[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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