Federal Register / Vol. 62, No. 233 / Thursday, December 4, 1997 / Proposed Rules 64185

reasonably possible, the risks associated

with transactions supported by Ex-Im

Bank. It is often difficult to assess risks

related to individuals and non-publicly

trade entities. Therefore, when an

individual or a non-publicly traded

entity applies for participation in an ExIm Bank program or is proposed as a

guarantor for an Ex-Im Bank transaction,

Ex-Im Bank may request social security

and/or U.S. passport numbers from such

individual or from the principals of

such entity. Ex-Im Bank shall not

require submission of this information,

and unwillingness or inability to

provide a social security or passport

number shall not affect Ex-Im Bank’s

decision on an application for Ex-Im

Bank assistance.

(b) Use. Ex-Im Bank shall use social

security and passport numbers to assess

the creditworthiness of Ex-Im Bank

program participants and as a

mechanism for enforcing agreements

with Ex-Im Bank. Such information

shall not be disclosed, except as

warranted by law and regulation.

(c) Notice. Whenever Ex-Im Bank

requests a social security or passport

number, Ex-Im Bank shall place an

appropriate Privacy Act notification on

the form used to collect the information.

§ 404.22 Government contracts.

(a) Approval by Assistant General

Counsel for Administration. Ex-Im Bank

shall not contract for the operation of a

system of records or for an activity

which requires access to a system of

records without the express, written

approval of the Assistant General

Counsel for Administration.

(b) Contract clauses. Any contract

authorized under paragraph (a) of this

section shall contain the standard

contract clauses required by the Federal

Acquisition Regulation (48 CFR 24.104)

to ensure compliance with the

requirements imposed by the Privacy

Act. The division within Ex-Im Bank

which is responsible for technical

supervision of the contract shall be

responsible for ensuring that the

contractor complies with the Privacy

Act contract requirements.

(c) Contractor status. Any contractor

that operates an Ex-Im Bank system of

records or engages in an activity which

requires access to an Ex-Im Bank system

of records shall be considered an Ex-Im

Bank employee for purposes of this

subpart. Ex-Im Bank shall supply any

such contractor with a copy of the

regulations in this subpart upon

entering into a contract with Ex-Im

Bank.

§§ 404.23–404.25 [Reserved]

§ 404.26 Employee standards of conduct.

(a) Ex-Im Bank responsibilities. Ex-Im

Bank shall inform its employees of the

provisions of the Privacy Act, including

the Act’s civil liability and criminal

penalty provisions. Ex-Im Bank also

shall notify its employees that they have

a duty to:

(1) Protect the security of records;

(2) Ensure the accuracy, relevance,

timeliness, and completeness of records;

(3) Avoid the unauthorized

disclosure, either verbal or written, of

records; and

(4) Ensure that Ex-Im Bank maintains

no system of records without public

notice.

(b) Employee responsibilities. Except

as otherwise permitted by the Privacy

Act, Ex-Im Bank employees shall:

(1) Not collect information of a

personal nature from individuals unless

an employee is authorized to collect

such information to perform a function

or discharge a responsibility on behalf

of Ex-Im Bank;

(2) Collect from individuals only that

information which is necessary to the

performance of the functions or to the

discharge of official responsibilities;

(3) Collect information about an

individual directly from that individual,

whenever practicable;

(4) Inform each individual from

whom information protected by the

Privacy Act is collected of:

(i) The legal authority that authorizes

Ex-Im Bank to collect such information

and whether disclosure is mandatory or

voluntary;

(ii) The principal purposes for which

Ex-Im Bank intends to use the

information;

(iii) The routine uses Ex-Im Bank may

make of the information; and

(iv) The practical and legal effects

upon the individual of not furnishing

the information;

(5) Maintain all records which are

used by the agency in making any

determination about any individual

with such accuracy, relevance,

timeliness, and completeness as to

ensure fairness to the individual in the

determination;

(6) Make reasonable efforts, prior to

disseminating any record about an

individual, to ensure that such records

are accurate, relevant, timely, and

complete;

(7) Maintain no record concerning an

individual’s religious or political beliefs

or activities, or his membership in

associations or organizations, unless:

(i) The individual has volunteered

such information for his own benefit;

(ii) A statute expressly authorizes ExIm Bank to collect, maintain, use or

disseminate the information; or

(iii) The individual’s beliefs, activities

or membership are pertinent to and

within the scope of an authorized law

enforcement or correctional activity;

(8) Notify the Assistant General

Counsel for Administration of the

existence or development of any system

of records that has not been disclosed to

the public;

(9) When required by the Act,

maintain an accounting in the

prescribed form of all disclosures of

records by Ex-Im Bank to agencies or

individuals;

(10) Not disclose any record to anyone

for any use, unless such disclosure is

permitted by the Act;

(11) Maintain and use records with

care to prevent the inadvertent

disclosure of records; and

(12) Notify the Assistant General

Counsel for Administration of any

record that contains information that the

Act or the foregoing provisions of this

paragraph do not permit Ex-Im Bank to

maintain.

(c) Review of systems of records. Not

less than once each year, the Ex-Im

Bank Chief Information Officer shall

review the systems of records

maintained by Ex-Im Bank to ensure

that Ex-Im Bank is in compliance with

the provisions of the Privacy Act

regarding publication of systems of

records.

§ 404.27 Other rights and services.

Nothing in this subpart shall be

construed to entitle any person to any

service or to the disclosure of any record

to which such person is not entitled

under the Privacy Act.

PART 405—[REMOVED AND

RESERVED]

2. 12 CFR part 405 is removed and

reserved.

Dated: November 24, 1997.

Kenneth W. Hansen,

General Counsel, Federal Register Liaison

Officer.

[FR Doc. 97–31775 Filed 12–3–97; 8:45 am]

BILLING CODE 6690–01–P

NATIONAL CREDIT UNION

ADMINISTRATION

12 CFR Part 708a

Mergers or Conversions of FederallyInsured Credit Unions to Non Credit

Union Status: NCUA Approval

AGENCY: National Credit Union

Administration (NCUA).
64186 Federal Register / Vol. 62, No. 233 / Thursday, December 4, 1997 / Proposed Rules

ACTION: Notice of proposed rulemaking.

SUMMARY: The proposed rule would add

a new provision to the disclosure

statement in regulations relating to

NCUA approval of mergers or

conversions of federally-insured credit

unions to non credit union status. Credit

unions would be required to disclose in

plain English on the cover page of the

disclosure statement specific facts

relating to the proposed transaction’s

impact on the members.

DATES: Comments must be received by

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, Virginia 22314–3428. Fax

comments to (703) 518–6319. E-mail

comments to boardmail@ncua.gov.

Please send comments by one method

only.

FOR FURTHER INFORMATION CONTACT:

Mary F. Rupp, Staff Attorney, Office of

General Counsel, National Credit Union

Administration, 1775 Duke Street,

Alexandria, Virginia 22314–3428 or

telephone: (703) 518–6553.

SUPPLEMENTARY INFORMATION:

Background

On September 16, 1994, the NCUA

Board issued an interim final rule, part

708a, and request for comments. 59 FR

48790 (September 23, 1994). The rule

established that the NCUA Board must

approve any merger or conversion of a

federally insured credit union to a non

credit union institution. On March 1,

1995, the NCUA Board issued a final

rule setting forth the procedures and

disclosure requirements for these

transactions. 60 FR 12659 (March 8,

1995). One of the issues addressed in

the final rule was the requirement that

a uniform member notice be sent to the

members as part of the disclosure. Nine

of the ten commenters supported a

uniform notice. The reasons given were

that a uniform notice would provide

clear and consistent guidelines for

merging credit unions, ensure that

important information is not withheld

from the members and require less

individual review. The NCUA Board

agreed with these goals, but believed

that they could be accomplished more

effectively through a listing of the

information that must be included in

the notice to members, rather than a

form that may become outdated or not

apply to all transactions. The final rule

did not require a uniform notice.

The NCUA Board has had an

opportunity to review Disclosure

Statements under this rule and now,

agrees with the commenters that certain

key information should be routinely

provided to the members in plain

English. Although most of the

information is currently being provided,

it is buried in a multi-page Disclosure

Statement, often in excess of fifteen

pages. Further, it is stated in a way that

is difficult to understand.

Proposal

To ensure that the members

understand the proposed transaction’s

impact, the Board proposes requiring

credit unions to provide in plain

English on the cover page of the

Disclosure the following information:

(1) The institution will no longer be

democratically controlled with each

member having one equal vote. The

larger depositors will have more votes

than the smaller depositors; (2) This

action would enable the credit union to

further change its organizational

structure in the future. For example, if

the institution were to convert to a stock

institution, the members will lose their

equity ownership interest. Any future

decision to convert to a stock institution

would be made by a vote of the

members. The weight a member’s vote

carries will be based on the amount of

the member’s deposit; and (3) The board

of directors may receive financial

benefits not available to other members.

For example, after waiting the two years

required by NCUA’s regulation, Board

members could be compensated and

they could obtain stock under terms not

available to other members.

In the event these statements do not

apply to a particular transaction, they

may be modified as necessary.

The NCUA Board is interested in

receiving comments on the proposed

uniform disclosure requirements.

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 reason for this

determination is that it is highly

unlikely that small credit unions would

be engaged in a merger or conversion to

a noncredit union institution.

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, existing statutory

requirements mandate the Board

approve transactions of this nature for

all federally insured credit unions.

Recognizing the interests of states and

state regulators in supervising state

chartered credit unions, the rule

governing transactions of this nature

includes a provision that allows

federally insured state chartered credit

unions, on a case-by-case basis, to

obtain a waiver from NCUA’s rule and

follow state procedures if those

procedures are determined to

adequately address the concerns of

NCUA’s rule. With this provision in the

rule, the NCUA Board has determined

that the proposed amendments are not

likely to have any direct effect on states,

on the relationship between the states,

or on 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).

List of Subjects in 12 CFR Part 708a

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 708a as follows:

PART 708a—MERGERS OR

CONVERSIONS OF FEDERALLYINSURED CREDIT UNIONS TO NON

CREDIT UNION STATUS: NCUA

APPROVAL

1. The authority citation for part 708a

is revised to read as follows:

Authority: 12 U.S.C. 1766, 1785.
Federal Register / Vol. 62, No. 233 / Thursday, December 4, 1997 / Proposed Rules 64187

2. Amend Appendix A to part 708a to

revise paragraph (2)(m) to read as

follows:

Appendix A to Part 708a—Notice to

Members of Special Meeting, Disclosure

and Ballot

* * * * *

(2) * * *

(m) The cover of the Disclosure Statement

must contain the following statement in bold,

appropriately modified to the extent that this

statement does not accurately describe the

transaction:

PLEASE READ THIS DISCLOSURE

DOCUMENT. IT CONTAINS IMPORTANT

INFORMATION ABOUT YOUR CREDIT

UNION.

If the credit union converts to a savings

bank, the institution will no longer be

democratically controlled with each member

having one equal vote. As explained in this

Disclosure, the larger depositors will have

more votes than the smaller depositors.

This action would enable the credit union

to further change its organizational structure

in the future. For example, if the institution

were to convert to a stock institution, you

would lose your equity ownership interest.

Any future decision to convert to a stock

institution would be made by a vote of the

members, however, the weight your vote

carries will be based on the amount of your

deposit in the institution.

If the credit union converts to a savings

bank, your board of directors may receive

financial benefits not available to other

members. For example, Board members

could be compensated and they could obtain

stock on terms not available to other

members, after waiting the two years

required by credit union regulation.

* * * * *

[FR Doc. 97–31501 Filed 12–3–97; 8:45 am]

BILLING CODE 7535–01–P

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.

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 federallyinsured 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 boardmail@ncua.gov.

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).