[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]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 745


Share Insurance and Appendix

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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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 An outdated reference in the Regulations regarding 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