[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2957 Introduced in Senate (IS)]
110th CONGRESS
2d Session
S. 2957
To modernize credit union net worth standards, advance credit union
efforts to promote economic growth, and modify credit union regulatory
standards and reduce burdens, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 1, 2008
Mr. Lieberman introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To modernize credit union net worth standards, advance credit union
efforts to promote economic growth, and modify credit union regulatory
standards and reduce burdens, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Credit Union Regulatory Improvements
Act of 2008''.
TITLE I--CAPITAL MODERNIZATION
SEC. 101. AMENDMENTS TO NET WORTH CATEGORIES.
(a) In General.--Section 216(c)(1) of the Federal Credit Union Act
(12 U.S.C. 1790d(c)(1)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``7 percent'' and
inserting ``5.25 percent''; and
(B) by striking clause (ii) and inserting the
following:
``(ii) it has a risk-based net worth ratio
of not less than 10 percent.'';
(2) in subparagraph (B)--
(A) in clause (i), by striking ``6 percent'' and
inserting ``4.25 percent''; and
(B) by striking clause (ii) and inserting the
following:
``(ii) it has a risk-based net worth ratio
of not less than 8 percent.'';
(3) in subparagraph (C)--
(A) in clause (i), by striking ``6 percent'' and
inserting ``4.25 percent''; and
(B) by striking clause (ii) and inserting the
following:
``(ii) it has a risk-based net worth ratio
of less than 8 percent.''; and
(4) by striking subparagraph (D) and inserting the
following:
``(D) Significantly undercapitalized.--An insured
credit union is `significantly undercapitalized' if--
``(i) the credit union has a net worth
ratio of less than 3.25 percent;
``(ii) the credit union has a net worth
ratio of less than 4.25 percent and either--
``(I) fails to submit an acceptable
net worth restoration plan within the
time allowed under subsection (f); or
``(II) materially fails to
implement a net worth restoration plan
approved by the Board; or
``(iii) the credit union has a risk-based
net worth ratio of less than 6 percent.''.
(b) Relevant Capital Measures.--Section 216(c)(2) of the Federal
Credit Union Act (12 U.S.C. 1790d(c)(2)) is amended by striking
``leverage limit'' each place such term appears and inserting
``relevant capital measures''.
(c) Adjustment by Federal Deposit Insurance Corporation.--Section
216(c)(2)(A) of the Federal Credit Union Act (12 U.S.C. 1790d(c)(2)(A))
is amended--
(1) by striking ``Federal banking agencies increase or
decrease'' and inserting ``Federal Deposit Insurance
Corporation increases or decreases one of''; and
(2) by striking ``level'' the first place such term appears
and inserting ``levels''.
(d) Adjusting Net Worth Levels.--Section 216(c)(2)(A) of the
Federal Credit Union Act (12 U.S.C. 1790d(c)(2)(A)) is amended by
striking ``not more than the difference between the required minimum
level most recently established by the Federal banking agencies and 4
percent of total assets (with respect to institutions regulated by
those agencies)'' and inserting ``the increase or decrease made by the
Federal Deposit Insurance Corporation''.
(e) Consultation With Federal Deposit Insurance Corporation.--
Section 216(c)(2)(B)(i) of the Federal Credit Union Act (12 U.S.C.
1790d(c)(2)(B)(i)) is amended by striking ``Federal banking agencies''
and inserting ``Federal Deposit Insurance Corporation''.
SEC. 102. AMENDMENTS RELATING TO RISK-BASED NET WORTH REQUIREMENTS.
Section 216(d) of the Federal Credit Union Act (12 U.S.C. 1790d(d))
is amended--
(1) in paragraph (1)--
(A) by striking ``that are complex, as defined by
the Board''; and
(B) by inserting ``, as defined by the Board''
before the period at the end;
(2) by striking paragraph (2) and inserting the following:
``(2) Standard.--The Board shall design the risk-based net
worth requirement to take account of any material risks, as
defined by the Board, applicable to insured credit unions that
are taken account of by comparable standards applicable to
institutions insured by the Federal Deposit Insurance
Corporation.''; and
(3) in the subsection heading, by striking ``for Complex
Credit Unions''.
SEC. 103. TREATMENT BASED ON OTHER CRITERIA.
Section 216(h)(2) of the Federal Credit Union Act (12 U.S.C.
1790d(h)(2)) is amended by inserting ``, except to reclassify an
insured credit union into the next lower net worth category, based on
interest rate risk, to the extent that any such reclassification by a
delegatee may be reviewed by the Board,'' after ``to reclassify an
insured credit union into a lower net worth category''.
SEC. 104. DEFINITIONS RELATING TO NET WORTH.
(a) Secondary Capital Accounts for Purposes of Determining Net
Worth.--Section 216(o)(2)(B) of the Federal Credit Union Act (12 U.S.C.
1790d(o)(2)(B)) is amended by inserting ``, subject to limitations set
by the Board to address the safe and sound use of secondary capital to
carry out the purpose of this section,'' after ``secondary capital
accounts''.
(b) Net Worth Ratio.--Section 216(o)(3) of the Federal Credit Union
Act (12 U.S.C. 1790d(o)(3)) is amended--
(1) by inserting ``minus its deposit in the Fund,'' after
``net worth of the credit union''; and
(2) by inserting ``minus its deposit in the Fund'' after
``total assets of the credit union''.
(c) Risk-Based Net Worth Ratio.--Section 216(o) of the Federal
Credit Union Act (12 U.S.C. 1790d)(o)) is amended by adding at the end
the following new paragraph:
``(5) Risk-based net worth ratio.--The term `risk-based net
worth ratio' means, with respect to any credit union, the ratio
of the net worth of the credit union, plus any loan loss
reserves (subject to limitations established by the Board) and
minus the credit union's deposit in the Fund, to the risk
assets of the credit union, as defined by the Board.''.
SEC. 105. AMENDMENTS RELATING TO NET WORTH RESTORATION PLANS.
(a) Temporary Waiver of Net Worth Restoration Plan Requirement in
Response to Disasters.--Subsection 216(f)(1) of the Federal Credit
Union Act (12 U.S.C. 1790d(f)(1)) is amended by striking ``Each insured
credit union'' and inserting ``Except as determined by the Board in the
case of a credit union that becomes or remains no less than
undercapitalized due to the impact of a major natural or man-made
disaster, each insured credit union''.
(b) Net Worth Restoration Requirement for Credit Unions That Are
Not Well Capitalized.--Section 216(e) of the Federal Credit Union Act
(12 U.S.C. 1790d(e)) is amended to read as follows:
``(e) Net Worth Restoration Plan Requirement Applicable to Credit
Unions That Are Not Well Capitalized.--The Board may require an insured
credit union that is not well capitalized to submit a net worth
restoration plan, as required under subsection (f), if--
``(1) material safety and soundness concerns caused the
credit union to become less than well capitalized; and
``(2) the safety and soundness concerns remain
unresolved.''.
(c) Board Action May Include Order to Credit Union.--Section
216(i)(1)(B) of the Federal Credit Union Act (12 U.S.C. 1790d(i)(1)(B))
is amended--
(1) by inserting ``order the credit union to'' before
``take such other action''; and
(2) by inserting ``, in the discretion of the Board,''
after ``as the Board''.
(d) Substitution of 90 Calendar Days.--Section 216(i)(3)(A) of the
Federal Credit Union Act (12 U.S.C. 1790d(i)(3)(A)) is amended--
(1) by striking ``calendar quarter'' and inserting ``90-
calendar day period''; and
(2) by inserting ``first'' after ``the date on which the
credit union''.
(e) Clarification of Coordination Requirement.--Section
216(l)(3)(A)(ii) of the Federal Credit Union Act (12 U.S.C.
1790d(l)(3)(A)(ii)) is amended by inserting before the semicolon at the
end ``, if the Board determines that such action by the official will
carry out the purpose of this section''.
TITLE II--ECONOMIC GROWTH
SEC. 201. LIMITS ON MEMBER BUSINESS LOANS.
Section 107A(a) of the Federal Credit Union Act (12 U.S.C.
1757a(a)) is amended by striking ``the lesser
of--'' and all that follows through the end of the subsection and
inserting ``20 percent of the total assets of the credit union.''.
SEC. 202. DEFINITION OF MEMBER BUSINESS LOAN.
Section 107A(c)(1)(B)(iii) of the Federal Credit Union Act (12
U.S.C. 1757a(c)(1)(B)(iii)) is amended by striking ``$50,000'' and
inserting ``an amount, not to exceed $100,000, that the Board shall
prescribe by regulation''.
SEC. 203. RESTRICTION ON MEMBER BUSINESS LOANS.
Section 216(g)(2) of the Federal Credit Union Act (12 U.S.C.
1790d(g)(2)) is amended by striking ``until such time as the credit
union becomes adequately capitalized'' and inserting ``unless otherwise
approved by the Board''.
SEC. 204. MEMBER BUSINESS LOAN EXCLUSION FOR LOANS TO NONPROFIT
RELIGIOUS ORGANIZATIONS.
Section 107A(a) of the Federal Credit Union Act (12 U.S.C.
1757a(a)) is amended by inserting ``, excluding loans made to nonprofit
religious organizations,'' after ``total amount of such loans''.
SEC. 205. CREDIT UNIONS AUTHORIZED TO LEASE SPACE IN BUILDINGS IN
CREDIT UNION OFFICES IN UNDERSERVED AREAS.
Section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is
amended--
(1) in paragraph (16), by striking ``and'' at the end;
(2) by redesignating paragraph (17) as paragraph (18); and
(3) by inserting after paragraph (16) the following:
``(17) with regard to any building purchased or constructed
by the credit union for a credit union office or credit union
operations in an underserved area, to lease office space in
such building that is separate and clearly distinct from any
office or operation of the credit union to any business
enterprise, subject to such regulations as the Board may
prescribe, taking into account the safety and soundness of the
credit union; and''.
SEC. 206. AMENDMENTS RELATING TO CREDIT UNION SERVICE TO UNDERSERVED
AREAS.
Section 109(c)(2) of the Federal Credit Union Act (12 U.S.C.
1759(c)(2)) is amended--
(1) in the matter preceding subparagraph (A), by striking
``the field of membership category of which is described in
subsection (b)(2),'';
(2) by striking subparagraph (A) and inserting the
following:
``(A) the Board determines, at any time after
August 7, 1998, that the local community, neighborhood,
or rural district is an underserved area; and''; and
(3) in subparagraph (B), by inserting ``not later than 2
years after having an underserved area added to the credit
union's charter,'' before ``the credit union''.
SEC. 207. UNDERSERVED AREA DEFINED.
Section 101 of the Federal Credit Union Act (12 U.S.C. 1752) is
amended--
(1) in paragraph (8), by striking ``and'' at the end;
(2) in paragraph (9), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following new paragraph:
``(10) the term `underserved area' means a geographic area
consisting of one or more population census tracts, that
encompass or are located within--
``(A) an investment area designated under section
103(16) of the Community Development Banking and
Financial Institutions Act of 1994; or
``(B) a low income community, as defined in section
45D(e) of the Internal Revenue Code of 1986.''.
TITLE III--REGULATORY MODIFICATIONS
SEC. 301. INVESTMENTS IN SECURITIES BY FEDERAL CREDIT UNIONS.
(a) In General.--Section 107 of the Federal Credit Union Act (12
U.S.C. 1757) is amended--
(1) by striking ``A Federal credit union'' and inserting
the following:
``(a) In General.--A Federal credit union''; and
(2) by adding at the end the following:
``(b) Investment for the Credit Union's Own Account.--
``(1) In general.--In addition to the investments
authorized by subsection (a), a Federal credit union may
purchase and hold for its own account such investment
securities of investment grade as the Board may authorize by
regulation, subject to such limitations and restrictions as the
Board may prescribe in such regulations.
``(2) Percentage limitations.--
``(A) Single obligor.--In no event may the total
amount of investment securities of any single obligor
or maker held by a Federal credit union for the credit
union's own account exceed at any time an amount equal
to 10 percent of the net worth of the credit union.
``(B) Aggregate investments.--In no event may the
aggregate amount of investment securities held by a
Federal credit union for the credit union's own account
exceed at any time an amount equal to 10 percent of the
assets of the credit union.
``(3) Investment security defined.--
``(A) In general.--For purposes of this subsection,
the term `investment security' means marketable
obligations evidencing the indebtedness of any person
in the form of bonds, notes, or debentures and other
instruments commonly referred to as investment
securities.
``(B) Further definition by board.--The Board may,
by regulation, further define the term `investment
security'.
``(4) Investment grade defined.--The term `investment
grade' means, with respect to an investment security purchased
by a credit union for its own account, an investment security
that at the time of such purchase is rated in one of the 4
highest rating categories by at least 1 nationally recognized
statistical rating organization.
``(5) Clarification of prohibition on stock ownership.--No
provision of this subsection shall be construed as authorizing
a Federal credit union to purchase shares of stock of any
corporation for the credit union's own account, except as
otherwise permitted by law.''.
(b) Clerical Amendments.--The Federal Credit Union Act is amended--
(1) in section 101(5) (12 U.S.C. 1751(5)), by striking
``section 107(13)'' and inserting ``section 107(a)(13)'';
(2) in section 114(a) (12 U.S.C. 1764(a)), by striking
``section 107(5)'' and inserting ``section 107(a)(5)''.
SEC. 302. AUTHORITY OF NCUA TO ESTABLISH LONGER MATURITIES FOR CERTAIN
CREDIT UNION LOANS.
Section 107(a)(5) of the Federal Credit Union Act (12 U.S.C.
1757(5)), as so designated by this Act, is amended in the matter
preceding subparagraph (A), by striking ``except as otherwise provided
herein'' and inserting ``or any longer maturity as the Board may allow,
by regulation''.
SEC. 303. INCREASE IN LENDING AND INVESTMENT LIMITS IN CREDIT UNION
SERVICE ORGANIZATIONS.
(a) Lending.--Section 107(a)(5)(D) of the Federal Credit Union Act
(12 U.S.C. 1757(5)(D)), as so designated by this Act, is amended--
(1) by striking ``shall not exceed 1 per centum of the
paid-in'' and inserting ``shall not exceed 2 percent of the
total paid-in''; and
(2) by inserting ``, except that the percentage limitation
on any such loans by any credit union may be reduced by order
of the Board when the Board determines such reduction is
appropriate to preserve the safety and soundness of the credit
union'' before the period at the end.
(b) Investing.--Section 107(a)(7)(I) of the Federal Credit Union
Act (12 U.S.C. 1757(7)(I)), as so designated by this Act, is amended--
(1) by striking ``up to 1 per centum of the total paid''
and inserting ``up to 2 percent of the total paid''; and
(2) by inserting ``, and such approval authority includes
the authority to reduce the percentage limitation on any such
investment by any credit union if the Board determines that
such reduction is appropriate to preserve the safety and
soundness of the credit union'' after ``with the approval of
the Board''.
SEC. 304. VOLUNTARY MERGERS INVOLVING MULTIPLE COMMON-BOND CREDIT
UNIONS.
Section 109(d)(2) of the Federal Credit Union Act (12 U.S.C.
1759(d)(2)) is amended by striking subparagraph (C) and inserting the
following:
``(C) any group transferred in connection with a
voluntary merger of any such Federal credit union with
another insured credit union, as approved by the Board
on or after August 7, 1998, in accordance with
guidelines and regulations issued under section 120.''.
SEC. 305. CONVERSIONS OF CERTAIN CREDIT UNIONS TO A COMMUNITY CHARTER.
Section 109(g) of the Federal Credit Union Act (12 U.S.C. 1759(g))
is amended by adding at the end the following:
``(3) Criteria for continued membership of certain member
groups in community charter conversions.--In the case of a
voluntary conversion of a credit union described in paragraph
(1) or (2) of subsection (b) into a community credit union
described in subsection (b)(3), the Board shall prescribe, by
regulation, the criteria under which the Board may determine
that a member group or other portion of a credit union's
existing membership, that is located outside of the well-
defined local community, neighborhood, or rural district that
shall constitute the community charter, can be satisfactorily
served by the credit union and remain within the community
credit union's field of membership permitting new members to be
added from such groups.''.
SEC. 306. CREDIT UNION GOVERNANCE.
(a) Expulsion of Members for Just Cause.--Section 118(b) of the
Federal Credit Union Act (12 U.S.C. 1764(b)) is amended to read as
follows:
``(b) Policy and Actions of Boards of Directors of Federal Credit
Unions.--
``(1) Expulsion of members for nonparticipation or for just
cause.--The board of directors of a Federal credit union may,
by majority vote of a quorum of directors, adopt and enforce a
policy with respect to expulsion from membership, by a majority
vote of such board of directors, based on just cause, including
disruption of credit union operations, or on nonparticipation
by a member in the affairs of the credit union.
``(2) Written notice of policy to members.--If a policy
described in paragraph (1) is adopted, written notice of the
policy as adopted and the effective date of such policy shall
be provided to--
``(A) each existing member of the credit union, not
later than 30 days prior to the effective date of such
policy; and
``(B) each new member prior to or upon applying for
membership.''.
(b) Term Limits Authorized for Board Members of Federal Credit
Unions.--Section 111(a) of the Federal Credit Union Act (12 U.S.C.
1761(a)) is amended by adding at the end the following: ``The bylaws of
a Federal credit union may limit the number of consecutive terms that
any person may serve on the board of directors of such credit union.''.
SEC. 307. PROVIDING THE NATIONAL CREDIT UNION ADMINISTRATION WITH
GREATER FLEXIBILITY IN RESPONDING TO MARKET CONDITIONS.
Section 107(a)(5)(A)(vi)(I) of the Federal Credit Union Act (12
U.S.C. 1757(5)(A)(vi)(I)), as so designated by this Act, is amended by
striking ``six-month period and that prevailing interest rate levels''
and inserting ``6-month period or that prevailing interest rate
levels''.
SEC. 308. CREDIT UNION CONVERSION VOTING REQUIREMENTS.
Section 205(b)(2) of the Federal Credit Union Act (12 U.S.C.
1785(b)(2)(B)) is amended--
(1) by redesignating subparagraphs (E), (F), and (G) as
subparagraphs (F), (G), and (H), respectively;
(2) by inserting after subparagraph (D) the following:
``(E) Conversion voting requirements.--
``(i) In general.--Approval of a proposal
for conversion in an election set by a majority
of the directors of an insured credit union
under subparagraph (B) shall be by the
affirmative vote of a majority of the members
of the insured credit union who vote on the
proposal, in a vote in which at least 30
percent of the credit union membership
participates.
``(ii) Special membership meeting.--An
insured credit union which provides notices to
its members under subparagraph (C) of a
proposed conversion shall--
``(I) hold a special meeting of the
membership to provide information
regarding the proposal at least 30 days
before making any ballots available to
its members; and
``(II) include a notice of such
meeting in the notices provided under
subparagraph (C).
``(iii) Prohibition on incentives.--An
insured credit union proposing to convert under
subparagraph (A)--
``(I) is expressly prohibited from
using or providing any incentive in any
form of prize raffles, contests,
giveaways, or other voting incentives
in connection with the member vote on
conversion; and
``(II) may make no mention of any
incentive in the notices to members or
in other materials that it sends or
otherwise communicates to members
pursuant to subparagraph (C).''; and
(3) in subparagraph (B), by striking the ultimate sentence.
SEC. 309. EXEMPTION FROM PRE-MERGER NOTIFICATION REQUIREMENT OF THE
CLAYTON ACT.
Section 7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) is
amended by inserting ``section 205(b)(3) of the Federal Credit Union
Act (12 U.S.C. 1785(b)(3)),'' before ``or section 3''.
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