[Federal Register Volume 75, Number 190 (Friday, October 1, 2010)]
[Proposed Rules]
[Pages 60651-60655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24659]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 704

RIN 3133-AD80


Corporate Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed Interpretive Ruling and Policy Statement 10-XX.

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SUMMARY: The NCUA Board is proposing to adopt an Interpretive Ruling 
and Policy Statement (IRPS) setting forth the requirements and process 
for chartering corporate federal credit unions.

DATES: Comments must be received on or before November 1, 2010.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web site: http://www.ncua.gov/Resources/RegulationsOpinionsLaws/ProposedRegulations.aspx. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your

[[Page 60652]]

name] Comments on ``Notice of Proposed Rulemaking for Corporate FCU 
Chartering'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: All public comments are available on the 
agency's Web site at http://www.ncua.gov/Resources/RegulationsOpinionsLaws/ProposedRegulations.aspx as submitted, except 
as may not be possible for technical reasons. Public comments will not 
be edited to remove any identifying or contact information. Paper 
copies of comments may be inspected in NCUA's law library at 1775 Duke 
Street, Alexandria, Virginia 22314, by appointment weekdays between 9 
a.m. and 3 p.m. To make an appointment, call (703) 518-6546 or send an 
e-mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Lisa Henderson, Staff Attorney, Office 
of General Counsel, at the address above or telephone: (703) 518-6540; 
or Dave Shetler, Deputy Director, Office of Corporate Credit Unions, at 
the address above or telephone: (703) 518-6640.

SUPPLEMENTARY INFORMATION:

A. Background

    NCUA recently finalized changes to its Corporate Credit Union Rule, 
12 CFR part 704. These changes, as well as NCUA's other efforts to 
resolve the problems created by the legacy assets remaining in the 
corporate credit union system, are likely to result in a fundamental 
restructuring of the corporate credit union system. As part of this 
restructuring, NCUA believes that some groups of natural person credit 
unions may wish to form new corporate credit unions.
    NCUA first issued guidance on chartering corporate federal credit 
unions (corporate FCUs) in 1982, but withdrew this guidance and never 
reissued it. See NCUA Interpretive Ruling and Policy Statement (IRPS) 
82-6. In light of the impending changes to the corporate system, NCUA 
is now reissuing chartering guidance in the form of a new proposed 
IRPS. The proposed IRPS explains the requirements for prospective new 
corporate FCUs and NCUA's standards for evaluating applications and 
will assist credit union officials in assessing the feasibility of a 
new corporate charter. The proposed IRPS also lists timeframes for NCUA 
action on corporate charter applications.
    The proposal requires charter applicants submit various information 
to NCUA, including:
     A detailed business plan;
     NCUA Form 4001, the Federal Credit Union Organization 
Report;
     NCUA Forms 9500 and 9501, regarding federal share 
insurance for member accounts;
     NCUA Form 4012, containing key biographical information 
and authorization of a background check and credit check for each 
prospective board member, credit and supervisory committee member, and 
senior management employee; and
     NCUA Form 4008, the credit union's organization 
certificate.
    The proposed IRPS also includes detailed timelines for processing a 
charter application.

B. Comment Period and Charter Applications Submitted Before IRPS Is 
Finalized

    The Board is proposing this IRPS with a 30-day comment period 
rather than NCUA's standard 60-day comment period. The Board believes 
that this proposal is neither novel nor complex, and that 30 days 
should be sufficient for all parties interested in commenting. Any 
charter application submitted before this IRPS is finalized should 
conform to the requirements of the proposed IRPS, and NCUA will process 
applications under the terms of the proposed IRPS until the IRPS is 
finalized. The possibility of impending charter applications further 
supports the Board's perceived need for a shorter comment period and a 
quicker finalization of the IRPS.

C. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact any proposed regulation may 
have on a substantial number of small entities (those under $10 million 
in assets). The proposed IRPS only applies to corporate credit unions, 
all of which have assets well in excess of $10 million. Accordingly, 
the proposed IRPS will not have a significant economic impact on a 
substantial number of small credit unions and, therefore, a regulatory 
flexibility analysis is not required.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or modifies an existing burden. 44 U.S.C. 3507(d); 5 CFR part 
1320. For purposes of the PRA, a paperwork burden may take the form of 
either a reporting or a recordkeeping requirement, both referred to as 
information collections. The Office of Management and Budget (OMB) has 
approved the current information collection requirements in part 704 
and assigned them control number 3133-0129.
    The proposed IRPS contains an additional information collection in 
the form of an application requirement. Any group of persons creating a 
new federally chartered corporate credit union must apply for NCUA's 
approval. As required by the PRA, NCUA is submitting a copy of this 
proposed IRPS to OMB for its review and approval. Persons interested in 
submitting comments with respect to the information collection aspects 
of the proposed IRPS should submit them to OMB at the address noted 
below.
1. Estimated PRA Burden
    The following describes the application requirements in the 
proposed IRPS that create manhour burdens:
a. Form 4001 and Business Plan
    The proposed IRPS requires applicants for a corporate FCU charter 
to submit Form 4001, which lists the prospective credit union's 
officers, directors and basic information about proposed operations. 
Form 4001 also requires applicants to submit a business plan. For 
corporate credit union charter applications, the business plan must 
address the following items:
     Mission statement;
     Analysis of market conditions (i.e., economic prospects 
for the corporate credit union and availability of proposed financial 
services from alternative depository institutions);
     Summary of survey results and/or customer base analysis;
     Proposed financial services to be offered;
     How and when services are to be implemented;
     Anticipated corporate credit union staffing and 
credentials of key employees;
     Physical facility--office and equipment;
     Proposed recordkeeping, data processing, and 
communications systems and/or vendors;
     Budget for the first three years;
     Semiannual pro-forma financial statements for the first 
three years,

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including a listing of the assumptions used to develop the financial 
statements;
     Goals for the number of members and shares under various 
scenarios;
     Projected break-even or date of achieving independent 
operations;
     Source of funds to pay expenses during the initial setup 
and early months of operation;
     Written policies for shares, lending, investments, funds 
management, capital accumulation as required by part 704, payment 
systems, and EDP;
     Plan for continuity--directors, committee members, and 
senior management;
     Evidence of commitment (i.e., letters and/or contracts 
used to substantiate projections); and
     Services and marketing strategies for financial and 
correspondent services, including the ability of the proposed corporate 
credit union to efficiently deliver these products.
    While the precise time necessary to prepare the business plan will 
vary with the intended complexity and activities of the proposed 
corporate credit union, NCUA estimates that on average, preparation of 
Form 4001 and an acceptable business plan will require 300 hours.
b. Form 4012, Report of Official or Employee
    NCUA requires each prospective board member, members of key 
committees, and senior management employees to submit this form 
providing basic biographical information and authorizing NCUA to 
conduct a background and credit check. Because the form is 
straightforward and applicants are likely to have most of the 
information requested in other formats, such as resumes, NCUA estimates 
completion of the form will take no more than one hour for each 
individual required to submit the form.
c. Forms 9500 and 9501, Insurance Forms
    NCUA requires the prospective chief executive officer and recording 
officer to submit Form 9500 to certify that the prospective board has 
adopted a resolution that the prospective FCU will apply for federal 
share insurance. NCUA requires the chair and the chief financial 
officer to submit Form 9501 to apply for federal share insurance. NCUA 
estimates completion of both these forms will require no more than one 
hour per charter applicant.
d. Form 4008, Organization Certificate
    Prospective organizers must also submit an organization certificate 
listing the credit union's name and names and contact information of 
the initial subscribers. NCUA estimates that collection of the required 
information and completion of this form should require no more than two 
hours per charter applicant.
2. Summary of Collection Burden
    NCUA estimates the total information collection burden represented 
by the proposal, as follows:
    Estimated annual number of respondents: 1 corporate FCU charter 
applicant.
    Preparation of Form 4001 and business plan: 1 charter applicant x 
300 hours = 300 hours.
    Preparation of NCUA Form 4012: 1 charter applicant x 25 individual 
officials, committee members and employees per applicant x 1 hour per 
individual = 25 hours.
    Preparation of NCUA Forms 9500 and 9501: 1 charter applicant x 1 
hour = 1 hour.
    Preparation of NCUA Form 4008: 1 charter applicant x 2 hours = 2 
hours.
    Total estimated annual burden hours: 328 hours.
    The NCUA considers comments by the public on this proposed 
collection of information in:
     Evaluating whether the proposed collection of information 
is necessary for the proper performance of the functions of the NCUA, 
including whether the information will have a practical use;
     Evaluating the accuracy of the NCUA's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology; e.g., permitting 
electronic submission of responses.
    The Paperwork Reduction Act requires OMB to make a decision 
concerning the collection of information contained in the proposed 
regulation between 30 and 60 days after publication of this document in 
the Federal Register. Therefore, a comment to OMB is best assured of 
having its full effect if OMB receives it within 30 days of 
publication. This does not affect the deadline for the public to 
comment to the NCUA on the proposed regulation.
    Comments on the proposed information collection requirements should 
be sent to: Office of Information and Regulatory Affairs, OMB, New 
Executive Office Building, Washington, DC 20503; Attention: NCUA Desk 
Officer, with a copy to Mary Rupp, Secretary of the Board, National 
Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 
22314-3428.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order.
    The proposed IRPS would not have substantial direct effects on the 
states, on the connection between the national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. NCUA has determined that this proposal 
does not constitute a policy that has federalism implications for 
purposes of the executive order.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this proposed IRPS will not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

    By the National Credit Union Administration Board on September 
24, 2010.
Mary F. Rupp,
Secretary of the Board.

    Authority:  12 U.S.C. 1753, 1754, 1758, 1766.

Corporate Federal Credit Union Chartering Guidelines

I--Goals of NCUA Corporate Chartering Guidelines

    These guidelines are intended to achieve the following goals:
     Uphold the provisions of the Federal Credit Union Act 
(Act);
     Promote safety and soundness within the credit union 
industry; and
     Provide quality services to members.
    NCUA will consider the above criteria as the primary factors in 
determining whether to approve a corporate federal credit union (FCU) 
charter. In unusual circumstances, NCUA may consider

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other information in deciding if a charter should be approved, such as 
other federal law or public policies.

II--Subscribers

    Seven or more natural person representatives of natural person 
credit unions (NPCUs)--``the subscribers''--must present to NCUA for 
approval a sworn organization certificate stating at a minimum:
     The name of the proposed corporate FCU;
     The location of the proposed corporate FCU;
     The names and addresses of the subscribers to the 
certificate and the number of shares subscribed by each;
     The initial par value of the shares; and
     The proposed field of membership.
    False statements on any of the required documentation filed in 
obtaining an FCU charter may be grounds for federal criminal 
prosecution.

III--Economic Advisability

A--General

    Before chartering a corporate FCU, NCUA must be satisfied that the 
institution will be viable and that it will provide needed services to 
its members. NCUA will conduct an independent investigation of each 
charter application to ensure that the proposed corporate credit union 
can be successful. In general, the success of any credit union depends 
on: (a) The character and fitness of management; (b) the depth of the 
members' support; and (c) present and projected market conditions.

B--Proposed Management's Character and Fitness

    The Act requires NCUA to ensure that the subscribers of federal 
charters are of good ``general character and fitness.'' In addition, 
employees and officials must be competent, experienced, honest, and of 
good character.
    NCUA will conduct background and credit investigations on 
prospective officials and employees, and the reports must establish 
each applicant's character and ability to effectively handle financial 
matters. Factors that may lead to disapproval of a prospective official 
or employee include criminal convictions, indictments, and acts of 
fraud and dishonesty. Other factors, such as serious or unresolved past 
due credit obligations and bankruptcies disclosed during credit checks, 
may also disqualify an individual.
    NCUA also needs reasonable assurance that the management team will 
have the requisite skills--particularly in leadership, accounting, 
funds management, and payment systems risk--and the commitment to 
dedicate the time and effort needed to make the proposed corporate FCU 
a success.
    Section 701.14 of NCUA's Rules and Regulations sets forth the 
procedures for NCUA approval of officials of newly chartered FCUs, 
including corporate FCUs. If the application of a prospective official 
or employee to serve is not acceptable to NCUA's Director, Office of 
Corporate Credit Unions (OCCU), the group can propose an alternate to 
act in that individual's place. If the charter applicant feels it is 
essential that the disqualified individual be retained, the individual 
may appeal the OCCU's decision to the NCUA Board. If an appeal is 
pursued, action on the application may be delayed. If the appeal is 
denied by the NCUA Board, an applicant acceptable to NCUA must be 
provided before the charter can be approved.

C--Member Support

    An important chartering consideration is the degree of support from 
the field of membership. The charter applicant must demonstrate a 
sufficient customer base from which to draw business in the form of 
membership applications, capital and share commitments, and commitments 
to use the corporate FCU's services. The applicant must provide surveys 
and/or written commitments certifying to this potential membership base 
and capital commitment to the levels required by Part 704 of NCUA's 
Rules and Regulations. Although NCUA may work with a newly chartered 
corporate on a plan to meet the retained earnings requirements of Part 
704, the newly chartered corporate must have a viable plan to solicit 
and maintain sufficient contributed capital. Generally, the plan must 
show how the corporate FCU will keep its total capital at 4 percent or 
more of its moving daily average net assets at all times beginning on 
the date NCUA issues the charter.

D--Present and Future Market Conditions--Business Plan

    The ability to provide effective service to members, compete in the 
marketplace, and adapt to changing market conditions are key to the 
survival of any enterprise. Before NCUA will charter a corporate credit 
union, a charter applicant must submit a business plan based on 
realistic and supportable projections and assumptions. The business 
plan should contain, at a minimum, the following elements:
    (1) Mission statement;
    (2) Analysis of market conditions (i.e., economic prospects for the 
corporate credit union and availability of proposed financial services 
from alternative depository institutions);
    (3) Summary of survey results and/or customer base analysis;
    (4) Proposed financial services to be offered;
    (5) How and when services are to be implemented;
    (6) Anticipated corporate credit union staffing and credentials of 
key employees;
    (7) Physical facility--office and equipment;
    (8) Proposed recordkeeping, data processing, and communications 
systems and/or vendors;
    (9) Budget for the first three years;
    (10) Semiannual pro-forma financial statements for the first three 
years, including a listing of the assumptions used to develop the 
financial statements;
    (11) Goals for the number of members and shares under various 
scenarios;
    (12) Projected break-even or date of achieving independent 
operations;
    (13) Source of funds to pay expenses during the initial setup and 
early months of operation;
    (14) Written policies for shares, lending, investments, funds 
management, capital accumulation as required by Part 704, payment 
systems, and EDP;
    (15) Plan for continuity--directors, committee members, and senior 
management;
    (16) Evidence of commitment (i.e., letters and/or contracts used to 
substantiate projections); and
    (17) Services and marketing strategies for financial and 
correspondent services, including the ability of the proposed corporate 
credit union to efficiently deliver these products.

IV--Organizing a Corporate Federal Credit Union

    The subscribers must submit the following documentation to the NCUA 
Office of Corporate Credit Unions (OCCU) for processing:
    (1) NCUA Form 4001--Federal Credit Union Investigation Report.
    (2) NCUA Form 4012--Report of Officials and Agreement to Serve. 
This form documents general background information for each official 
and employee of the proposed corporate credit union. Each designee must 
complete and sign this form. In completing the form, subscribers may 
disregard any reference to ``common bond.'' In addition, where Section 
B.2 of the form requires a potential interest

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survey sample of at least 250 potential members, subscribers may use a 
sample of at least 30 potential members.
    (3) NCUA Form 4008--Organization Certificate. This document 
establishes the seven criteria required of subscribers by the Act and 
is signed by the subscribers and notarized. This document should be 
executed in duplicate.
    (4) NCUA Form 9501--Certification of Resolutions. This document 
certifies the board of the proposed corporate credit union has resolved 
to apply for federal insurance of member's accounts and has authorized 
the chief executive officer and chief financial officer to execute the 
Application and Agreements for Insurance of Accounts. Both the chief 
executive officer and recording officer of the proposed corporate 
credit union must sign this certification.
    (5) NCUA Form 9500--Application and Agreements for Insurance of 
Accounts. This document contains agreements FCUs must comply with in 
order to obtain NCUA insurance coverage of member accounts. The 
document must be completed and signed by both the chief executive 
officer and chief financial officer.

V--Name Selection

    It is the responsibility of the corporate FCU organizers to ensure 
that the proposed corporate FCU name does not constitute an 
infringement on the name of any corporation in its trade area. This 
responsibility also includes researching any service marks or 
trademarks used by any other corporation (including credit unions) in 
its trade area. NCUA will ensure, to the extent possible, that the 
corporate credit union's name:
     Is not already being officially used by another FCU;
     Will not be confused with NCUA or another federal or state 
agency, or with another credit union; and
     Does not include misleading or inappropriate language.
    The last three words in the name of every credit union chartered by 
NCUA must be ``Federal Credit Union.''

VI--NCUA Review

A--General

    OCCU will conduct an independent investigation of the corporate 
credit union's charter application to assess the economic and long-term 
viability of the proposed corporate credit union. OCCU field staff will 
conduct the review and, if necessary, perform an on-site contact with 
selected officials and others having an interest in the proposed 
corporate credit union.
    The review will include evaluation of proposed management's 
experience and suitability, commitment of proposed officials, and 
assessment of economic viability. OCCU field staff may also be called 
upon to assist subscribers in the proper completion of required forms 
and the Organization Certificate--NCUA Form 4008.
    OCCU field staff will thoroughly analyze the prospective corporate 
credit union's business plan for realistic projections, attainable 
goals, and time commitment. Any concerns will be reviewed with the 
subscribers and discussed with prospective officials.
    NCUA will follow the timeline set forth below in processing 
corporate charter applications:
    1. Within 30 days of receipt of the charter package, OCCU field 
staff will meet with the proposed officials and management team to 
evaluate the adequacy of management and the information provided and to 
discuss the FCU's ability to begin operations and meet their financial 
projections if the charter is approved.
    2. On completion of all required reviews, but no later than 60 days 
after the meeting described above, OCCU field staff will make a 
recommendation to the OCCU Director regarding the charter application. 
The recommendation may include provisional requirements to be completed 
prior to final approval of a corporate FCU charter.
    3. Within 30 days of receiving OCCU field staff recommendation, an 
OCCU analyst will determine if the application package can be forwarded 
to the NCUA Board for appropriate action, or if it should be returned 
to the subscribers. The subscribers will receive written notification 
of this decision.
    4. Within 60 days after receipt of a complete application that 
addresses all of OCCU's concerns, the NCUA Board will vote on the 
proposed charter. If the charter is approved, the officials must sign a 
``Letter of Understanding and Agreement'' (LUA) before the corporate 
credit union can commence operations. This LUA will impose certain 
operational restrictions, require compliance with NCUA's Rules and 
Regulations and adoption of the standard Corporate FCU Bylaws, and 
contain several financial performance milestones that the new charter 
must meet, consistent with Part 704.

B--Finalization of New Charter

    If NCUA approves the charter application, the subscribers, as their 
final duty, will elect the board of directors for the newly chartered 
corporate FCU. The new board of directors will subsequently appoint the 
supervisory committee. The corporate FCU must then submit a report of 
officials to OCCU.
[FR Doc. 2010-24659 Filed 9-30-10; 8:45 am]
BILLING CODE 7535-01-P