[Federal Register Volume 62, Number 233 (Thursday, December 4, 1997)]
[Proposed Rules]
[Pages 64187-64188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31502]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 708b
Mergers of Federally-Insured Credit Unions; Voluntary Termination
or Conversion of Insured Status
AGENCY: National Credit Union Administration (``NCUA'').
ACTION: Notice of proposed rulemaking.
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SUMMARY: The NCUA Board propose to amend the disclosure forms in NCUA's
regulations relating to mergers and voluntary termination or conversion
of insured status in mergers of federally-insured credit unions. The
amendments inform the members that, if their credit union converts to
nonfederal insurance, the private insurance fund insuring their
accounts is not backed by the full faith and credit of the United
States government. It also informs the members that, if their credit
union terminates insurance, their shares, excluding those covered for
one year, are no longer insured by the federal government or any other
entity.
DATES: Comments must be received on or before February 2, 1998.
ADDRESSES: Comments should be directed to Becky Baker, Secretary of the
Board. Mail or hand-deliver comments to: National Credit Union
Administration, 1775 Duke Street, Alexandria, VA 22314-3428. Fax
comments to (703) 518-6319. E-mail comments to [email protected].
Please send comments by one method only.
FOR FURTHER INFORMATION CONTACT: Mary F. Rupp, Staff Attorney, Office
of General Counsel, at the above address or telephone: (703) 518-6540.
SUPPLEMENTARY INFORMATION:
Background
The Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., requires
credit unions that are not federally insured to advise their members on
``all periodic statements of account, on each signature card, and on
each passbook, certificate or deposit, or similar instrument evidencing
a deposit a notice that the institution is not federally insured, and
that if the institution fails, the Federal government does not
guarantee that depositors will get back their money.'' 12 U.S.C.
1831t(b)(1). Clearly, a member of a credit union being asked to vote on
a proposal that would replace federal insurance with private insurance
is entitled to a similar disclosure. Currently, NCUA's regulations do
not require disclosure of this information.
Proposal
Sections 708(b).301 (a)(1) and (b)(1) contain the form notices that
are sent to the members if a credit union is seeking to terminate
federal insurance. The proposal would amend the notices by clarifying
to the members that if the credit union fails, their shares are no
longer insured by the federal government or any other entity.
Sections 708b.302(a)(1), (a)(2), (b)(1) and (b)(2) contain the form
notices and ballots that are sent to the members if a credit union is
seeking to convert from federal to nonfederal insurance. The proposal
would add a sentence to the notice and ballot explaining that the
insurance provided by the NCUA is backed by the full faith and credit
of the United States government and that the private insurance the
member will receive if the credit union converts is not backed by the
United States government.
The Board believes this information must be disclosed in order for
the member to make an informed vote on the proposed transaction.
Disclosure of this information is consistent with the disclosure
requirements Congress imposes on credit unions lacking federal
insurance.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires the NCUA to prepare an
analysis to describe any significant economic effect any regulation may
have on a substantial number of small credit unions, meaning those
under $1 million in assets. The NCUA Board has determined and certifies
that the proposed rule if adopted will not have a significant economic
impact on a substantial number of small credit unions. The reasons for
this determination are that the proposed rule requires the addition of
two sentences to the disclosure form used by credit unions converting
to nonfederal insurance. The addition of these two sentences will not
increase the costs of the conversion and therefore will not create a
financial burden. Accordingly, the NCUA Board has determined that a
Regulatory Flexibility Analysis is not required.
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. The proposed amendments will apply to all
federally insured credit unions. The proposed amendments are not
designed or intended to interfere with the state regulation of state-
chartered institutions. However, the Board is modeling this proposal on
federal legislation that specifically applies to state-chartered credit
unions. The NCUA Board has determined that the proposed amendments are
not likely to have any direct effect on states, the relationship
between the states, or the distribution of power and responsibilities
among the various levels of government.
Paperwork Reduction Act
The proposed amendment requires the credit union to provide to its
members information that is provided by NCUA in the proposal. The
Paperwork Reduction Act does not apply to disclosures that are
directives for a person to disclose information completely supplied by
the agency. 5 CFR 1320.3(c)(2).
[[Page 64188]]
List of Subjects in 12 CFR Part 708b
Bank deposit insurance, Credit unions, Reporting and recordkeeping
requirements.
By the National Credit Union Administration Board on November
24, 1997.
Becky Baker,
Secretary of the Board.
Accordingly, NCUA proposes to amend 12 CFR part 708b as follows:
PART 708b--MERGERS OF FEDERALLY-INSURED CREDIT UNIONS; VOLUNTARY
TERMINATION OR CONVERSION OF INSURED STATUS
1. The authority citation for part 708b continues to read as
follows:
Authority: 12 U.S.C. 1766, 1785, 1786, 1789.
2. In Sec. 708b.301, paragraph (a)(1) is amended by revising the
second paragraph of the Notice of Proposal to Terminate Federal
Insurance and paragraph (b)(1) is amended by revising the third
paragraph of the Notice of Proposal to Merge and Terminate Federal
Insurance to read as follows:
Sec. 708b.301 Termination of insurance.
(a) * * *
(1) Notice of Proposal to Terminate Federal Insurance
* * * * *
If approved, any deposits made by you after the date of
termination, either new deposits or additions to existing accounts,
will not be insured by the NCUA or any other entity. In the event
the credit union fails, these deposits are not insured by the
federal government. No provision has been made for alternative
insurance, therefore, these deposits will be uninsured.
* * * * *
(b) * * *
(1) Notice of Proposal to Merge and Terminate Federal Insurance
* * * * *
Any deposits made by you after the effective date of the merger,
either new deposits or additions to existing accounts, will not be
insured by the NCUA or any other entity. In the event the credit
union fails, these deposits are not insured by the federal
government. No provision has been made for alternative insurance,
therefore, these deposits will be uninsured. Accounts in the merging
Credit Union on the date of the merger, up to a maximum of $100,000
for each member, will continue to be insured, as provided in the
Federal Credit Union Act, for one (1) year after the close of
business on the date of the merger, but any withdrawals after the
close of business on that date will reduce the insurance coverage by
the amount of the withdrawal.
* * * * *
3. In Sec. 708b.302, paragraph (a)(1) is amended by adding two
sentences at the end of the second paragraph of the Notice of Proposal
to Convert to Nonfederally-Insured Status, paragraph (a)(2) is amended
by adding a sentence at the end of the second paragraph of the ballot,
paragraph (b)(1) is amended by adding two sentences at the end of the
second paragraph of the Notice of Proposal to Merge and Convert to
Nonfederally-Insured Status and paragraph (b)(2) is amended by adding a
sentence at the end of the second paragraph of the ballot to read as
follows:
Sec. 708b.302 Conversion of insurance.
(a) * * *
(1) Notice of Proposal to Convert to Nonfederally-Insured Status
* * * * *
* * * The insurance provided by the National Credit Union
Administration, an independent agency of the United States, is
backed by the full faith and credit of the United States government.
The private insurance you will receive from ____________________ is
not guaranteed by the federal or any state government.
(2) * * * The private insurance provided by ____________________
is not backed by the full faith and credit of the United States
government as is the federal insurance provided by the National
Credit Union Administration.
* * * * *
(b) * * *
(1) Notice of Proposal to Merge and Convert to Nonfederally-Insured
Status
* * * * *
* * * The insurance provided by the National Credit Union
Administration, an independent agency of the United States, is
backed by the full faith and credit of the United States government.
The private insurance you will receive from ____________________ is
not guaranteed by the federal or any state government.
(2) * * * The private insurance provided by ____________________
is not backed by the full faith and credit of the United States
government as is the federal insurance provided by the National
Credit Union Administration.
* * * * *
[FR Doc. 97-31502 Filed 12-3-97; 8:45 am]
BILLING CODE 7535-01-P