[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