[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)] [Rules and Regulations] [Pages 60185-60186] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-30287] ======================================================================= ----------------------------------------------------------------------- NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 745 Share Insurance and Appendix AGENCY: National Credit Union Administration (NCUA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: Currently, the NCUA Rules and Regulations include dividends accrued and posted to share accounts for any prior accounting period as principal for determining the amount of share insurance on insured accounts. To provide equitable treatment, the NCUA Board is amending the regulations to provide authority for the liquidating agent to include dividends earned or accrued in the normal course of business but not posted in the determination of the amount of share insurance on insured accounts. An outdated reference in the Regulations regarding time computation is updated. DATES: The rule is effective on November 27, 1996. ADDRESSES: National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. FOR FURTHER INFORMATION CONTACT: Jerry L. Courson, Special Assistant to the President, Asset Management and Assistance Center, National Credit Union Administration, 4807 Spicewood Springs Road, Suite 5100, Austin, Texas 78759 or telephone (512) 795-0999 or Allan H. Meltzer, Associate General Counsel, National Credit Union Administration, Office of General Counsel, 1775 Duke Street, Alexandria, Virginia 22314-3428 or telephone (703) 518-6540. SUPPLEMENTARY INFORMATION: Background Subpart B of Part 745 of the NCUA Rules and Regulations deals with the payment of share insurance and appeals. Specifically, Sec. 745.200(b) provides that in determining the amount of share insurance, no dividends shall be paid on shares if sufficient undivided and current earnings are not available for such purpose. However, dividends accrued and posted to share accounts for prior accounting periods are considered as principal (regardless of earnings). In a small number of liquidations, it has been necessary to reconstruct and correct the credit union records. In these liquidation cases, the reconstruction process disclosed situations where dividends were posted to some member accounts and not posted to other member accounts. Under the current regulation, to properly reconstruct these accounts and the dividends that were miscalculated or omitted, the liquidating agent obtained authority from the NCUA Board. On July 9, 1996, the NCUA Board issued a Notice of Proposed Rulemaking, 61 FR 36663 (July 12, 1996), proposing to amend Sec. 745.200(b) to provide the liquidating agent authority to record unposted dividends to provide for a more equitable treatment of all members. The proposed rule provides discretion for the liquidating agent to correct share accounts by recording dividend payments that were not posted or were incorrectly posted by credit union personnel due to fraud, embezzlement, or accounting errors. Under the proposed rule, dividends not earned in the normal course of business, would not be included in the determination of insured shares. In addition, the proposed rule provides flexibility in dealing with sufficient earnings. Under the current regulation, dividend payments cannot be considered as principal for insurance purposes if sufficient earnings were not available. The proposed rule is silent on sufficient earnings, but a credit union's earnings could be a factor used by the liquidating agent in determining insured shares. Under the proposed rule, decisions on unposted dividends can be made without specific NCUA Board action. In addition to the issue of unposted dividends, the proposed rule also noted a needed change to the reference in Sec. 745.200(d) to Sec. 747.119 of the NCUA Rules and Regulations. This is a reference to the Section in the Regulations on time computation. Section 747.119 no longer exists and the reference is updated to read Sec. 747.12(a). The Notice of Proposed Rulemaking included a Request for Comments seeking public comment on the proposed changes to Part 745 of the NCUA Rules and Regulations. Five comment letters were received, one from a federal credit union and four from national and state credit union leagues. All commenters expressed unqualified support for the proposed regulation. Analysis The final rule is unchanged from the proposed rule that was published on July 12, 1996. Immediate Effective Date Since the rule relieves a restriction in that the liquidating agent can pay certain unposted dividends without specific NCUA Board action, the thirty day delay in effective date is not applicable. 5 U.S.C. 553(d)(1). Regulatory Procedures Regulatory Flexibility Act The NCUA Board certifies that this rule will not have a significant economic impact on a substantial number of small credit unions (those under $1 million in assets). Accordingly, a Regulatory Flexibility Act analysis is not required. Paperwork Reduction Act The rule does not impose any new paperwork requirements. Executive Order 12612 Executive Order 12612 requires NCUA to consider the effect of its actions on state interests. The changes to Sec. 745.200 will apply to both federal credit unions and federally-insured, state chartered credit unions. The [[Page 60186]] NCUA Board, pursuant to Executive Order 12612, has determined that the amendment will not have substantial direct effect on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Further, the rule will not preempt provisions of state law or regulation. List of Subjects in 12 CFR Part 745 Administrative practice and procedure, Bank deposit insurance, Claims, Credit unions. By the National Credit Union Administration Board on November 20, 1996. Becky Baker, Secretary of the Board. Accordingly, NCUA amends 12 CFR part 745 as follows: PART 745--SHARE INSURANCE AND APPENDIX 1. The authority citation for part 745 is revised to read as follows: Authority: 12 U.S.C. 1766, 1781, 1789. 2. Section 745.200 is amended by revising paragraphs (b) and (d) to read as follows: Sec. 745.200 General. * * * * * (b) Amount of insurance. The amount of insurance on an insured account shall be determined in accordance with the provisions of Subpart A of this part and the Federal Credit Union Act. For the purpose of determining insurance coverage, dividends earned in the ordinary course of business and posted to share accounts for any prior accounting or dividend period shall be deemed to be principal under this part. Dividends earned or accrued in the ordinary course of business, but not posted to share accounts, may be paid at the discretion of the liquidating agent. In making such determination, the liquidating agent will take into consideration whether the failure to post dividends earned or accrued was due to the fraud, embezzlement or accounting errors of credit union personnel. The liquidating agent may require an accountholder to submit documentation supporting any claim for unposted dividends not otherwise evidenced in the credit union records. However, in no event will dividend amounts be considered as principal for insurance purposes pursuant to this section if not consistent with the amounts paid on similar classes of shares. * * * * * (d) Computing time. In computing any period of time prescribed by this subpart, the provisions of Sec. 747.12(a) shall apply. [FR Doc. 96-30287 Filed 11-26-96; 8:45 am] BILLING CODE 7535-01-P