board.--
``(1) In general.--The Board''; and
(2) by adding at the end the following new paragraph:
``(2) Appointment criteria.--
``(A) Experience in financial services.--In considering
appointments to the Board under paragraph (1), the President
shall give consideration to individuals who, by virtue of
their education, training, or experience relating to a broad
range of financial services, financial services regulation,
or financial policy, are especially qualified to serve on the
Board.
``(B) Limit on appointment of credit union officers.--Not
more than 1 member of the Board may be appointed to the Board
from among individuals who, at the time of the appointment,
are, or have recently been, involved with any insured credit
union as a committee member, director, officer, employee, or
other institution-affiliated party.''.
SEC. 206. REPORT AND CONGRESSIONAL REVIEW REQUIREMENT FOR
CERTAIN REGULATIONS.
A regulation prescribed by the Board shall be treated as a
major rule for purposes of chapter 8 of title 5, United
States Code, if the regulation defines, or amends the
definition of--
(1) the term ``immediate family or household'' for purposes
of section 109(e)(1) of the Federal Credit Union Act (as
added by section 101 of this Act); or
(2) the term ``well-defined local community, neighborhood,
or rural district'' for purposes of section 109(g) of the
Federal Credit Union Act (as added by section 103 of this
Act).
TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS
SEC. 301. PROMPT CORRECTIVE ACTION.
(a) In General.--Title II of the Federal Credit Union Act
(12 U.S.C. 1781 et seq.) is amended by adding at the end the
following new section:
``SEC. 216. PROMPT CORRECTIVE ACTION.
``(a) Resolving Problems To Protect Fund.--
``(1) Purpose.--The purpose of this section is to resolve
the problems of insured credit unions at the least possible
long-term loss to the Fund.
``(2) Prompt corrective action required.--The Board shall
carry out the purpose of this section by taking prompt
corrective action to resolve the problems of insured credit
unions.
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``(b) Regulations Required.--
``(1) Insured credit unions.--
``(A) In general.--The Board shall, by regulation,
prescribe a system of prompt corrective action for insured
credit unions that is--
``(i) consistent with this section; and
``(ii) comparable to section 38 of the Federal Deposit
Insurance Act.
``(B) Cooperative character of credit unions.--The Board
shall design the system required under subparagraph (A) to
take into account that credit unions are not-for-profit
cooperatives that--
``(i) do not issue capital stock;
``(ii) must rely on retained earnings to build net worth;
and
``(iii) have boards of directors that consist primarily of
volunteers.
``(2) New credit unions.--
``(A) In general.--In addition to regulations under
paragraph (1), the Board shall, by regulation, prescribe a
system of prompt corrective action that shall apply to new
credit unions in lieu of this section and the regulations
prescribed under paragraph (1).
``(B) Criteria for alternative system.--The Board shall
design the system prescribed under subparagraph (A)--
``(i) to carry out the purpose of this section;
``(ii) to recognize that credit unions (as cooperatives
that do not issue capital stock) initially have no net worth,
and give new credit unions reasonable time to accumulate net
worth;
``(iii) to create adequate incentives for new credit unions
to become adequately capitalized by the time that they
either--
``(I) have been in operation for more than 10 years; or
``(II) have more than $10,000,000 in total assets;
``(iv) to impose appropriate restrictions and requirements
on new credit unions that do not make sufficient progress
toward becoming adequately capitalized; and
``(v) to prevent evasion of the purpose of this section.
``(c) Net Worth Categories.--
``(1) In general.--For purposes of this section the
following definitions shall apply:
``(A) Well capitalized.--An insured credit union is `well
capitalized' if--
``(i) it has a net worth ratio of not less than 7 percent;
and
``(ii) it meets any applicable risk-based net worth
requirement under subsection (d).
``(B) Adequately capitalized.--An insured credit union is
`adequately capitalized' if--
``(i) it has a net worth ratio of not less than 6 percent;
and
``(ii) it meets any applicable risk-based net worth
requirement under subsection (d).
``(C) Undercapitalized.--An insured credit union is
`undercapitalized' if--
``(i) it has a net worth ratio of less than 6 percent; or
``(ii) it fails to meet any applicable risk-based net worth
requirement under subsection (d).
``(D) Significantly undercapitalized.--An insured credit
union is `significantly undercapitalized'--
``(i) if it has a net worth ratio of less than 4 percent;
or
``(ii) if--
``(I) it has a net worth ratio of less than 5 percent; and
``(II) it--
``(aa) fails to submit an acceptable net worth restoration
plan within the time allowed under subsection (f); or
``(bb) materially fails to implement a net worth
restoration plan accepted by the Board.
``(E) Critically undercapitalized.--An insured credit union
is `critically undercapitalized' if it has a net worth ratio
of less than 2 percent (or such higher net worth ratio, not
to exceed 3 percent, as the Board may specify by regulation).
``(2) Adjusting net worth levels.--
``(A) In general.--If, for purposes of section 38(c) of the
Federal Deposit Insurance Act, the Federal banking agencies
increase or decrease the required minimum level for the
leverage limit (as those terms are used in that section 38),
the Board may, by regulation, and subject to subparagraph (B)
of this paragraph, correspondingly increase or decrease 1 or
more of the net worth ratios specified in subparagraphs (A)
through (D) of paragraph (1) of this subsection in an amount
that is equal to 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).
``(B) Determinations required.--The Board may increase or
decrease net worth ratios under subparagraph (A) only if the
Board--
``(i) determines, in consultation with the Federal banking
agencies, that the reason for the increase or decrease in the
required minimum level for the leverage limit also justifies
the adjustment in net worth ratios; and
``(ii) determines that the resulting net worth ratios are
sufficient to carry out the purpose of this section.
``(C) Transition period required.--If the Board increases
any net worth ratio under this paragraph, the Board shall
give insured credit unions a reasonable period of time to
meet the increased ratio.
``(d) Risk-Based Net Worth Requirement for Complex Credit
Unions.--
``(1) In general.--The regulations required under
subsection (b)(1) shall include a risk-based net worth
requirement for insured credit unions that are complex, as
defined by the Board based on the portfolios of assets and
liabilities of credit unions.
``(2) Standard.--The Board shall design the risk-based net
worth requirement to take account of any material risks
against which the net worth ratio required for an insured
credit union to be adequately capitalized may not provide
adequate protection.
``(e) Earnings-Retention Requirement Applicable to Credit
Unions That Are Not Well Capitalized.--
``(1) In general.--An insured credit union that is not well
capitalized shall annually set aside as net worth an amount
equal to not less than 0.4 percent of its total assets.
``(2) Board's authority to decrease earnings-retention
requirement.--
``(A) In general.--The Board may, by order, decrease the
0.4 percent requirement in paragraph (1) with respect to a
credit union to the extent that the Board determines that the
decrease--
``(i) is necessary to avoid a significant redemption of
shares; and
``(ii) would further the purpose of this section.
``(B) Periodic review required.--The Board shall
periodically review any order issued under subparagraph (A).
``(f) Net Worth Restoration Plan Required.--
``(1) In general.--Each insured credit union that is
undercapitalized shall submit an acceptable net worth
restoration plan to the Board within the time allowed under
this subsection.
``(2) Assistance to small credit unions.--The Board (or the
staff of the Board) shall, upon timely request by an insured
credit union with total assets of less than $10,000,000, and
subject to such regulations or guidelines as the Board may
prescribe, assist that credit union in preparing a net worth
restoration plan.
``(3) Deadlines for submission and review of plans.--The
Board shall, by regulation, establish deadlines for
submission of net worth restoration plans under this
subsection that--
``(A) provide insured credit unions with reasonable time to
submit net worth restoration plans; and
``(B) require the Board to act on net worth restoration
plans expeditiously.
``(4) Failure to submit acceptable plan within time
allowed.--
``(A) Failure to submit any plan.--If an insured credit
union fails to submit a net worth restoration plan within the
time allowed under paragraph (3), the Board shall--
``(i) promptly notify the credit union of that failure; and
``(ii) give the credit union a reasonable opportunity to
submit a net worth restoration plan.
``(B) Submission of unacceptable plan.--If an insured
credit union submits a net worth restoration plan within the
time allowed under paragraph (3) and the Board determines
that the plan is not acceptable, the Board shall--
``(i) promptly notify the credit union of why the plan is
not acceptable; and
``(ii) give the credit union a reasonable opportunity to
submit a revised plan.
``(5) Accepting plan.--The Board may accept a net worth
restoration plan only if the Board determines that the plan
is based on realistic assumptions and is likely to succeed in
restoring the net worth of the credit union.
``(g) Restrictions on Undercapitalized Credit Unions.--
``(1) Restriction on asset growth.--An insured credit union
that is undercapitalized shall not generally permit its
average total assets to increase, unless--
``(A) the Board has accepted the net worth restoration plan
of the credit union for that action;
``(B) any increase in total assets is consistent with the
net worth restoration plan; and
``(C) the net worth ratio of the credit union increases at
a rate that is consistent with the net worth restoration
plan.
``(2) Restriction on member business loans.--
Notwithstanding section 107A(a), an insured credit union that
is undercapitalized may not make any increase in the total
amount of member business loans (as defined in section
107A(c)) outstanding at that credit union at any one time,
until such time as the credit union becomes adequately
capitalized.
``(h) More Stringent Treatment Based on Other Supervisory
Criteria.--With respect to the exercise of authority by the
Board under regulations comparable to section 38(g) of the
Federal Deposit Insurance Act--
``(1) the Board may not reclassify an insured credit union
into a lower net worth category, or treat an insured credit
union as if it were in a lower net worth category, for
reasons not pertaining to the safety and soundness of that
credit union; and
``(2) the Board may not delegate its authority to
reclassify an insured credit union into a lower net worth
category or to treat an insured credit union as if it were in
a lower net worth category.
``(i) Action Required Regarding Critically Undercapitalized
Credit Unions.--
``(1) In general.--The Board shall, not later than 90 days
after the date on which an insured credit union becomes
critically undercapitalized--
``(A) appoint a conservator or liquidating agent for the
credit union; or
``(B) take such other action as the Board determines would
better achieve the purpose of this section, after documenting
why the action would better achieve that purpose.
``(2) Periodic redeterminations required.--Any
determination by the Board under paragraph (1)(B) to take any
action with respect to an insured credit union in lieu of
appointing a conservator or liquidating agent shall cease to
be effective not later than the end of the 180-day period
beginning on the date on which the determination is made, and
a conservator or liquidating agent shall be appointed for
that credit union under paragraph (1)(A), unless the Board
makes a new determination under paragraph (1)(B) before the
end of the effective period of the prior determination.
``(3) Appointment of liquidating agent required if other
action fails to restore net worth.--
[[Page
S8960]]
``(A) In general.--Notwithstanding paragraphs (1) and (2),
the Board shall appoint a liquidating agent for an insured
credit union if the credit union is critically
undercapitalized on average during the calendar quarter
beginning 18 months after the date on which the credit union
became critically undercapitalized.
``(B) Exception.--Notwithstanding subparagraph (A), the
Board may continue to take such other action as the Board
determines to be appropriate in lieu of appointment of a
liquidating agent if--
``(i) the Board determines that--
``(I) the insured credit union has been in substantial
compliance with an approved net worth restoration plan that
requires consistent improvement in the net worth of the
credit union since the date of the approval of the plan; and
``(II) the insured credit union has positive net income or
has an upward trend in earnings that the Board projects as
sustainable; and
``(ii) the Board certifies that the credit union is viable
and not expected to fail.
``(4) Nondelegation.--
``(A) In general.--Except as provided in subparagraph (B),
the Board may not delegate the authority of the Board under
this subsection.
``(B) Exception.--The Board may delegate the authority of
the Board under this subsection with respect to an insured
credit union that has less than $5,000,000 in total assets,
if the Board permits the credit union to appeal any adverse
action to the Board.
``(j) Review Required When Fund Incurs Material Loss.--For
purposes of determining whether the Fund has incurred a
material loss with respect to an insured credit union (such
that the inspector general of the Board must make a report),
a loss is material if it exceeds the sum of--
``(1) $10,000,000; and
``(2) an amount equal to 10 percent of the total assets of
the credit union at the time at which the Board initiated
assistance under section 208 or was appointed liquidating
agent.
``(k) Appeals Process.--Material supervisory
determinations, including decisions to require prompt
corrective action, made pursuant to this section by
Administration officials other than the Board may be appealed
to the Board pursuant to the independent appellate process
required by section 309 of the Riegle Community Development
and Regulatory Improvement Act of 1994 (or, if the Board so
specifies, pursuant to separate procedures prescribed by
regulation).
``(l) Consultation and Cooperation With State Credit Union
Supervisors.--
``(1) In general.--In implementing this section, the Board
shall consult and seek to work cooperatively with State
officials having jurisdiction over State-chartered insured
credit unions.
``(2) Evaluating net worth restoration plan.--In evaluating
any net worth restoration plan submitted by a State-chartered
insured credit union, the Board shall seek the views of the
State official having jurisdiction over the credit union.
``(3) Deciding whether to appoint conservator or
liquidating agent.--With respect to any decision by the Board
on whether to appoint a conservator or liquidating agent for
a State-chartered insured credit union--
``(A) the Board shall--
``(i) seek the views of the State official having
jurisdiction over the credit union; and
``(ii) give that official an opportunity to take the
proposed action;
``(B) the Board shall, upon timely request of an official
referred to in subparagraph (A), promptly provide the
official with--
``(i) a written statement of the reasons for the proposed
action; and
``(ii) reasonable time to respond to that statement;
``(C) if the official referred to in subparagraph (A) makes
a timely written response that disagrees with the proposed
action and gives reasons for that disagreement, the Board
shall not appoint a conservator or liquidating agent for the
credit union, unless the Board, after considering the views
of the official, has determined that--
``(i) the Fund faces a significant risk of loss with
respect to the credit union if a conservator or liquidating
agent is not appointed; and
``(ii) the appointment is necessary to reduce--
``(I) the risk that the Fund would incur a loss with
respect to the credit union; or
(II) any loss that the Fund is expected to incur with
respect to the credit union; and
``(D) the Board may not delegate any determination under
subparagraph (C).
``(m) Corporate Credit Unions Exempted.--This section does
not apply to any insured credit union that--
``(1) operates primarily for the purpose of serving credit
unions; and
``(2) permits individuals to be members of the credit union
only to the extent that applicable law requires that such
persons own shares.
``(n) Other Authority Not Affected.--This section does not
limit any authority of the Board or a State to take action in
addition to (but not in derogation of) that required under
this section.
``(o) Definitions.--For purposes of this section the
following definitions shall apply:
``(1) Federal banking agency.--The term `Federal banking
agency' has the same meaning as in section 3 of the Federal
Deposit Insurance Act.
``(2) Net worth.--The term `net worth'--
``(A) with respect to any insured credit union, means
retained earnings balance of the credit union, as determined
under generally accepted accounting principles; and
``(B) with respect to a low-income credit union, includes
secondary capital accounts that are--
``(i) uninsured; and
``(ii) subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and
the Fund.
``(3) Net worth ratio.--The term `net worth ratio' means,
with respect to a credit union, the ratio of the net worth of
the credit union to the total assets of the credit union.
``(4) New credit union.--The term `new credit union' means
an insured credit union that--
``(A) has been in operation for less than 10 years; and
``(B) has not more than $10,000,000 in total assets.''.
(b) Conservatorship and Liquidation Amendments To
Facilitate Prompt Corrective Action.--
(1) Conservatorship.--Section 206(h) of the Federal Credit
Union Act (12 U.S.C. 1786(h)) is amended--
(A) in paragraph (1)--
(i) in subparagraph (D), by striking ``or'' at the end;
(ii) in subparagraph (E), by striking the period at the end
and inserting a semicolon; and
(iii) by adding at the end the following new subparagraphs:
``(F) the credit union is significantly undercapitalized,
as defined in section 216, and has no reasonable prospect of
becoming adequately capitalized, as defined in section 216;
or
``(G) the credit union is critically undercapitalized, as
defined in section 216.''; and
(B) in paragraph (2)--
(i) in subparagraph (A), by striking ``In the case'' and
inserting ``Except as provided in subparagraph (C), in the
case''; and
(ii) by adding at the end the following new subparagraph:
``(C) In the case of a State-chartered insured credit
union, the authority conferred by subparagraphs (F) and (G)
of paragraph (1) may not be exercised unless the Board has
complied with section 216(l).''.
(2) Liquidation.--Section 207(a) of the Federal Credit
Union Act (12 U.S.C. 1787(a)) is amended--
(A) in paragraph (1)(A), by striking ``himself'' and
inserting ``itself''; and
(B) by adding at the end the following new paragraph:
``(3) Liquidation to facilitate prompt corrective action.--
The Board may close any credit union for liquidation, and
appoint itself or another (including, in the case of a State-
chartered insured credit union, the State official having
jurisdiction over the credit union) as liquidating agent of
that credit union, if--
``(A) the Board determines that--
``(i) the credit union is significantly undercapitalized,
as defined in section 216, and has no reasonable prospect of
becoming adequately capitalized, as defined in section 216;
or
``(ii) the credit union is critically undercapitalized, as
defined in section 216; and
``(B) in the case of a State-chartered insured credit
union, the Board has complied with section 216(l).''.
(c) Consultation Required.--In developing regulations to
implement section 216 of the Federal Credit Union Act (as
added by subsection (a) of this section), the Board shall
consult with the Secretary, the Federal banking agencies, and
the State officials having jurisdiction over State-chartered
insured credit unions.
(d) Deadlines for Regulations.--
(1) In general.--Except as provided in paragraph (2), the
Board shall--
(A) publish in the Federal Register proposed regulations to
implement section 216 of the Federal Credit Union Act (as
added by subsection (a) of this section) not later than 270
days after the date of enactment of this Act; and
(B) promulgate final regulations to implement that section
216 not later than 18 months after the date of enactment of
this Act.
(2) Risk-based net worth requirement.--
(A) Advance notice of proposed rulemaking.--Not later than
180 days after the date of enactment of this Act, the Board
shall publish in the Federal Register an advance notice of
proposed rulemaking, as required by section 216(d) of the
Federal Credit Union Act, as added by this Act.
(B) Final regulations.--The Board shall promulgate final
regulations, as required by that section 216(d) not later
than 2 years after the date of enactment of this Act.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2),
section 216 of the Federal Credit Union Act (as added by this
section) shall become effective 2 years after the date of
enactment of this Act.
(2) Risk-based net worth requirement.--Section 216(d) of
the Federal Credit Union Act (as added by this section) shall
become effective on January 1, 2001.
(f) Report to Congress Required.--When the Board publishes
proposed regulations pursuant to subsection (d)(1)(A), or
promulgates final regulations pursuant to subsection
(d)(1)(B), the Board shall submit to the Congress a report
that specifically explains--
(1) how the regulations carry out section 216(b)(1)(B) of
the Federal Credit Union Act (as added by this section),
relating to the cooperative character of credit unions; and
(2) how the regulations differ from section 38 of the
Federal Deposit Insurance Act, and the reasons for those
differences.
(g) Conforming Amendments.--
(1) Amendments relating to enforcement of prompt corrective
action.--Section 206(k) of the Federal Credit Union Act (12
U.S.C. 1786(k)) is amended--
(A) in paragraph (1), by inserting ``or section 216'' after
``this section'' each place it appears; and
(B) in paragraph (2)(A)(ii), by inserting ``, or any final
order under section 216'' before the semicolon.
(2) Conforming amendment regarding appointment of state
credit union supervisor as conservator.--Section 206(h)(1) of
the Federal Credit Union Act (12 U.S.C. 1786(h)(1)) is
[[Page
S8961]]
amended by inserting ``or another (including, in the case of
a State-chartered insured credit union, the State official
having jurisdiction over the credit union)'' after ``appoint
itself''.
(3) Amendment repealing superseded provision.--Section 116
of the Federal Credit Union Act (12 U.S.C. 1762) is repealed.
SEC. 302. NATIONAL CREDIT UNION SHARE INSURANCE FUND EQUITY
RATIO, AVAILABLE ASSETS RATIO, AND STANDBY
PREMIUM CHARGE.
(a) In General.--Section 202 of the Federal Credit Union
Act (12 U.S.C. 1782) is amended--
(1) by striking subsection (b) and inserting the following:
``(b) Certified Statement.--
``(1) Statement required.--
``(A) In general.--For each calendar year, in the case of
an insured credit union with total assets of not more than
$50,000,000, and for each semi-annual period in the case of
an insured credit union with total assets of $50,000,000 or
more, an insured credit union shall file with the Board, at
such time as the Board prescribes, a certified statement
showing the total amount of insured shares in the credit
union at the close of the relevant period and both the amount
of its deposit or adjustment of deposit and the amount of the
insurance charge due to the Fund for that period, both as
computed under subsection (c).
``(B) Exception for newly insured credit union.--
Subparagraph (A) shall not apply with respect to a credit
union that became insured during the reporting period.
``(2) Form.--The certified statements required to be filed
with the Board pursuant to this subsection shall be in such
form and shall set forth such supporting information as the
Board shall require.
``(3) Certification.--The president of the credit union or
any officer designated by the board of directors shall
certify, with respect to each statement required to be filed
with the Board pursuant to this subsection, that to the best
of his or her knowledge and belief the statement is true,
correct, complete, and in accordance with this title and the
regulations issued under this title.'';
(2) in subsection (c)(1)(A), by striking clause (iii) and
inserting the following:
``(iii) Periodic adjustment.--The amount of each insured
credit union's deposit shall be adjusted as follows, in
accordance with procedures determined by the Board, to
reflect changes in the credit union's insured shares:
``(I) annually, in the case of an insured credit union with
total assets of not more than $50,000,000; and
``(II) semi-annually, in the case of an insured credit
union with total assets of $50,000,000 or more.'';
(3) in subsection (c), by striking paragraphs (2) and (3)
and inserting the following:
``(2) Insurance premium charges.--
``(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.
``(3) Distributions from fund required.--
``(A) In general.--The Board shall effect a pro rata
distribution to insured credit unions after each calendar
year if, as of the end of that calendar year--
``(i) any loans to the Fund from the Federal Government,
and any interest on those loans, have been repaid;
``(ii) the Fund's equity ratio exceeds the normal operating
level; and
``(iii) the Fund's available assets ratio exceed
s 1.0
percent.
``(B) Amount of distribution.--The Board shall distribute
under subparagraph (A) the maximum possible amount that--
``(i) does not reduce the Fund's equity ratio below the
normal operating level; and
``(ii) does not reduce the Fund's available assets ratio
below 1.0 percent.
``(C) Calculation based on certified statements.--In
calculating the Fund's equity ratio and available assets
ratio for purposes of this paragraph, the Board shall
determine the aggregate amount of the insured shares in all
insured credit unions from insured credit unions certified
statements under subsection (b) for the final reporting
period of the calendar year referred to in subparagraph
(A).'';
(4) in subsection (c), by adding at the end the following
new paragraph:
``(4) Timeliness and accuracy of data.--In calculating the
available assets ratio and equity ratio of the Fund, the
Board shall use the most current and accurate data reasonably
available.''; and
(5) by striking subsection (h) and inserting the following:
``(h) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Available assets ratio.--The term `available assets
ratio', when applied to the Fund, means the ratio of--
``(A) the amount determined by subtracting--
``(i) direct liabilities of the Fund and contingent
liabilities for which no provision for losses has been made,
from
``(ii) the sum of cash and the market value of unencumbered
investments authorized under section 203(c), to
``(B) the aggregate amount of the insured shares in all
insured credit unions.
``(2) Equity ratio.--The term `equity ratio', when applied
to the Fund, means the ratio of--
``(A) the amount of Fund capitalization, including insured
credit unions' 1 percent capitalization deposits and the
retained earnings balance of the Fund (net of direct
liabilities of the Fund and contingent liabilities for which
no provision for losses has been made); to
``(B) the aggregate amount of the insured shares in all
insured credit unions.
``(3) Insured shares.--The term `insured shares', when
applied to this section, includes share, share draft,
Major Actions:
All articles in Senate section
CREDIT UNION MEMBERSHIP ACCESS ACT
(Senate - July 24, 1998)
Text of this article available as:
TXT
PDF
[Pages
S8956-S8982]
CREDIT UNION MEMBERSHIP ACCESS ACT
The PRESIDING OFFICER. Under the previous order, the Senate will
proceed to the consideration of
H.R. 1151, which the clerk will report.
A bill (
H.R. 1151) to amend the Federal Credit Union Act to
clarify existing law with regard to the field of membership
of Federal credit unions, to preserve the integrity and
purpose of Federal credit unions, to enhance supervisory
oversight of insured credit unions, and for other purposes.
The Senate proceeded to consider the bill, which had been reported
from the Committee on Banking, Housing, and Urban Affairs, with an
amendment to strike all after the enacting clause and inserting in lieu
thereof the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Credit
Union Membership Access Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.
TITLE I--CREDIT UNION MEMBERSHIP
Sec. 101. Fields of membership.
Sec. 102. Criteria for approval of expansion of membership of multiple
common-bond credit unions.
Sec. 103. Geographical guidelines for community credit unions.
TITLE II--REGULATION OF CREDIT UNIONS
Sec. 201. Financial statement and audit requirements.
Sec. 202. Conversion of insured credit unions.
Sec. 203. Limitation on member business loans.
Sec. 204. Serving persons of modest means within the field of
membership of credit unions.
Sec. 205. National Credit Union Administration Board membership.
Sec. 206. Report and congressional review requirement for certain
regulations.
TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS
Sec. 301. Prompt corrective action.
Sec. 302. National credit union share insurance fund equity ratio,
available assets ratio, and standby premium charge.
Sec. 303. Access to liquidity.
TITLE IV--MISCELLANEOUS PROVISIONS
Sec. 401. Study and report on differing regulatory treatment.
Sec. 402. Review of regulations and paperwork reduction.
Sec. 403. Treasury report on reduced taxation and viability of small
banks.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The American credit union movement began as a
cooperative effort to serve the productive and provident
credit needs of individuals of modest means.
(2) Credit unions continue to fulfill this public purpose,
and current members and membership groups should not face
divestiture from the financial services institution of their
choice as a result of recent court action.
(3) To promote thrift and credit extension, a meaningful
affinity and bond among members, manifested by a commonality
of routine interaction, shared and related work experiences,
interests, or activities, or the maintenance of an otherwise
well-understood sense of cohesion or identity is essential to
the fulfillment of the public mission of credit unions.
(4) Credit unions, unlike many other participants in the
financial services market, are exempt from Federal and most
State taxes because they are member-owned, democratically
operated, not-for-profit organizations generally managed by
volunteer boards of directors and because they have the
specified mission of meeting the credit and savings needs of
consumers, especially persons of modest means.
(5) Improved credit union safety and soundness provisions
will enhance the public benefit that citizens receive from
these cooperative financial services institutions.
SEC. 3. DEFINITIONS.
As used in this Act--
(1) the term ``Administration'' means the National Credit
Union Administration;
(2) the term ``Board'' means the National Credit Union
Administration Board;
(3) the term ``Federal banking agencies'' has the same
meaning as in section 3 of the Federal Deposit Insurance Act;
(4) the terms ``insured credit union'' and ``State-
chartered insured credit union'' have the same meanings as in
section 101 of the Federal Credit Union Act; and
(5) the term ``Secretary'' means the Secretary of the
Treasury.
TITLE I--CREDIT UNION MEMBERSHIP
SEC. 101. FIELDS OF MEMBERSHIP.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended--
(1) in the first sentence--
(A) by striking ``Federal credit union membership shall
consist of'' and inserting ``(a) In General.--Subject to
subsection (b), Federal credit union membership shall consist
of''; and
(B) by striking ``, except that'' and all that follows
through ``rural district''; and
(2) by adding at the end the following new subsections:
``(b) Membership Field.--Subject to the other provisions of
this section, the membership of any Federal credit union
shall be limited to the membership described in 1 of the
following categories:
``(1) Single common-bond credit union.--1 group that has a
common bond of occupation or association.
``(2) Multiple common-bond credit union.--More than 1
group--
``(A) each of which has (within the group) a common bond of
occupation or association; and
``(B) the number of members of each of which (at the time
the group is first included within the field of membership of
a credit union described in this paragraph) does not exceed
any numerical limitation applicable under subsection (d).
``(3) Community credit union.--Persons or organizations
within a well-defined local community, neighborhood, or rural
district.
``(c) Exceptions.--
``(1) Grandfathered members and groups.--
``(A) In general.--Notwithstanding subsection (b)--
``(i) any person or organization that is a member of any
Federal credit union as of the date of enactment of the
Credit Union Membership Access Act may remain a member of the
credit union after that date of enactment; and
``(ii) a member of any group whose members constituted a
portion of the membership of any Federal credit union as of
that date of enactment shall continue to be eligible to
become a member of that credit union, by virtue of membership
in that group, after that date of enactment.
``(B) Successors.--If the common bond of any group referred
to in subparagraph (A) is defined by any particular
organization or business entity, subparagraph (A) shall
continue to apply with respect to any successor to the
organization or entity.
``(2) Exception for underserved areas.--Notwithstanding
subsection (b), in the case of a Federal credit union, the
field of membership category of which is described in
subsection (b)(2), the Board may allow the membership of the
credit union to include any person or organization within a
local community, neighborhood, or rural district if--
``(A) the Board determines that the local community,
neighborhood, or rural district--
``(i) meets the requirements of paragraph (3) and
subparagraphs (A) and (B) of paragraph (4) of section 233(b)
of the Bank Enterprise Act of 1991, and such additional
requirements as the Board may impose; and
``(ii) is underserved, based on data of the Board and the
Federal banking agencies (as defined in section 3 of the
Federal Deposit Insurance Act), by other depository
institutions (as defined in section 19(b)(1)(A) of the
Federal Reserve Act); and
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``(B) the credit union establishes and maintains an office
or facility in the local community, neighborhood, or rural
district at which credit union services are available.
``(d) Multiple Common-Bond Credit Union Group
Requirements.--
``(1) Numerical limitation.--Except as provided in
paragraph (2), only a group with fewer than 3,000 members
shall be eligible to be included in the field of membership
category of a credit union described in subsection (b)(2).
``(2) Exceptions.--In the case of any Federal credit union,
the field of membership category of which is described in
subsection (b)(2), the numerical limitation in paragraph (1)
of this subsection shall not apply with respect to--
``(A) any group that the Board determines, in writing and
in accordance with the guidelines and regulations issued
under paragraph (3), could not feasibly or reasonably
establish a new single common-bond credit union, the field of
membership category of which is described in subsection
(b)(1) because--
``(i) the group lacks sufficient volunteer and other
resources to support the efficient and effective operation of
a credit union;
``(ii) the group does not meet the criteria that the Board
has determined to be important for the likelihood of success
in establishing and managing a new credit union, including
demographic characteristics such as geographical location of
members, diversity of ages and income levels, and other
factors that may affect the financial viability and stability
of a credit union; or
``(iii) the group would be unlikely to operate a safe and
sound credit union;
``(B) any group transferred from another credit union--
``(i) in connection with a merger or consolidation
recommended by the Board or any appropriate State credit
union supervisor based on safety and soundness concerns with
respect to that other credit union; or
``(ii) by the Board in the Board's capacity as conservator
or liquidating agent with respect to that other credit union;
or
``(C) any group transferred in connection with a voluntary
merger, having received conditional approval by the
Administration of the merger application prior to October 25,
1996, but not having consummated the merger prior to October
25, 1996, if the merger is consummated not later than 180
days after the date of enactment of the Credit Union
Membership Access Act.
``(3) Regulations and guidelines.--The Board shall issue
guidelines or regulations, after notice and opportunity for
comment, setting forth the criteria that the Board will apply
in determining under this subsection whether or not an
additional group may be included within the field of
membership category of an existing credit union described in
subsection (b)(2).
``(e) Additional Membership Eligibility Provisions.--
``(1) Membership eligibility limited to immediate family or
household members.--No individual shall be eligible for
membership in a credit union on the basis of the relationship
of the individual to another person who is eligible for
membership in the credit union, unless the individual is a
member of the immediate family or household (as those terms
are defined by the Board, by regulation) of the other person.
``(2) Retention of membership.--Except as provided in
section 118, once a person becomes a member of a credit union
in accordance with this title, that person or organization
may remain a member of that credit union until the person or
organization chooses to withdraw from the membership of the
credit union.''.
SEC. 102. CRITERIA FOR APPROVAL OF EXPANSION OF MEMBERSHIP OF
MULTIPLE COMMON-BOND CREDIT UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended by adding at the end the following new
subsection:
``(f) Criteria for Approval of Expansion of Multiple
Common-Bond Credit Unions.--
``(1) In general.--The Board shall--
``(A) encourage the formation of separately chartered
credit unions instead of approving an application to include
an additional group within the field of membership of an
existing credit union whenever practicable and consistent
with reasonable standards for the safe and sound operation of
the credit union; and
``(B) if the formation of a separate credit union by the
group is not practicable or consistent with the standards
referred to in subparagraph (A), require the inclusion of the
group in the field of membership of a credit union that is
within reasonable proximity to the location of the group
whenever practicable and consistent with reasonable standards
for the safe and sound operation of the credit union.
``(2) Approval criteria.--The Board may not approve any
application by a Federal credit union, the field of
membership category of which is described in subsection
(b)(2) to include any additional group within the field of
membership of the credit union (or an application by a
Federal credit union described in subsection (b)(1) to
include an additional group and become a credit union
described in subsection (b)(2)), unless the Board determines,
in writing, that--
``(A) the credit union has not engaged in any unsafe or
unsound practice (as defined in section 206(b)) that is
material during the 1-year period preceding the date of
filing of the application;
``(B) the credit union is adequately capitalized;
``(C) the credit union has the administrative capability to
serve the proposed membership group and the financial
resources to meet the need for additional staff and assets to
serve the new membership group;
``(D) pursuant to the most recent evaluation of the credit
union under section 215, the credit union is satisfactorily
providing affordable credit union services to all individuals
of modest means within the field of membership of the credit
union;
``(E) any potential harm that the expansion of the field of
membership of the credit union may have on any other insured
credit union and its members is clearly outweighed in the
public interest by the probable beneficial effect of the
expansion in meeting the convenience and needs of the members
of the group proposed to be included in the field of
membership; and
``(F) the credit union has met such additional requirements
as the Board may prescribe, by regulation.''.
SEC. 103. GEOGRAPHICAL GUIDELINES FOR COMMUNITY CREDIT
UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C.
1759) is amended by adding at the end the following new
subsection:
``(g) Regulations Required for Community Credit Unions.--
``(1) Definition of well-defined local community,
neighborhood, or rural district.--The Board shall prescribe,
by regulation, a definition for the term `well-defined local
community, neighborhood, or rural district' for purposes of--
``(A) making any determination with regard to the field of
membership of a credit union described in subsection (b)(3);
and
``(B) establishing the criteria applicable with respect to
any such determination.
``(2) Scope of application.--The definition prescribed by
the Board under paragraph (1) shall apply with respect to any
application to form a new credit union, or to alter or expand
the field of membership of an existing credit union, that is
filed with the Board after the date of enactment of the
Credit Union Membership Access Act.''.
TITLE II--REGULATION OF CREDIT UNIONS
SEC. 201. FINANCIAL STATEMENT AND AUDIT REQUIREMENTS.
(a) In General.--Section 202(a)(6) of the Federal Credit
Union Act (12 U.S.C. 1782(a)(6)) is amended by adding at the
end the following new subparagraphs:
``(C) Accounting principles.--
``(i) In general.--Accounting principles applicable to
reports or statements required to be filed with the Board by
each insured credit union shall be uniform and consistent
with generally accepted accounting principles.
``(ii) Board determination.--If the Board determines that
the application of any generally accepted accounting
principle to any insured credit union is not appropriate, the
Board may prescribe an accounting principle for application
to the credit union that is no less stringent than generally
accepted accounting principles.
``(iii) De minimus exception.--This subparagraph shall not
apply to any insured credit union, the total assets of which
are less than $10,000,000, unless prescribed by the Board or
an appropriate State credit union supervisor.
``(D) Large credit union audit requirement.--
``(i) In general.--Each insured credit union having total
assets of $500,000,000 or more shall have an annual
independent audit of the financial statements of the credit
union, performed in accordance with generally accepted
auditing standards by an independent certified public
accountant or public accountant licensed by the appropriate
State or jurisdiction to perform those services.
``(ii) Voluntary audits.--If a Federal credit union that is
not required to conduct an audit under clause (i), and that
has total assets of more than $10,000,000 conducts such an
audit for any purpose, using an independent auditor who is
compensated for his or her audit services with respect to
that audit, the audit shall be performed consistent with the
accountancy laws of the appropriate State or jurisdiction,
including licensing requirements.''.
(b) Technical and Conforming Amendment.--Section
202(a)(6)(B) of the Federal Credit Union Act (12 U.S.C.
1782(a)(6)(B)) is amended by striking ``subparagraph (A)''
and inserting ``subparagraph (A) or (D)''.
SEC. 202. CONVERSION OF INSURED CREDIT UNIONS.
Section 205(b) of the Federal Credit Union Act (12 U.S.C.
1785(b)) is amended--
(1) in paragraph (1), by striking ``Except with the prior
written approval of the Board, no insured credit union
shall'' and inserting ``Except as provided in paragraph (2),
no insured credit union shall, without the prior approval of
the Board'';
(2) by redesignating paragraph (2) as paragraph (3); and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) Conversion of insured credit unions to mutual savings
banks.--
``(A) In general.--Notwithstanding paragraph (1), an
insured credit union may convert to a mutual savings bank or
savings association (if the savings association is in mutual
form), as those terms are defined in section 3 of the Federal
Deposit Insurance Act, without the prior approval of the
Board, subject to the requirements and procedures set forth
in the laws and regulations governing mutual savings banks
and savings associations.
``(B) Conversion proposal.--A proposal for a conversion
described in subparagraph (A) shall first be approved, and a
date set for a vote thereon by the members (either at a
meeting to be held on that date or by written ballot to be
filed on or before that date), by a majority of the directors
of the insured credit union. Approval of the proposal for
conversion shall be by the affirmative vote of a majority of
the members of the insured credit union who vote on the
proposal.
``(C) Notice of proposal to members.--An insured credit
union that proposes to convert to a mutual savings bank or
savings association under subparagraph (A) shall submit
notice to each of its members who is eligible to vote on the
matter of its intent to convert--
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``(i) 90 days before the date of the member vote on the
conversion;
``(ii) 60 days before the date of the member vote on the
conversion; and
``(iii) 30 days before the date of the member vote on the
conversion.
``(D) Notice of proposal to board.--The Board may require
an insured credit union that proposes to convert to a mutual
savings bank or savings association under subparagraph (A) to
submit a notice to the Board of its intent to convert during
the 90-day period preceding the date of the completion of the
conversion.
``(E) Inapplicability of act upon conversion.--Upon
completion of a conversion described in subparagraph (A), the
credit union shall no longer be subject to any of the
provisions of this Act.
``(F) Limit on compensation of officials.--
``(i) In general.--No director or senior management
official of an insured credit union may receive any economic
benefit in connection with a conversion of the credit union
as described in subparagraph (A), other than--
``(I) director fees; and
``(II) compensation and other benefits paid to directors or
senior management officials of the converted institution in
the ordinary course of business.
``(ii) Senior management official.--For purposes of this
subparagraph, the term `senior management official' means a
chief executive officer, an assistant chief executive
officer, a chief financial officer, and any other senior
executive officer (as defined by the appropriate Federal
banking agency pursuant to section 32(f) of the Federal
Deposit Insurance Act).
``(G) Consistent rules.--
``(i) In general.--Not later than 6 months after the date
of enactment of the Credit Union Membership Access Act, the
Administration shall promulgate final rules applicable to
charter conversions described in this paragraph that are
consistent with rules promulgated by other financial
regulators, including the Office of Thrift Supervision and
the Office of the Comptroller of the Currency. The rules
required by this clause shall provide that charter conversion
by an insured credit union shall be subject to regulation
that is no more or less restrictive than that applicable to
charter conversions by other financial institutions.
``(ii) Oversight of member vote.--The member vote
concerning charter conversion under this paragraph shall be
administered by the Administration, and shall be verified by
the Federal or State regulatory agency that would have
jurisdiction over the institution after the conversion. If
either the Administration or that regulatory agency
disapproves of the methods by which the member vote was taken
or procedures applicable to the member vote, the member vote
shall be taken again, as directed by the Administration or
the agency.''.
SEC. 203. LIMITATION ON MEMBER BUSINESS LOANS.
The Federal Credit Union Act (12 U.S.C. 1701 et seq.) is
amended by inserting after section 107 the following new
section:
``SEC. 107A. LIMITATION ON MEMBER BUSINESS LOANS.
``(a) In General.--On and after the date of enactment of
this section, no insured credit union may make any member
business loan that would result in a total amount of such
loans outstanding at that credit union at any one time equal
to more than the lesser of--
``(1) 1.75 times the actual net worth of the credit union;
or
``(2) 1.75 times the minimum net worth required under
section 216(c)(1)(A) for a credit union to be well
capitalized.
``(b) Exceptions.--Subsection (a) does not apply in the
case of--
``(1) an insured credit union chartered for the purpose of
making, or that has a history of primarily making, member
business loans to its members, as determined by the Board; or
``(2) an insured credit union that--
``(A) serves predominantly low-income members, as defined
by the Board; or
``(B) is a community development financial institution, as
defined in section 103 of the Community Development Banking
and Financial Institutions Act of 1994.
``(c) Definitions.--As used in this section--
``(1) the term `member business loan'--
``(A) means any loan, line of credit, or letter of credit,
the proceeds of which will be used for a commercial,
corporate or other business investment property or venture,
or agricultural purpose; and
``(B) does not include an extension of credit--
``(i) that is fully secured by a lien on a 1- to 4-family
dwelling that is the primary residence of a member;
``(ii) that is fully secured by shares in the credit union
making the extension of credit or deposits in other financial
institutions;
``(iii) that is described in subparagraph (A), if it was
made to a borrower or an associated member that has a total
of all such extensions of credit in an amount equal to less
than $50,000;
``(iv) the repayment of which is fully insured or fully
guaranteed by, or where there is an advance commitment to
purchase in full by, any agency of the Federal Government or
of a State, or any political subdivision thereof; or
``(v) that is granted by a corporate credit union (as that
term is defined by the Board) to another credit union.
``(2) the term `net worth'--
``(A) with respect to any insured credit union, means the
credit union's retained earnings balance, as determined under
generally accepted accounting principles; and
``(B) with respect to a credit union that serves
predominantly low-income members, as defined by the Board,
includes secondary capital accounts that are--
``(i) uninsured; and
``(ii) subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and
the Fund; and
``(3) the term `associated member' means any member having
a shared ownership, investment, or other pecuniary interest
in a business or commercial endeavor with the borrower.
``(d) Effect on Existing Loans.--An insured credit union
that has, on the date of enactment of this section, a total
amount of outstanding member business loans that exceeds the
amount permitted under subsection (a) shall, not later than 3
years after that date of enactment, reduce the total amount
of outstanding member business loans to an amount that is not
greater than the amount permitted under subsection (a).''.
SEC. 204. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD OF
MEMBERSHIP OF CREDIT UNIONS.
(a) In General.--Title II of the Federal Credit Union Act
(12 U.S.C. 1781 et seq.) is amended by adding at the end the
following new section:
``SEC. 215. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD
OF MEMBERSHIP OF CREDIT UNIONS.
``(a) Continuing and Affirmative Obligation.--The purpose
of this section is to reaffirm that insured credit unions
have a continuing and affirmative obligation to meet the
financial services needs of persons of modest means,
consistent with safe and sound operation.
``(b) Evaluation by the Board.--The Board shall, before the
end of the 12-month period beginning on the date of enactment
of the Credit Union Membership Access Act--
``(1) prescribe criteria for periodically reviewing the
record of each insured credit union in providing affordable
credit union services to all individuals of modest means
(including low- and moderate-income individuals) within the
field of membership of the credit union; and
``(2) provide for making the results of the reviews
publicly available.
``(c) Additional Criteria for Community Credit Unions
Required.--The Board shall, by regulation--
``(1) prescribe additional criteria for annually evaluating
the record of any insured credit union that is organized to
serve a well-defined local community, neighborhood, or rural
district in meeting the credit needs and credit union service
needs of the entire field of membership of the credit union;
and
``(2) prescribe procedures for remedying the failure of any
insured credit union described in paragraph (1) to meet the
criteria established pursuant to paragraph (1), including the
disapproval of any application by the credit union to expand
the field of membership of the credit union.
``(d) Emphasis on Performance, Not Paperwork.--In
evaluating any insured credit union under this section, the
Board--
``(1) shall focus on the actual performance of the insured
credit union; and
``(2) may not impose burdensome paperwork or recordkeeping
requirements.''.
(b) Annual Reports.--With respect to each of the first 5
years that begin after the date of enactment of this Act, the
Board shall include in the annual report to the Congress
under section 102(d) of the Federal Credit Union Act, a
report on the progress of the Board in implementing section
215 of that Act (as added by subsection (a) of this section).
SEC. 205. NATIONAL CREDIT UNION ADMINISTRATION BOARD
MEMBERSHIP.
Section 102(b) of the Federal Credit Union Act (12 U.S.C.
1752a(b)) is amended--
(1) by striking ``(b) The Board'' and inserting ``(b)
Membership and Appointment of Board.--
``(1) In general.--The Board''; and
(2) by adding at the end the following new paragraph:
``(2) Appointment criteria.--
``(A) Experience in financial services.--In considering
appointments to the Board under paragraph (1), the President
shall give consideration to individuals who, by virtue of
their education, training, or experience relating to a broad
range of financial services, financial services regulation,
or financial policy, are especially qualified to serve on the
Board.
``(B) Limit on appointment of credit union officers.--Not
more than 1 member of the Board may be appointed to the Board
from among individuals who, at the time of the appointment,
are, or have recently been, involved with any insured credit
union as a committee member, director, officer, employee, or
other institution-affiliated party.''.
SEC. 206. REPORT AND CONGRESSIONAL REVIEW REQUIREMENT FOR
CERTAIN REGULATIONS.
A regulation prescribed by the Board shall be treated as a
major rule for purposes of chapter 8 of title 5, United
States Code, if the regulation defines, or amends the
definition of--
(1) the term ``immediate family or household'' for purposes
of section 109(e)(1) of the Federal Credit Union Act (as
added by section 101 of this Act); or
(2) the term ``well-defined local community, neighborhood,
or rural district'' for purposes of section 109(g) of the
Federal Credit Union Act (as added by section 103 of this
Act).
TITLE III--CAPITALIZATION AND NET WORTH OF CREDIT UNIONS
SEC. 301. PROMPT CORRECTIVE ACTION.
(a) In General.--Title II of the Federal Credit Union Act
(12 U.S.C. 1781 et seq.) is amended by adding at the end the
following new section:
``SEC. 216. PROMPT CORRECTIVE ACTION.
``(a) Resolving Problems To Protect Fund.--
``(1) Purpose.--The purpose of this section is to resolve
the problems of insured credit unions at the least possible
long-term loss to the Fund.
``(2) Prompt corrective action required.--The Board shall
carry out the purpose of this section by taking prompt
corrective action to resolve the problems of insured credit
unions.
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``(b) Regulations Required.--
``(1) Insured credit unions.--
``(A) In general.--The Board shall, by regulation,
prescribe a system of prompt corrective action for insured
credit unions that is--
``(i) consistent with this section; and
``(ii) comparable to section 38 of the Federal Deposit
Insurance Act.
``(B) Cooperative character of credit unions.--The Board
shall design the system required under subparagraph (A) to
take into account that credit unions are not-for-profit
cooperatives that--
``(i) do not issue capital stock;
``(ii) must rely on retained earnings to build net worth;
and
``(iii) have boards of directors that consist primarily of
volunteers.
``(2) New credit unions.--
``(A) In general.--In addition to regulations under
paragraph (1), the Board shall, by regulation, prescribe a
system of prompt corrective action that shall apply to new
credit unions in lieu of this section and the regulations
prescribed under paragraph (1).
``(B) Criteria for alternative system.--The Board shall
design the system prescribed under subparagraph (A)--
``(i) to carry out the purpose of this section;
``(ii) to recognize that credit unions (as cooperatives
that do not issue capital stock) initially have no net worth,
and give new credit unions reasonable time to accumulate net
worth;
``(iii) to create adequate incentives for new credit unions
to become adequately capitalized by the time that they
either--
``(I) have been in operation for more than 10 years; or
``(II) have more than $10,000,000 in total assets;
``(iv) to impose appropriate restrictions and requirements
on new credit unions that do not make sufficient progress
toward becoming adequately capitalized; and
``(v) to prevent evasion of the purpose of this section.
``(c) Net Worth Categories.--
``(1) In general.--For purposes of this section the
following definitions shall apply:
``(A) Well capitalized.--An insured credit union is `well
capitalized' if--
``(i) it has a net worth ratio of not less than 7 percent;
and
``(ii) it meets any applicable risk-based net worth
requirement under subsection (d).
``(B) Adequately capitalized.--An insured credit union is
`adequately capitalized' if--
``(i) it has a net worth ratio of not less than 6 percent;
and
``(ii) it meets any applicable risk-based net worth
requirement under subsection (d).
``(C) Undercapitalized.--An insured credit union is
`undercapitalized' if--
``(i) it has a net worth ratio of less than 6 percent; or
``(ii) it fails to meet any applicable risk-based net worth
requirement under subsection (d).
``(D) Significantly undercapitalized.--An insured credit
union is `significantly undercapitalized'--
``(i) if it has a net worth ratio of less than 4 percent;
or
``(ii) if--
``(I) it has a net worth ratio of less than 5 percent; and
``(II) it--
``(aa) fails to submit an acceptable net worth restoration
plan within the time allowed under subsection (f); or
``(bb) materially fails to implement a net worth
restoration plan accepted by the Board.
``(E) Critically undercapitalized.--An insured credit union
is `critically undercapitalized' if it has a net worth ratio
of less than 2 percent (or such higher net worth ratio, not
to exceed 3 percent, as the Board may specify by regulation).
``(2) Adjusting net worth levels.--
``(A) In general.--If, for purposes of section 38(c) of the
Federal Deposit Insurance Act, the Federal banking agencies
increase or decrease the required minimum level for the
leverage limit (as those terms are used in that section 38),
the Board may, by regulation, and subject to subparagraph (B)
of this paragraph, correspondingly increase or decrease 1 or
more of the net worth ratios specified in subparagraphs (A)
through (D) of paragraph (1) of this subsection in an amount
that is equal to 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).
``(B) Determinations required.--The Board may increase or
decrease net worth ratios under subparagraph (A) only if the
Board--
``(i) determines, in consultation with the Federal banking
agencies, that the reason for the increase or decrease in the
required minimum level for the leverage limit also justifies
the adjustment in net worth ratios; and
``(ii) determines that the resulting net worth ratios are
sufficient to carry out the purpose of this section.
``(C) Transition period required.--If the Board increases
any net worth ratio under this paragraph, the Board shall
give insured credit unions a reasonable period of time to
meet the increased ratio.
``(d) Risk-Based Net Worth Requirement for Complex Credit
Unions.--
``(1) In general.--The regulations required under
subsection (b)(1) shall include a risk-based net worth
requirement for insured credit unions that are complex, as
defined by the Board based on the portfolios of assets and
liabilities of credit unions.
``(2) Standard.--The Board shall design the risk-based net
worth requirement to take account of any material risks
against which the net worth ratio required for an insured
credit union to be adequately capitalized may not provide
adequate protection.
``(e) Earnings-Retention Requirement Applicable to Credit
Unions That Are Not Well Capitalized.--
``(1) In general.--An insured credit union that is not well
capitalized shall annually set aside as net worth an amount
equal to not less than 0.4 percent of its total assets.
``(2) Board's authority to decrease earnings-retention
requirement.--
``(A) In general.--The Board may, by order, decrease the
0.4 percent requirement in paragraph (1) with respect to a
credit union to the extent that the Board determines that the
decrease--
``(i) is necessary to avoid a significant redemption of
shares; and
``(ii) would further the purpose of this section.
``(B) Periodic review required.--The Board shall
periodically review any order issued under subparagraph (A).
``(f) Net Worth Restoration Plan Required.--
``(1) In general.--Each insured credit union that is
undercapitalized shall submit an acceptable net worth
restoration plan to the Board within the time allowed under
this subsection.
``(2) Assistance to small credit unions.--The Board (or the
staff of the Board) shall, upon timely request by an insured
credit union with total assets of less than $10,000,000, and
subject to such regulations or guidelines as the Board may
prescribe, assist that credit union in preparing a net worth
restoration plan.
``(3) Deadlines for submission and review of plans.--The
Board shall, by regulation, establish deadlines for
submission of net worth restoration plans under this
subsection that--
``(A) provide insured credit unions with reasonable time to
submit net worth restoration plans; and
``(B) require the Board to act on net worth restoration
plans expeditiously.
``(4) Failure to submit acceptable plan within time
allowed.--
``(A) Failure to submit any plan.--If an insured credit
union fails to submit a net worth restoration plan within the
time allowed under paragraph (3), the Board shall--
``(i) promptly notify the credit union of that failure; and
``(ii) give the credit union a reasonable opportunity to
submit a net worth restoration plan.
``(B) Submission of unacceptable plan.--If an insured
credit union submits a net worth restoration plan within the
time allowed under paragraph (3) and the Board determines
that the plan is not acceptable, the Board shall--
``(i) promptly notify the credit union of why the plan is
not acceptable; and
``(ii) give the credit union a reasonable opportunity to
submit a revised plan.
``(5) Accepting plan.--The Board may accept a net worth
restoration plan only if the Board determines that the plan
is based on realistic assumptions and is likely to succeed in
restoring the net worth of the credit union.
``(g) Restrictions on Undercapitalized Credit Unions.--
``(1) Restriction on asset growth.--An insured credit union
that is undercapitalized shall not generally permit its
average total assets to increase, unless--
``(A) the Board has accepted the net worth restoration plan
of the credit union for that action;
``(B) any increase in total assets is consistent with the
net worth restoration plan; and
``(C) the net worth ratio of the credit union increases at
a rate that is consistent with the net worth restoration
plan.
``(2) Restriction on member business loans.--
Notwithstanding section 107A(a), an insured credit union that
is undercapitalized may not make any increase in the total
amount of member business loans (as defined in section
107A(c)) outstanding at that credit union at any one time,
until such time as the credit union becomes adequately
capitalized.
``(h) More Stringent Treatment Based on Other Supervisory
Criteria.--With respect to the exercise of authority by the
Board under regulations comparable to section 38(g) of the
Federal Deposit Insurance Act--
``(1) the Board may not reclassify an insured credit union
into a lower net worth category, or treat an insured credit
union as if it were in a lower net worth category, for
reasons not pertaining to the safety and soundness of that
credit union; and
``(2) the Board may not delegate its authority to
reclassify an insured credit union into a lower net worth
category or to treat an insured credit union as if it were in
a lower net worth category.
``(i) Action Required Regarding Critically Undercapitalized
Credit Unions.--
``(1) In general.--The Board shall, not later than 90 days
after the date on which an insured credit union becomes
critically undercapitalized--
``(A) appoint a conservator or liquidating agent for the
credit union; or
``(B) take such other action as the Board determines would
better achieve the purpose of this section, after documenting
why the action would better achieve that purpose.
``(2) Periodic redeterminations required.--Any
determination by the Board under paragraph (1)(B) to take any
action with respect to an insured credit union in lieu of
appointing a conservator or liquidating agent shall cease to
be effective not later than the end of the 180-day period
beginning on the date on which the determination is made, and
a conservator or liquidating agent shall be appointed for
that credit union under paragraph (1)(A), unless the Board
makes a new determination under paragraph (1)(B) before the
end of the effective period of the prior determination.
``(3) Appointment of liquidating agent required if other
action fails to restore net worth.--
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S8960]]
``(A) In general.--Notwithstanding paragraphs (1) and (2),
the Board shall appoint a liquidating agent for an insured
credit union if the credit union is critically
undercapitalized on average during the calendar quarter
beginning 18 months after the date on which the credit union
became critically undercapitalized.
``(B) Exception.--Notwithstanding subparagraph (A), the
Board may continue to take such other action as the Board
determines to be appropriate in lieu of appointment of a
liquidating agent if--
``(i) the Board determines that--
``(I) the insured credit union has been in substantial
compliance with an approved net worth restoration plan that
requires consistent improvement in the net worth of the
credit union since the date of the approval of the plan; and
``(II) the insured credit union has positive net income or
has an upward trend in earnings that the Board projects as
sustainable; and
``(ii) the Board certifies that the credit union is viable
and not expected to fail.
``(4) Nondelegation.--
``(A) In general.--Except as provided in subparagraph (B),
the Board may not delegate the authority of the Board under
this subsection.
``(B) Exception.--The Board may delegate the authority of
the Board under this subsection with respect to an insured
credit union that has less than $5,000,000 in total assets,
if the Board permits the credit union to appeal any adverse
action to the Board.
``(j) Review Required When Fund Incurs Material Loss.--For
purposes of determining whether the Fund has incurred a
material loss with respect to an insured credit union (such
that the inspector general of the Board must make a report),
a loss is material if it exceeds the sum of--
``(1) $10,000,000; and
``(2) an amount equal to 10 percent of the total assets of
the credit union at the time at which the Board initiated
assistance under section 208 or was appointed liquidating
agent.
``(k) Appeals Process.--Material supervisory
determinations, including decisions to require prompt
corrective action, made pursuant to this section by
Administration officials other than the Board may be appealed
to the Board pursuant to the independent appellate process
required by section 309 of the Riegle Community Development
and Regulatory Improvement Act of 1994 (or, if the Board so
specifies, pursuant to separate procedures prescribed by
regulation).
``(l) Consultation and Cooperation With State Credit Union
Supervisors.--
``(1) In general.--In implementing this section, the Board
shall consult and seek to work cooperatively with State
officials having jurisdiction over State-chartered insured
credit unions.
``(2) Evaluating net worth restoration plan.--In evaluating
any net worth restoration plan submitted by a State-chartered
insured credit union, the Board shall seek the views of the
State official having jurisdiction over the credit union.
``(3) Deciding whether to appoint conservator or
liquidating agent.--With respect to any decision by the Board
on whether to appoint a conservator or liquidating agent for
a State-chartered insured credit union--
``(A) the Board shall--
``(i) seek the views of the State official having
jurisdiction over the credit union; and
``(ii) give that official an opportunity to take the
proposed action;
``(B) the Board shall, upon timely request of an official
referred to in subparagraph (A), promptly provide the
official with--
``(i) a written statement of the reasons for the proposed
action; and
``(ii) reasonable time to respond to that statement;
``(C) if the official referred to in subparagraph (A) makes
a timely written response that disagrees with the proposed
action and gives reasons for that disagreement, the Board
shall not appoint a conservator or liquidating agent for the
credit union, unless the Board, after considering the views
of the official, has determined that--
``(i) the Fund faces a significant risk of loss with
respect to the credit union if a conservator or liquidating
agent is not appointed; and
``(ii) the appointment is necessary to reduce--
``(I) the risk that the Fund would incur a loss with
respect to the credit union; or
(II) any loss that the Fund is expected to incur with
respect to the credit union; and
``(D) the Board may not delegate any determination under
subparagraph (C).
``(m) Corporate Credit Unions Exempted.--This section does
not apply to any insured credit union that--
``(1) operates primarily for the purpose of serving credit
unions; and
``(2) permits individuals to be members of the credit union
only to the extent that applicable law requires that such
persons own shares.
``(n) Other Authority Not Affected.--This section does not
limit any authority of the Board or a State to take action in
addition to (but not in derogation of) that required under
this section.
``(o) Definitions.--For purposes of this section the
following definitions shall apply:
``(1) Federal banking agency.--The term `Federal banking
agency' has the same meaning as in section 3 of the Federal
Deposit Insurance Act.
``(2) Net worth.--The term `net worth'--
``(A) with respect to any insured credit union, means
retained earnings balance of the credit union, as determined
under generally accepted accounting principles; and
``(B) with respect to a low-income credit union, includes
secondary capital accounts that are--
``(i) uninsured; and
``(ii) subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and
the Fund.
``(3) Net worth ratio.--The term `net worth ratio' means,
with respect to a credit union, the ratio of the net worth of
the credit union to the total assets of the credit union.
``(4) New credit union.--The term `new credit union' means
an insured credit union that--
``(A) has been in operation for less than 10 years; and
``(B) has not more than $10,000,000 in total assets.''.
(b) Conservatorship and Liquidation Amendments To
Facilitate Prompt Corrective Action.--
(1) Conservatorship.--Section 206(h) of the Federal Credit
Union Act (12 U.S.C. 1786(h)) is amended--
(A) in paragraph (1)--
(i) in subparagraph (D), by striking ``or'' at the end;
(ii) in subparagraph (E), by striking the period at the end
and inserting a semicolon; and
(iii) by adding at the end the following new subparagraphs:
``(F) the credit union is significantly undercapitalized,
as defined in section 216, and has no reasonable prospect of
becoming adequately capitalized, as defined in section 216;
or
``(G) the credit union is critically undercapitalized, as
defined in section 216.''; and
(B) in paragraph (2)--
(i) in subparagraph (A), by striking ``In the case'' and
inserting ``Except as provided in subparagraph (C), in the
case''; and
(ii) by adding at the end the following new subparagraph:
``(C) In the case of a State-chartered insured credit
union, the authority conferred by subparagraphs (F) and (G)
of paragraph (1) may not be exercised unless the Board has
complied with section 216(l).''.
(2) Liquidation.--Section 207(a) of the Federal Credit
Union Act (12 U.S.C. 1787(a)) is amended--
(A) in paragraph (1)(A), by striking ``himself'' and
inserting ``itself''; and
(B) by adding at the end the following new paragraph:
``(3) Liquidation to facilitate prompt corrective action.--
The Board may close any credit union for liquidation, and
appoint itself or another (including, in the case of a State-
chartered insured credit union, the State official having
jurisdiction over the credit union) as liquidating agent of
that credit union, if--
``(A) the Board determines that--
``(i) the credit union is significantly undercapitalized,
as defined in section 216, and has no reasonable prospect of
becoming adequately capitalized, as defined in section 216;
or
``(ii) the credit union is critically undercapitalized, as
defined in section 216; and
``(B) in the case of a State-chartered insured credit
union, the Board has complied with section 216(l).''.
(c) Consultation Required.--In developing regulations to
implement section 216 of the Federal Credit Union Act (as
added by subsection (a) of this section), the Board shall
consult with the Secretary, the Federal banking agencies, and
the State officials having jurisdiction over State-chartered
insured credit unions.
(d) Deadlines for Regulations.--
(1) In general.--Except as provided in paragraph (2), the
Board shall--
(A) publish in the Federal Register proposed regulations to
implement section 216 of the Federal Credit Union Act (as
added by subsection (a) of this section) not later than 270
days after the date of enactment of this Act; and
(B) promulgate final regulations to implement that section
216 not later than 18 months after the date of enactment of
this Act.
(2) Risk-based net worth requirement.--
(A) Advance notice of proposed rulemaking.--Not later than
180 days after the date of enactment of this Act, the Board
shall publish in the Federal Register an advance notice of
proposed rulemaking, as required by section 216(d) of the
Federal Credit Union Act, as added by this Act.
(B) Final regulations.--The Board shall promulgate final
regulations, as required by that section 216(d) not later
than 2 years after the date of enactment of this Act.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2),
section 216 of the Federal Credit Union Act (as added by this
section) shall become effective 2 years after the date of
enactment of this Act.
(2) Risk-based net worth requirement.--Section 216(d) of
the Federal Credit Union Act (as added by this section) shall
become effective on January 1, 2001.
(f) Report to Congress Required.--When the Board publishes
proposed regulations pursuant to subsection (d)(1)(A), or
promulgates final regulations pursuant to subsection
(d)(1)(B), the Board shall submit to the Congress a report
that specifically explains--
(1) how the regulations carry out section 216(b)(1)(B) of
the Federal Credit Union Act (as added by this section),
relating to the cooperative character of credit unions; and
(2) how the regulations differ from section 38 of the
Federal Deposit Insurance Act, and the reasons for those
differences.
(g) Conforming Amendments.--
(1) Amendments relating to enforcement of prompt corrective
action.--Section 206(k) of the Federal Credit Union Act (12
U.S.C. 1786(k)) is amended--
(A) in paragraph (1), by inserting ``or section 216'' after
``this section'' each place it appears; and
(B) in paragraph (2)(A)(ii), by inserting ``, or any final
order under section 216'' before the semicolon.
(2) Conforming amendment regarding appointment of state
credit union supervisor as conservator.--Section 206(h)(1) of
the Federal Credit Union Act (12 U.S.C. 1786(h)(1)) is
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amended by inserting ``or another (including, in the case of
a State-chartered insured credit union, the State official
having jurisdiction over the credit union)'' after ``appoint
itself''.
(3) Amendment repealing superseded provision.--Section 116
of the Federal Credit Union Act (12 U.S.C. 1762) is repealed.
SEC. 302. NATIONAL CREDIT UNION SHARE INSURANCE FUND EQUITY
RATIO, AVAILABLE ASSETS RATIO, AND STANDBY
PREMIUM CHARGE.
(a) In General.--Section 202 of the Federal Credit Union
Act (12 U.S.C. 1782) is amended--
(1) by striking subsection (b) and inserting the following:
``(b) Certified Statement.--
``(1) Statement required.--
``(A) In general.--For each calendar year, in the case of
an insured credit union with total assets of not more than
$50,000,000, and for each semi-annual period in the case of
an insured credit union with total assets of $50,000,000 or
more, an insured credit union shall file with the Board, at
such time as the Board prescribes, a certified statement
showing the total amount of insured shares in the credit
union at the close of the relevant period and both the amount
of its deposit or adjustment of deposit and the amount of the
insurance charge due to the Fund for that period, both as
computed under subsection (c).
``(B) Exception for newly insured credit union.--
Subparagraph (A) shall not apply with respect to a credit
union that became insured during the reporting period.
``(2) Form.--The certified statements required to be filed
with the Board pursuant to this subsection shall be in such
form and shall set forth such supporting information as the
Board shall require.
``(3) Certification.--The president of the credit union or
any officer designated by the board of directors shall
certify, with respect to each statement required to be filed
with the Board pursuant to this subsection, that to the best
of his or her knowledge and belief the statement is true,
correct, complete, and in accordance with this title and the
regulations issued under this title.'';
(2) in subsection (c)(1)(A), by striking clause (iii) and
inserting the following:
``(iii) Periodic adjustment.--The amount of each insured
credit union's deposit shall be adjusted as follows, in
accordance with procedures determined by the Board, to
reflect changes in the credit union's insured shares:
``(I) annually, in the case of an insured credit union with
total assets of not more than $50,000,000; and
``(II) semi-annually, in the case of an insured credit
union with total assets of $50,000,000 or more.'';
(3) in subsection (c), by striking paragraphs (2) and (3)
and inserting the following:
``(2) Insurance premium charges.--
``(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.
``(3) Distributions from fund required.--
``(A) In general.--The Board shall effect a pro rata
distribution to insured credit unions after each calendar
year if, as of the end of that calendar year--
``(i) any loans to the Fund from the Federal Government,
and any interest on those loans, have been repaid;
``(ii) the Fund's equity ratio exceeds the normal operating
level; and
``(iii) the Fund's available assets ratio exceed
s 1.0
percent.
``(B) Amount of distribution.--The Board shall distribute
under subparagraph (A) the maximum possible amount that--
``(i) does not reduce the Fund's equity ratio below the
normal operating level; and
``(ii) does not reduce the Fund's available assets ratio
below 1.0 percent.
``(C) Calculation based on certified statements.--In
calculating the Fund's equity ratio and available assets
ratio for purposes of this paragraph, the Board shall
determine the aggregate amount of the insured shares in all
insured credit unions from insured credit unions certified
statements under subsection (b) for the final reporting
period of the calendar year referred to in subparagraph
(A).'';
(4) in subsection (c), by adding at the end the following
new paragraph:
``(4) Timeliness and accuracy of data.--In calculating the
available assets ratio and equity ratio of the Fund, the
Board shall use the most current and accurate data reasonably
available.''; and
(5) by striking subsection (h) and inserting the following:
``(h) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Available assets ratio.--The term `available assets
ratio', when applied to the Fund, means the ratio of--
``(A) the amount determined by subtracting--
``(i) direct liabilities of the Fund and contingent
liabilities for which no provision for losses has been made,
from
``(ii) the sum of cash and the market value of unencumbered
investments authorized under section 203(c), to
``(B) the aggregate amount of the insured shares in all
insured credit unions.
``(2) Equity ratio.--The term `equity ratio', when applied
to the Fund, means the ratio of--
``(A) the amount of Fund capitalization, including insured
credit unions' 1 percent capitalization deposits and the
retained earnings balance of the Fund (net of direct
liabilities of the Fund and contingent liabilities for which
no provision for losses has been made); to
``(B) the aggregate amount of the insured shares in all
insured credit unions.
``(3) Insured shares.--The term `insured shares', when
applied to this section, includes share, sha
