36618 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 

interested persons are invited to submit 

information on the regulatory and 

informational impacts of this action on 

small businesses. 

This proposed rule would impose no 

additional reporting or recordkeeping 

requirements on either small or large 

Washington-Oregon prune handlers. As 

with all Federal marketing order 

programs, reports and forms are 

periodically reviewed to reduce 

information requirements and 

duplication by industry and public 

sector agencies. Additionally, USDA has 

not identified any relevant Federal rules 

that duplicate, overlap, or conflict with 

this rule. 

AMS is committed to complying with 

the E-Government Act, to promote the 

use of the Internet and other 

information technologies to provide 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and order may be 

viewed at: http://www.ams.usda.gov/ 

AMSv1.0/ams.fetchTemplateData

.do?template=TemplateN&

page=MarketingOrders

SmallBusinessGuide. Any questions 

about the compliance guide should be 

sent to Jay Guerber at the previously 

mentioned address in the FOR FURTHER

INFORMATION CONTACT section. 

A 30-day comment period is provided 

to allow interested persons to respond 

to this proposed rule. Thirty days is 

deemed appropriate because: (1) The 

2009–10 fiscal period began on April 1, 

2009, and the order requires that the 

assessment rate for each fiscal period 

apply to all assessable prunes handled 

during such fiscal period; (2) the 

Washington-Oregon prune harvest and 

shipping season is expected to begin in 

early August; (3) the Committee needs 

to have sufficient funds to pay its 

expenses, which are incurred on a 

continuous basis; and (4) handlers are 

aware of this action, which was 

recommended by the Committee at a 

public meeting and is similar to other 

assessment rate actions issued in past 

years. 

List of Subjects in 7 CFR Part 924 

Prunes, Marketing agreements, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, 7 CFR part 924 is proposed to 

be amended as follows: 

PART 924—PRUNES GROWN IN 

DESIGNATED COUNTIES IN 

WASHINGTON 

1. The authority citation for 7 CFR 

part 924 continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

2. Section 924.236 is revised to read 

as follows: 

§ 924.236 Assessment rate. 

On or after April 1, 2009, an 

assessment rate of $2.00 per ton is 

established for the Washington-Oregon 

Fresh Prune Marketing Committee. 

Dated: July 20, 2009. 

Rayne Pegg, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. E9–17601 Filed 7–23–09; 8:45 am] 

BILLING CODE 3410–02–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Parts 701 and 741 

RIN 3133–AD63 

National Credit Union Share Insurance 

Fund Premium and One Percent 

Deposit 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Proposed rule. 

SUMMARY: Section 741.4 of NCUA’s rules 

describes the procedures for the 

capitalization and maintenance of the 

National Credit Union Share Insurance 

Fund (NCUSIF). The current rule, 

however, does not adequately address 

how credit unions that enter or depart 

the NCUSIF system in a given calendar 

year are affected by any NCUSIF 

premium or deposit replenishment 

assessments in that same year. Due to 

the unprecedented level of NCUSIF 

expenses in 2009, which required the 

NCUA to announce both such 

assessments, NCUA is now proposing 

amendments to § 741.4 to clarify these 

procedures. The proposal makes other 

minor changes to 741.4 and conforming 

changes to § 701.6 relating to the 

payment of operating fees by Federal 

credit unions. 

DATES: Comments must be received by 

August 24, 2009. 

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/ 

RegulationsOpinionsLaws/ 

proposed_regs/proposed_regs. html. 

Follow the instructions for submitting 

comments. 

• E-mail: Address to 

regcomments@ncua.gov. Include ‘‘[Your 

name] Comments on Insurance 

Premium and One Percent Deposit’’ 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/ 

RegulationsOpinionsLaws/comments 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 OGC Mail@ncua.gov. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Wirick, Staff Attorney, Office 

of General Counsel, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314–3428 

or telephone: (703) 518–6540; and Paul 

Peterson, Director, Applications 

Section, Office of General Counsel, 

National Credit Union Administration, 

at the same address and telephone 

number. 

SUPPLEMENTARY INFORMATION: 

A. Background 

Congress created the National Credit 

Union Share Insurance Fund (NCUSIF) 

in 1970 to provide share insurance 

coverage to all Federal credit unions 

and to those State chartered credit 

unions that apply and meet minimum 

qualification standards. The NCUSIF 

provides insurance coverage for each of 

an insured credit union’s members, 

similar to the coverage provided by the 

Federal Deposit Insurance Corporation’s 

(FDIC’s) Deposit Insurance Fund (DIF). 

Unlike the DIF, however, the NCUSIF 

was not capitalized at its inception by 

tax revenues. From 1971 through 1980, 

the capital of the NCUSIF was 

established solely through the annual 

insurance premium contributions of 

insured credit unions. During the period 

from 1971 through the end of calendar 

year 1980, the capital of the fund (i.e., 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 36619 

1The preamble to the proposed rule in 1984 

stated: 

The legislation provides that the NCUSIF may 

utilize the deposit funds if necessary to meet its 

expenses, in which case the amount used is to be 

expensed and replenished by insured credit unions 

in accordance with procedures established by the 

Board. Given the history of the Fund and the 

condition of insured credit unions, it seems 

unnecessary to anticipate at this time any possible 

utilization of the deposit funds to meet the Fund’s 

expenses. This authority is clearly intended to meet 

a catastrophic economic set of circumstances, as 

evidenced by the fact that it can only be exercised 

after the Fund has utilized all investment income 

and all of its 0.3% nondeposit equity. Thus, ample 

time would exist for development of expense and 

replenishment procedures and guidelines. 

Accordingly, such procedures are not proposed at 

this time. 

49 FR 30740 (Aug. 1, 1984). 

equity as a percentage of insured shares) 

grew, but the years 1981–1983 saw a 

reversal of this trend, due to both record 

share growth in insured credit unions 

and liquidation and problem credit 

union expenses. As an alternative to the 

premium approach to establishing a 

strong and viable insurance fund, the 

NCUA Board developed a legislative 

proposal which, with the support of the 

entire credit union system, Congress 

enacted in 1984. The NCUSIF was then 

capitalized with a deposit by each credit 

union of an amount equaling one 

percent of the credit union’s total 

insured shares. 

As required by the 1984 legislation, 

and subsequent amendments in 1998, 

NCUA maintains the NCUSIF’s equity 

ratio at a percentage between 1.2% and 

1.5%, but no greater than the normal 

operating level as established from time 

to time by the Board. If the NCUSIF’s 

equity ratio exceeds this normal 

operating level at the end of any given 

year, NCUA will, generally, distribute 

any excess funds to insured credit 

unions. If the NCUSIF’s equity ratio falls 

below 1.2%, the NCUSIF must assess a 

premium, and if the ratio falls below 

1.0%, depleting the one percent deposit 

provided by each credit union, the 

NCUSIF must also assess an amount 

sufficient to replenish the one percent 

deposit. 

In 1984, the Board adopted a rule 

establishing procedures for the 

capitalization and maintenance of the 

NCUSIF. 49 FR 40561 (Oct. 17, 1984). 

The rule, originally codified at 12 CFR 

741.5 but now located in § 741.4, dealt 

broadly with five issues: (1) The funding 

of the one percent deposit, (2) the return 

of the deposit, (3) the use of the deposit 

by the NCUSIF and its replenishment by 

insured credit unions, (4) the insurance 

agreement, and (5) NCUA reports to 

Congress. 

The content of § 741.4 today is much 

the same as its 1984 counterpart, having 

been modified only slightly in the past 

25 years. For example, while the current 

rule addresses some issues associated 

with the expense and replenishment of 

the one percent deposit, it does not 

contain much detail on this issue.1 In 

addition, the current rule does not 

adequately address how credit unions 

that enter or depart the NCUSIF system, 

such as through insurance or bank 

conversions, are affected by NCUSIF 

premium or deposit replenishment 

assessments in that same calendar year. 

Due to the unprecedented level of 

NCUSIF expenses in 2009, which 

required the NCUA to announce both 

premium and deposit replenishment 

assessments, NCUA is now proposing 

amendments to § 741.4 to clarify these 

issues and other related issues. 

B. Relevant Statutory Provisions 

The Federal Credit Union Act 

contains several relevant provisions on 

the return and replenishment of the one 

percent deposit and the timing and 

amount of NCUSIF premiums. These 

provisions are set forth below. 

With regard to the deposit, Section 

202(c)(1)(A) of the Act states: 

Each insured credit union shall pay to and 

maintain with the National Credit Union 

Share Insurance Fund a deposit in an amount 

equaling 1 per centum of the credit union’s 

insured shares. * * * 

12 U.S.C. 1782(c)(1)(A). Section 

202(c)(1)(B) of the Act also states: 

(i) The deposit shall be returned to an 

insured credit union in the event that its 

insurance coverage is terminated, it converts 

to insurance coverage from another source, or 

in the event the operations of the fund are 

transferred from the National Credit Union 

Administration Board. 

(ii) The deposit shall be returned in 

accordance with procedures and valuation 

methods determined by the Board, but in no 

event shall the deposit be returned any later 

than one year after the final date on which 

no shares of the credit union are insured by 

the Board. 

(iii) The deposit shall not be returned in 

the event of liquidation on account of 

bankruptcy or insolvency. 

(iv) The deposit funds may be used by the 

fund if necessary to meet its expenses, in 

which case the amount so used shall be 

expensed and shall be replenished by 

insured credit unions in accordance with 

procedures established by the Board. 

12 U.S.C. 1782(c)(1)(B). With regard to 

the premium, Section 202(c)(2) of the 

Act states: 

(A) In general. Each insured credit union 

shall, at such times as the Board prescribes 

(but not more than twice in any calendar 

year), pay to the Fund a premium charge for 

insurance in an amount stated as a 

percentage of insured shares (which shall be 

the same for all insured credit unions). 

(B) Relation of premium charge to equity 

ratio of fund. The Board may assess a 

premium charge only if— 

(i) the Fund’s equity ratio is less than 1.3 

percent; and 

(ii) the premium charge does not exceed 

the amount necessary to restore the equity 

ratio to 1.3 percent. 

(C) Premium charge required if equity ratio 

falls below 1.2 percent. If the Fund’s equity 

ratio is less than 1.2 percent, the Board shall, 

subject to subparagraph (B), assess a 

premium charge in such an amount as the 

Board determines to be necessary to restore 

the equity ratio to, and maintain that ratio at, 

1.2 percent. 

12 U.S.C. 1782(c)(2). Section 206(d)(3) 

of the Act also states: 

In the event of a conversion of a credit 

union from status as an insured credit union 

under this Act under subsection (a)(2) of this 

section, premium charges payable under 

section 202(c) of this Act shall be reduced by 

an amount proportionate to the number of 

calendar months for which the converting 

credit union will no longer be insured under 

this Act . * * * 

12 U.S.C. 1786(d)(3). Subsection (a)(2) 

in the quotation above refers to the 

conversion from a federally-insured 

credit union to a nonfederally-insured 

credit union. 

C. Proposed Amendments to Section 

741.4 

The proposal includes several 

amendments to clarify the NCUSIF 

premium and deposit replenishment 

obligations and procedures for credit 

unions and other entities that enter or 

depart from NCUSIF coverage. Most of 

these proposed amendments are located 

in § 741.4(i), Conversion to Federal 

insurance, and § 741.4(j), Conversion 

from, or termination of, Federal share 

insurance. The Board is, however, also 

proposing minor changes to other 

paragraphs in § 741.4. A paragraph-byparagraph description and discussion of 

all the proposed amendments follows. 

Paragraph (a)—Scope 

Section 741.4 provides for the 

capitalization and maintenance of the 

NCUSIF. The proposal does not change 

the scope of § 741.4, and the proposal 

does not amend this paragraph. 

Paragraph (b)—Definitions 

The proposal includes three 

amendments to the existing definitions. 

The proposal amends the definition of 

insured shares to include, for a credit 

union or other entity that is not 

federally insured, the amount of 

deposits of shares that would have been 

insured by the NCUSIF had the 

institution been federally insured on the 

date of measurement. This amended 

definition is necessary for calculating 


srobinson on DSKHWCL6B1PROD with PROPOSALS
36620 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 

NCUSIF premiums, deposit 

replenishments, and equity 

distributions for entities that enter the 

NCUSIF insurance system. 

The proposal adds a definition of the 

term premium/distribution ratio as the 

number of full remaining months in the 

calendar year following the date of the 

institution’s conversion or merger, 

divided by 12. This term is used in the 

NCUSIF premium, deposit 

replenishment, and equity distribution 

calculations involving credit unions and 

other entities that enter the NCUSIF 

insurance system. The ratio represents 

the fraction of the year that an 

institution entering the NCUSIF system 

was insured by the NCUSIF. 

The proposal also adds a definition of 

the term modified premium/distribution 

ratio as one minus the premium/ 

distribution ratio. This term is used in 

the NCUSIF premium, deposit 

replenishment, and equity distribution 

calculations involving credit unions that 

depart the NCUSIF insurance system. 

This ratio represents the fraction of the 

year that an institution departing the 

NCUSIF system was insured by the 

NCUSIF. 

Also, the proposal deletes the 

paragraph numbers in the current 

version, consistent with Office of the 

Federal Register drafting 

recommendations for definitions 

sections that list the terms defined in 

alphabetical order. 

Paragraph (c)—One Percent Deposit 

This paragraph describes the one 

percent deposit requirement and the 

periodic adjustments based on changes 

in insured shares. For credit unions 

with less than $50 million in assets, the 

adjustments occur after the annual 

reporting period ending on December 

31. For credit unions with $50 million 

or more in assets, the adjustments occur 

after the semiannual reporting periods 

ending on June 30 and December 31 

each year. 

The proposal does not amend this 

paragraph. 

Paragraph (d)—Insurance Premium 

Charges 

Paragraph (d)(1) provides that the 

Board may assess premium charges, in 

an amount stated as a percentage of 

insured shares, no more than twice 

annually. Subparagraph (d)(2)(i) states 

the relation of the premium charge to 

the equity ratio. The proposal does not 

amend these provisions. 

Subparagraph (d)(2)(ii) states that if 

the ratio of the NCUSIF falls below 1.2 

percent, the NCUA Board is required to 

assess a premium in an amount it 

determines necessary to restore the 

equity ratio to, and maintain that ratio 

at, 1.2 percent. This provision is 

confusing because it does not delineate 

between premium assessments and 

assessments to replenish the one 

percent deposit as required by § 202 of 

the Federal Credit Union Act. 

Accordingly, the proposal amends 

subparagraph(d)(2)(ii) to read as follows: 

If the equity ratio of the NCUSIF falls to 

between 1.0 and 1.2 percent, the NCUA 

Board is required to assess a premium in an 

amount it determines is necessary to restore 

the equity ratio to, and maintain that ratio at, 

at least 1.2 percent. If the equity ratio of the 

NCUSIF falls below 1.0 percent, the NCUA 

Board is required to assess a deposit 

replenishment charge in an amount it 

determines is necessary to restore the equity 

ratio to 1.0 percent and to assess a premium 

charge in an amount it determines is 

necessary to restore the equity ratio to, and 

maintain the ratio at, at least 1.2 percent. 

Paragraph (e)—Distribution of NCUSIF 

Equity 

This paragraph describes the 

mandatory year-end distribution of 

NCUSIF equity when the NCUSIF 

exceeds both its normal operating level 

and its available assets ratio as 

described in § 202(c)(3) of the Federal 

Credit Union Act. The proposal does not 

amend this paragraph. 

Paragraph (f)—Invoices 

This paragraph describes invoices for 

premiums and deposit adjustments. For 

clarity, the proposal amends this 

paragraph to specifically include 

invoices for deposit replenishment. 

Paragraph (g)—New Charters 

This paragraph permits new charters 

to delay the funding of their one percent 

deposit until the year following their 

chartering. The proposal does not 

amend this paragraph. 

Paragraph (h)—Depletion of One 

Percent Deposit 

The proposal adds a new paragraph(h) 

to read as follows: 

Depletion of one percent deposit. All or 

part of the one percent deposit may be used 

by the NCUSIF if necessary to meet its 

expenses, and the fund will expense the 

amount so used. The NCUSIF may invoice 

credit unions in an amount necessary to 

replenish the one percent deposit at any time 

following the effective date of the depletion, 

but must invoice credit unions no later than 

the adjustment described in paragraph (c) of 

this section based on insured shares as of 

December 31 of the year of the depletion. 

The first sentence of this provision 

restates the Board’s authority under 

§ 202(c)(1)(B)(iv) of the Federal Credit 

Union Act. The second sentence 

clarifies that NCUA may invoice insured 

credit unions for the deposit 

replenishment at any time after the 

deposit has been depleted, but requires 

that NCUA send the invoice no later 

than the date NCUA first adjusts the 

deposit for changes in insured share 

levels in the year following the 

depletion. 

The proposal takes the current 

paragraph (h), entitled Conversion to 

Federal Insurance, expands on that 

paragraph, and incorporates it into the 

proposed paragraph (i). This is 

discussed further below. 

Paragraph (i)—Conversion to Federal 

Insurance 

The proposal amends paragraph (i) to 

address, in detail, how a nonfederally 

insured credit union that converts to 

Federal insurance is affected by a 

NCUSIF declaration of a premium 

assessment, deposit replenishment 

assessment, or an equity distribution. 

Paragraph (i)(1) addresses a direct 

conversion to Federal insurance, and 

paragraph (i)(2) addresses an indirect 

conversion through the merger of a 

nonfederally insured credit union or 

entity into a federally insured credit 

union. The term ‘‘merger’’ includes not 

only mergers but also purchase and 

assumption transactions in which the 

continuing credit union obtains all, or 

substantially all, of the assets of the 

other entity. The current paragraph (i), 

entitled Mergers of nonfederally insured 

credit unions, is expanded and 

subsumed into the proposed paragraph 

(i)(2). 

This proposed paragraph (i), along 

with the proposed paragraph (j), 

constitute the most significant and 

complex of the proposed amendments 

to § 741.4. Accordingly, the discussion 

below is detailed and includes 

hypotheticals illustrating each 

subparagraph. 

Proposed paragraph (i)(1) addresses a 

direct conversion to NCUSIF insurance. 

Proposed paragraph (i)(1)(i) provides 

that: 

A credit union or other institution that 

converts to insurance coverage with the 

NCUSIF will: (i) Immediately fund its one 

percent deposit based on the total of its 

insured shares as of the last day of the most 

recently ended reporting period prior to the 

date of conversion. * * * 

To illustrate the application of this 

provision, consider the following 

hypothetical. Assume Main Street 

Credit Union completes its conversion 

from nonfederal to Federal insurance on 

May 15 of Year One. Assume further 

that Main Street credit union had 1,000 

insured shares for the end of month in 

December of the previous year (Year 

zero), 1,100 insured shares at the end of 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 36621 

2Although Main Street Credit Union was not 

Federally insured as of December 31 of Year Zero, 

proposed 741.4(b)(3) provides that ‘‘For a credit 

union or other entity that is not Federally insured, 

‘insured shares’ means, for purposes of this section 

only, the amount of deposits or shares that would 

have been insured by the NCUSIF under part 745 

had the institution been Federally insured on the 

date of measurement.’’ 

3Main Street’s actual premium charge will be this 

$583 divided by the aggregate insured shares of all 

Federally insured credit unions times the aggregate 

premium for all Federally insured credit unions. 

May, the month of conversion, and 

1,200 insured shares at the end of June. 

This information is presented in this 

Table A: 2

TABLE A 

End of month, 

December, 

Year Zero 

End of month, 

May, Year One 

(month conversion completed) 

End of month, 

June, Year One 

Main Street Credit Union’s Federally Insured Shares ..................................................... 1,000 1,100 1,200 

Proposed paragraph (i)(1)(i) requires 

that on the date of its conversion, Main 

Street fund its one percent deposit 

based on ‘‘the total of its insured shares 

as of the last day of the most recently 

ended reporting period prior to the date 

of conversion.’’ Since Main Street has 

less than $50,000,000 in assets, its 

reporting period is annual, and ends on 

December 31. 12 CFR 741.4(b)(6) 

(definition of ‘‘reporting period’’). Main 

Street had $1,000 in insured shares on 

that date, and one percent of that is $10, 

and so that is the amount Main Street 

must immediately remit to the NCUSIF 

to establish its one percent deposit. 

Proposed paragraph (i)(1)(ii) provides 

that: 

A credit union or other institution that 

converts to insurance coverage with the 

NCUSIF will: * * * (ii) If the NCUSIF 

assesses a premium in the calendar year of 

conversion, pay a premium based on the 

institution’s insured shares as of the last day 

of the most recently ended reporting period 

preceding the invoice date times the 

institution’s premium/distribution ratio. 

* * * 

To illustrate the application of 

paragraph (i)(1)(ii), take the same facts 

in hypothetical A related to the 

conversion of Main Street from 

nonfederal to Federal insurance. Now, 

further assume that on the previous 

March 15, NCUA had declared a 

premium assessment, and on September 

15 following the conversion NCUA sent 

out the invoices for the March 15 

assessment. Also assume that Main 

Street had grown to 1,300 insured 

shares at the end of September, the 

month the invoices were sent to Main 

Street and other credit unions. This 

information is presented in this Table B: 

TABLE B 

End of month, 

December, 

Year Zero 

End of month, 

May, Year One 

(month conversion completed) 

End of month, 

June, Year One 

End of month 

September, 

Year One 

(month invoice 

sent) 

Main Street Credit Union’s Federally Insured Shares ..................... 1,000 1,100 1,200 1,300 

Paragraph (i)(1)(ii) requires Main 

Street pay a premium based on the 

institution’s ‘‘insured shares as of the 

last day of the most recently ended 

reporting period preceding the invoice 

date times the institution’s premium/ 

distribution ratio.’’ Again, because Main 

Street is under $50 million in assets, the 

most recently ended reporting period 

preceding the September 15 invoice 

date is all the way back to December of 

Year Zero, when Main Street had $1,000 

in shares. Main Street’s ‘‘premium/ 

distribution ratio,’’ as defined in 

proposed § 741.4(b)(5), is ‘‘the number 

of full remaining months in the calendar 

year following the date of the 

institution’s conversion or merger 

divided by 12.’’ Since Main Street 

completed its conversion in May, there 

are seven full months remaining in the 

calendar year (June through December), 

and Main Street’s premium/distribution 

ratio is seven divided by 12. 

Accordingly, Main Street’s premium 

will be assessed on $1,000 times seven 

divided by 12, or about $583.3 Note that 

if Main Street’s assets had exceeded $50 

million as of June 30, it would have had 

semiannual reporting periods under 

§ 741.4(b)(6), and its ‘‘insured shares as 

of the last day of the most recently 

ended reporting period preceding the 

invoice date’’ would have been its 

insured shares as of June 30, Year One, 

and not as of December 31, Year Zero. 

Proposed paragraphs (i)(1)(iii) and (iv) 

describe the responsibility of a credit 

union or other entity converting to 

Federal insurance to replenish a 

depleted NCUSIF deposit, as follows: 

A credit union or other institution that 

converts to insurance coverage with the 

NCUSIF will * * * (iii) If the NCUSIF 

declares, in the calendar year of conversion 

but on or before the date of conversion, an 

assessment to replenish the one-percent 

deposit, pay nothing related to that 

assessment; (iv) If the NCUSIF declares, at 

any time after the date of conversion through 

the end of that calendar year, an assessment 

to replenish the one-percent deposit, pay a 

replenishment amount based on the 

institution’s insured shares as of the last day 

of the most recently ended reporting period 

preceding the invoice date. * * * 

Paragraph (i)(1)(iii) clarifies that a 

converting credit union has no 

responsibility to pay anything toward 

the replenishment of a depleted deposit 

that is declared on or before the date of 

conversion, even if NCUA sends out 

invoices related to the depletion after 

the date of conversion. Paragraph 

(i)(1)(iv) requires that a converting 

credit union replenish its deposit with 

regard to a depletion declared after the 

date of conversion through the end of 

the calendar year. Again, assume the 

same facts for Main Street as in Table B, 

but that the deposit depletion was 

announced in June, after Main Street 

converted, and that NCUA sent the 

invoices in September. 


srobinson on DSKHWCL6B1PROD with PROPOSALS
36622 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 

TABLE B 

End of month, 

December, 

Year Zero 

End of month, 

May, Year One 

(month conversion completed) 

End of month, 

June, Year One 

End of month 

September, 

Year One 

(month invoice 

sent) 

Main Street Credit Union’s Federally Insured Shares ..................... 1,000 1,100 1,200 1,300 

Main Street would receive an invoice 

amount ‘‘based on the [Main Street’s] 

insured shares as of the last day of the 

most recently ended reporting period 

preceding the invoice date.’’ Since Main 

Street has less than $50 million in 

shares, the most recently ended 

reporting period preceding the 

September invoice date was December 

31, Year Zero, and it would pay for the 

replenishment based on $1,000 in 

insured shares. If Main Street, however, 

had had $50 million or more in assets 

on June 30, its most recently ended 

reporting period preceding the invoice 

date would have been the semiannual 

period ending on June 30, and Main 

Street would have used its insured 

shares as of June 30 to calculate the 

replenishment amount due to the 

NCUSIF. 

Under the Federal Credit Union Act, 

distributions, if any, are declared once 

a year, early in the year, based on excess 

funds in the NCUSIF as of the prior 

December 31. Proposed paragraph 

(i)(1)(v) describes the right of a credit 

union or other entity converting to 

Federal insurance to receive a 

distribution from the NCUSIF, 

specifically: 

(1) A credit union or other institution that 

converts to insurance coverage with the 

NCUSIF will: * * * (v) If the NCUSIF 

declares a distribution in the year following 

conversion based the NCUSIF’s equity at the 

end of the year of conversion, receive a 

distribution based on the institution’s 

insured shares as of the end of the year of 

conversion times the institution’s premium/ 

distribution ratio. With regard to 

distributions declared in the calendar year of 

conversion but based on the NCUSIF’s equity 

at the end of the preceding year, the 

converting institution will receive no 

distribution. 

To illustrate how proposed paragraph 

(i)(1)(v) works, assume that Main Street 

Credit Union converts to Federal 

insurance in May of Year One, and that 

the NCUA declares a distribution in 

January of Year Two based on the 

NCUSIF equity as of December 31 of 

Year One. Then Main Street will be 

entitled to a pro rata portion of the 

distribution, calculated on its insured 

shares as of December 31 of Year One 

times its premium/distribution ratio. 

Since it converted in May of Year One, 

and there were seven full months 

remaining in Year One at on the date of 

conversion, Main Street’s premium/ 

distribution ratio under proposed 

§ 741.4(b)(6) equals seven divided by 12. 

On the other hand, if the NCUA 

declared a distribution a year earlier, 

that is, in January of Year One based on 

the NCUSIF’s equity ratio as of 

December 31 in Year Zero, then under 

proposed paragraph (i)(1)(v) Main Street 

would receive no part of this 

distribution. Main Street is not entitled 

to any part of this distribution because 

Main Street, which completed its 

conversion in Year One, did not 

contribute in any way to the excess 

funds in the NCUSIF as of the end of 

Year Zero. 

While proposed paragraph (i)(1), and 

the examples given above, involve the 

conversion of a credit union or entity 

directly to Federal insurance with the 

NCUSIF, such conversions can also 

happen indirectly through the merger of 

a nonfederally insured credit union or 

entity into a federally insured credit 

union. 

Proposed paragraph (i)(2) addresses 

the NCUSIF premiums, deposit 

replenishments, and distributions in 

this context. 

Proposed paragraph (i)(2)(i) provides 

that: 

(2) A federally insured credit union that 

merges with a nonfederally-insured credit 

union or other non-federally insured 

institution (the ‘‘merging institution’’), where 

the federally-insured credit union is the 

continuing institution, will: (i) Immediately 

on the date of merger increase the amount of 

its NCUSIF deposit by an amount equal to 

one percent of the merging institution’s 

insured shares as of the last day of the 

merging institution’s most recently ended 

reporting period preceding the date of merger 

* * *. 

To illustrate this provision, and the 

other provisions of paragraph (i)(2) 

related to mergers of nonfederally 

insured entities into federally-insured 

credit unions, consider the following 

hypothetical. Nonfederally-insured 

Credit Union A merges into federallyinsured Credit Union B on August 15 of 

Year One. The relevant insured shares 

of Credit Union A and Credit Union B 

at various dates before and after the 

merger are reflected in Table D: 

TABLE D 

End of month 

December, 

Year Zero 

End of month 

June, Year One 

End of month 

August, 

Year One 

(month merger 

completed) 

End of month 

September, 

Year One 

(month invoice 

sent) 

Credit Union A insured shares ........................................................ 1,000 1,100 N/A N/A 

Credit Union B insured shares ........................................................ 9,000 9,900 12,900 14,000 

Proposed paragraph (i)(2)(i) requires 

that Credit Union B, the continuing 

credit union, immediately increase the 

amount of its deposit with the NCUSIF 

in an amount ‘‘equal to one percent of 

the merging institution’s insured shares 

as of the last day of the merging 

institution’s most recently ended 

reporting period preceding the date of 

merger.’’ Since Credit Union A, the 

merging institution, has less than $50 

million in assets, its reporting period is 

the calendar year, and its most recently 

ended reporting period preceding the 

August merger date is December 31 in 

Year Zero. Credit Union A had $1,000 

in insured shares on that date. 

Accordingly, Credit Union B, the 

continuing credit union, must 

immediately increase the amount of its 

deposit with the NCUSIF by one percent 


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of $1,000, or $10. Note that if Credit 

Union A had been a larger credit union, 

with $50 million or more in assets on 

June 30 in Year One, then Credit Union 

B would have used Credit Union A’s 

insured shares as of June 30 in this 

calculation. 

Proposed paragraph (i)(2)(ii), relating 

to NCUSIF premium assessments, 

provides that the continuing institution 

will: 

(ii) With regard to any NCUSIF premiums 

assessed in the calendar year of merger, pay 

a two-part premium, with one part calculated 

on the merging institution’s insured shares as 

described in subparagraph (1)(ii) above, and 

the other part calculated on the continuing 

institution’s insured shares as of the last day 

of its most recently ended reporting period 

preceding the date of merger. * * * 

Paragraph (i)(2)(ii) provides for a twopart calculation, with the first part 

relating to the merging credit union and 

the second part relating to the 

continuing credit union. If we assume 

the facts as in Table D, and assume the 

premium is assessed sometime in Year 

One, then we calculate the insured 

shares of Credit Union A, the merging 

credit union, as we did in the example 

for paragraph (i)(1)(ii), which would be 

$583. Then we calculate the insured 

shares of Credit Union B, the continuing 

credit union, ‘‘as of the last day of its 

most recently ended reporting period 

preceding the merger date.’’ Since 

Credit Union B is also under $50 

million in assets, ‘‘the last day of the 

most recently ended reporting period’’ 

is also December 31 of Year Zero. Credit 

Union B’s insured shares on that date 

were $9,000, and so the combined 

insured shares for purposes of the 

premium assessment is $9,583. Note 

that if Credit Union B had $50 million 

or more in assets on June 30 of Year 

One, then Credit Union B’s ‘‘most 

recently ended reporting period 

preceding the merger date’’ would have 

been June 30 of Year One, and not 

December 31 of Year Zero. The Board is 

aware that the NCUA might declare a 

NCUSIF premium, invoice it, and 

receive the premiums in Year One from 

the continuing institution before the 

continuing institution consummates its 

merger. In that case, the Board would 

invoice the continuing credit union 

again after the merger, but only for the 

difference between the amount 

previously invoiced and the amount 

calculated under proposed paragraph 

(i)(2)(ii). 

Proposed paragraph (i)(2)(iii) 

prescribes the procedures for calculating 

the NCUSIF distribution when a 

nonfederally-insured credit union or 

entity merges into a federally insured 

credit union. Proposed paragraph 

(i)(2)(iii) provides that the federallyinsured credit union will: 

[i]f the NCUSIF declares a distribution in the 

year following the merger based on the 

NCUSIF’s equity at the end of the year of 

merger, receive a distribution based on the 

continuing institution’s insured shares as of 

the end of the year of merger. With regard to 

distributions declared in the calendar year of 

merger but based on the NCUSIF’s equity 

from the end of the preceding year, the 

institution will receive a distribution based 

on its insured shares as of the end of the 

preceding year. 

This formula recognizes that the 

merging institution did not contribute to 

the NCUSIF equity as of the end of the 

year preceding the merger and so no 

distribution is allotted against the 

merging institution’s shares. As for 

distributions based on the NCUSIF 

equity at the end of the year of merger, 

this formula does not include any pro 

rata reduction for the merging 

institution’s contribution. The Board 

determined that a pro rata reduction 

was unnecessary, given the generally 

small relative size of merging 

institutions to continuing institutions, 

and the fact that the Federal Credit 

Union Act does not require any sort of 

pro rata reduction or other pro rata 

calculation with regard to distributions. 

For credit unions converting to 

NCUSIF coverage, the proposal changes 

the date for calculating the one percent 

deposit from insured shares as of the 

close of the month before conversion to 

insured shares as of the most recently 

ended reporting period before 

conversion. NCUA is proposing this 

change to make the calculation method 

for credit unions entering NCUSIF 

consistent with the calculation method 

for federally-insured credit unions’ one 

percent deposit adjustment. Likewise, 

for federally-insured credit unions 

merging with nonfederally-insured 

credit unions, the proposal clarifies that 

the date used for calculation of the 

merged credit union’s increased one 

percent is insured shares of the 

nonfederally-insured credit union as of 

the most recently ended reporting 

period before conversion. Again, this 

change makes the calculation method 

for credit unions increasing insured 

shares by merger consistent with the 

calculation method for federally-insured 

credit unions’ one percent deposit 

adjustment. 

Paragraph (j)—Conversion From, or 

Termination of, Federal Share 

Insurance 

The proposal amends paragraph (j) to 

address, in detail, how a federally 

insured credit union that converts to 

insurance other than that provided by 

the NCUSIF, or that loses or terminates 

its NCUSIF insurance, is affected by a 

NCUSIF declaration of a premium 

assessment, deposit replenishment 

assessment, or equity distribution. 

Proposed subparagraph (j)(1) addresses 

direct insurance conversions and 

conversions by merger. Proposed 

subparagraph (j)(2) addresses 

liquidations and insurance termination. 

Proposed paragraph (j)(1)(i) provides 

that: 

A federally-insured credit union whose 

insurance coverage with the NCUSIF 

terminates, including through a conversion 

to, or merger into, a nonfederally insured 

credit union or a non-credit union entity, 

will: (i) Receive the full amount of its 

NCUSIF deposit, less any announced 

depletion, immediately after the final date on 

which any shares of the credit union are 

NCUSIF-insured. * * * 

The current paragraph (j) does not 

mention the possibility of deposit 

depletion, and this has been clarified in 

the proposed paragraph (j). To illustrate 

the application of this paragraph 

(j)(1)(i), consider the following 

hypothetical. Assume Anytown Credit 

Union, a credit union with $30 million 

in assets, converts from Federal to 

nonfederal insurance on November 15. 

Also assume Anytown Credit Union had 

$20 million in insured shares as of the 

previous December 31, the end of its 

most recent reporting period. 12 CFR 

741.4(b)(5), (c). The NCUSIF would 

return one percent of $20 million, or 

$200,000 to Anytown Credit Union 

immediately following the effective date 

of its conversion. Note that, if Anytown 

Credit Union had reported $50 million 

or more in assets on June 30, then June 

30 would have been the end of its most 

recent reporting period. Now further 

assume that, on July 15 of that same 

year, the NCUSIF had announced an 

expense that reduced the equity ratio 

from 1.3 to .75, which would have 

included a write-off (depletion) of 25 

percent, or 25 basis points, of the one 

percent deposit. The amount of the 

deposit returned to Anytown would be 

reduced by 25 percent, from $200,000 to 

$150,000. If the NCUSIF had announced 

expenses reducing the equity ratio to .75 

after the November 15 conversion date, 

this announcement would have no 

effect on Anytown and it would still 

receive $200,000 from the NCUSIF. 

Proposed paragraph (j)(1)(ii) provides 

that: 

A federally-insured credit union whose 

insurance coverage with the NCUSIF 

terminates, including through a conversion 

to, or merger into, a nonfederally insured 

credit union or a non-credit union entity, 

will: * * * (ii) If the NCUSIF declares a 

distribution at the end of the calendar year 


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36624 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 

4Anytown’s actual distribution would be $18.33 

million times the aggregate amount of the 

distribution divided by the aggregate amount of all 

insured shares at all federally insured credit unions. 

of conversion, receive a distribution based on 

the institution’s insured shares as of the last 

day of the most recently ended reporting 

period preceding the date of conversion 

times the institution’s modified premium/ 

distribution ratio. * * * 

To illustrate the application of this 

paragraph (j)(1)(ii), again assume 

Anytown Credit Union converts to 

nonfederal insurance on November 15, 

and in January of the following year, the 

NCUSIF declares a distribution based on 

the NCUSIF’s equity ratio as of 

December 31. Anytown would receive a 

pro rata distribution calculated as its 

$20 million in insured shares multiplied 

by the modified premium/distribution 

ratio. Anytown’s modified premium/ 

distribution ratio, from the definition in 

§ 741.4(b)(5), is one minus Anytown’s 

premium/distribution ratio, which is 

one minus the ratio of the full number 

of months remaining in the year divided 

by twelve, which is one minus (one 

divided by twelve), which is eleven 

divided by twelve. So Anytown would 

receive a pro rata distribution based on 

$20 million of insured shares times 

eleven twelfths, or about $18.33 million 

in shares.4

The current rule provides credit 

unions departing the NCUSIF system 

with the option to leave ‘‘a nominal sum 

on deposit with NCUSIF until the next 

distribution from NCUSIF equity and 

will thus qualify for a prorated share of 

the distribution.’’ For several reasons, 

the proposal eliminates this option. 

First, the current rule is ambiguous 

because it does not specify how the 

requisite nominal sum is calculated or 

how the prorated share of future 

distributions is calculated. Second, this 

option, if exercised, imposes a lengthy 

recordkeeping burden on the NCUSIF, 

as it can be many years between 

NCUSIF equity distributions. Third, 

although several credit unions have 

departed the NCUSIF system in recent 

years, the Board is not aware that any 

of these credit unions exercised this 

option. Finally, the proposed 

amendments will allow credit unions 

departing the NCUSIF to receive a pro 

rata share of any future distribution 

without leaving any sum on deposit 

with the NCUSIF, but only for a 

dividend declared on NCUSIF equity as 

of the close of the year of departure. The 

Board believes this simplification is 

appropriate, particularly since the 

contribution of a departing credit union 

to future distributions diminishes with 

the passage of time. 

Proposed paragraph (j)(1)(iii) provides 

that: 

A federally-insured credit union whose 

insurance coverage with the NCUSIF 

terminates, including through a conversion 

to, or merger into, a nonfederally insured 

credit union or a non-credit union entity, 

will: * * * (iii) If the NCUSIF assesses a 

premium in the calendar year of conversion 

or merger on or before the day in which the 

conversion or merger is completed, pay a 

premium based on the institution’s insured 

shares as of the last day of the most recently 

ended reporting period preceding the 

conversion or merger date times the 

institution’s modified premium/distribution 

ratio. If the institution has previously paid a 

premium based on this same assessment that 

exceeds this amount, the institution will 

receive a refund of the difference following 

completion of the conversion or merger. 

To illustrate these premium 

provisions, again assume Anytown 

Credit Union is a credit union with $30 

million in assets that converts from 

Federal to nonfederal insurance on 

November 15 of Year One, and that 

Anytown Credit Union had $20 million 

in insured shares as of the previous 

December 31 (of Year Zero), the end of 

its most recent reporting period. Further 

assume that NCUA declares a premium 

on February 12 of Year One and 

invoices the premium on November 15. 

Since the premium was declared ‘‘on or 

before the day in which [Anytown’s] 

conversion [was] completed,’’ 

§ 741.4(i)(1)(iii) applies. Anytown 

would then pay a premium based on 

$20 million (its ‘‘insured shares as of the 

last day of the most recently ended 

reporting period preceding the 

conversion or merger date’’) times 

eleven twelfths (its ‘‘modified premium/ 

distribution ratio’’), or about $18.33 

million. Note that NCUA might have 

already have invoiced Anytown for the 

premium sometime between February 

12 and Anytown’s merger on November 

15. If so, Anytown will likely receive a 

refund of some of this earlier premium, 

as provided in the last sentence of 

§ 741.1(i)(1)(iii), since it may have 

overpaid the earlier premium. 

Proposed paragraph (j)(2), dealing 

with liquidations, states the following: 

Notwithstanding the requirements of 

paragraph (j)(1) of this section: (i) Any 

insolvent credit union that is closed for 

involuntary liquidation will not be entitled to 

a return of its deposit; (ii) Any solvent credit 

union that is closed due to voluntary or 

involuntary liquidation will be entitled to a 

return of its deposit, less any announced 

depletion, prior to final distribution of 

member shares; and (iii) The Board reserves 

the right to delay return of the deposit to any 

credit union converting from or terminating 

its Federal insurance, or voluntarily 

liquidating, for up to one year if the Board 

determines that immediate repayment would 

jeopardize the NCUSIF. 

These provisions are identical to 

provisions in the current paragraph (j), 

except that the proposal adds the phrase 

‘‘less any announced depletion’’ in 

paragraph (j)(2)(ii) for clarity. 

Paragraph (k)—Assessment of 

Administrative Fee and Interest for 

Delinquent Payment 

This paragraph describes procedures 

for assessing fees for delinquent 

payments of the capitalization deposit 

and insurance premium. The proposal 

clarifies that paragraph (k) applies to 

delinquent deposit replenishment 

payments as well as premium payments. 

The proposal also deletes overlapping 

provisions for imposing both the ‘‘costs 

of collection’’ and an ‘‘administrative 

fee’’ in the current rule and changes the 

interest rate to a fixed rate of six percent 

per year. The delinquency fee will be 

calculated based on a 360-day year, that 

is, six percent times the unpaid balance 

divided by 360 times the number of 

days unpaid. The Office of the Chief 

Financial Officer has determined that 

switching to a fixed rate and imposing 

the delinquency fee based on the 

number of days the balance is 

outstanding will allow NCUA to 

automate the billing process, thus 

eliminating the need for additional 

administrative fees. 

Finally, the proposal restates 

provisions from the Act that: (a) Give 

the Board authority to collect a penalty 

of up to $20,000 per day for each day 

the balance related to a premium or 

deposit remains unpaid; and (b) prohibit 

insured credit unions from paying 

dividends or distributing assets while in 

default on insurance deposits or 

premiums, with possible punishment of 

fines up to $1,000 or imprisonment of 

one year for directors or officers who 

knowingly violate this prohibition. 

D. Temporary Corporate Credit Union 

Stabilization Fund 

In the Spring of 2009, Congress 

enacted the ‘‘Helping Families Save 

Their Homes Act of 2009,’’ Pub. L. 111– 

22. Section 204(f) of that Act established 

the Temporary Corporate Credit Union 

Stabilization Fund (CCSUF). 

The CCUSF is separate from the 

NCUSIF, and the CCUSF will make 

assessments on federally-insured credit 

unions separate and apart from any 

NCUSIF assessments. The CCUSF, 

unlike the NCUSIF, is funded by 

Treasury borrowings and not credit 

union capitalization deposits. 

Accordingly, the CCUSF does not make 

assessments to replenish capital 

deposits, nor does it make assessments 


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to reestablish a particular equity ratio. 

Instead, the CCUSF only makes 

assessments on insured credit unions as 

necessary to repay CCUSF borrowings 

from the Treasury. Accordingly, much 

of § 741.4 of NCUA’s rules is 

inapplicable to the CCUSF, and the 

CCUSF is not specifically addressed in 

the text of this rulemaking. 

While the obligation of a particular 

credit union to replenish its NCUSIF 

deposit or make a NCUSIF premium 

payment can be rather complicated, the 

obligation for a particular credit union 

to pay a particular CCUSF assessment is 

straightforward. CCUSF assessments are 

effective on the date the NCUA Board 

acts to order an assessment as 

authorized by Public Law 111–22. Any 

credit union whose shares are covered 

by Federal insurance on that date must 

pay its share of that particular 

assessment; but any credit union that is 

not covered by Federal insurance on 

that date is not obligated to pay any part 

of that assessment. The dollar amount of 

each credit union’s portion of a CCUSF 

assessment is calculated based on that 

credit union’s insured shares as of the 

end of its last reporting period 

preceding the date of the Board action. 

E. Proposed Amendment to Section 

701.6 

Section 701.6(d) of NCUA’s 

regulations addresses delinquent 

payment of the operating fee paid by 

FCUs. The proposal updates this section 

to parallel the revised provisions for 

delinquent payment of insurance 

premium and deposit replenishment 

expenses. As in § 741.4(k), the proposed 

amendments to § 701.6(d) delete 

potentially duplicative provisions 

allowing both administrative fees and 

costs of collection, and replace the 

variable interest rate with a fixed 

interest rate of six percent per year. The 

delinquency fee will be calculated based 

on a 360-day year, that is, six percent 

times the unpaid balance divided by 

360 times the number of days unpaid. 

F. 30-Day Comment Period 

NCUA seeks public comment on the 

proposed amendments discussed above. 

As a matter of agency policy, the 

NCUA Board general provides a 60-day 

comment period for proposed 

regulations. NCUA’s Interpretive Ruling 

and Policy Statement (IRPS) 87–2, 52 FR 

35231 (Sept. 18, 1987), as amended by 

IRPS 03–02, 68 FR 31949 (May 29, 

2003). In this case, the NCUA Board 

believes a 30-day comment period will 

suffice because the proposal clarifies an 

existing rule. 

NCUA also seeks comment on 

whether the examples that appear above 

illustrating the various proposed 

amendments should be placed in a 

formal Appendix and be published in 

the Code of Federal Regulations with 

the rule text. 

Regulatory Procedures 

Regulatory Flexibility Act 

The Regulatory Flexibility Act 

requires NCUA to prepare an analysis to 

describe any significant economic 

impact a rule may have on a substantial 

number of small credit unions, defined 

as those under ten million dollars in 

assets. This proposed rule clarifies 

existing requirements and will not 

impose any new regulatory 

requirements. The proposed rule 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 

NCUA has determined that the 

proposed rule would not increase 

paperwork requirements under the 

Paperwork Reduction Act of 1995 and 

regulations of the Office of Management 

and Budget. 44 U.S.C. 3501 et seq.; 5 

CFR part 1320. 

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 rule 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 proposed rule 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 the 

proposed rule would not affect family 

well-being within the meaning of § 654 

of the Treasury and General 

Government Appropriations Act, 1999, 

Public Law 105–277, 112 Stat. 2681 

(1998). 

List of Subjects in 12 CFR Part 701 

Credit, Credit unions, Operating fee. 

List of Subjects in 12 CFR Part 741 

Credit unions, insurance. 

By the National Credit Union 

Administration Board on July 16, 2009. 

Mary F. Rupp, 

Secretary of the Board. 

For the reasons set forth above, NCUA 

proposes to amend 12 CFR parts 701 

and 741 as follows. 

PART 701—ORGANIZATION AND 

OPERATION OF FEDERAL CREDIT 

UNIONS 

1. The authority citation for part 701 

continues to read as follows: 

Authority: 12 U.S.C. 1752(5), 1755, 1756, 

1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 

1782, 1784, 1786, 1787, 1789. Section 701.6 

is also authorized by 15 U.S.C. 3717. Section 

701.31 is also authorized by 15 U.S.C. 1601 

et seq.; 42 U.S.C. 1981 and 3601–3610. 

Section 701.35 is also authorized by 42 

U.S.C. 4311–4312. 

2. Revise paragraph (d) of § 701.6 to 

read as follows: 

§ 701.6 Fees paid by Federal credit unions. 

* * * * * 

(d) Assessment of interest for 

delinquent payment. Each Federal 

credit union must pay to the 

Administration interest on any 

delinquent payment of its operating fee. 

A payment will be considered 

delinquent if it is post-marked later than 

the date stated in the notice to the credit 

union provided under § 701.6(c). The 

National Credit Union Administration 

may waive the collection of interest if 

circumstances warrant. 

(1) The interest rate charged on any 

delinquent payment is six percent per 

annum of the unpaid balance for the 

number of days the balance remains 

unpaid. The delinquency fee is 

calculated based on a 360-day year, that 

is, six percent times the unpaid balance 

divided by 360 times the number of 

days unpaid. 

(2) If a credit union makes a combined 

payment of its operating fee and its 

share insurance deposit and/or 

insurance premium as provided in 

§ 741.4 of this chapter and such 

payment is delinquent, interest will be 

charged on the combined amount. 

PART 741—REQUIREMENTS FOR 

INSURANCE 

3. The authority citation for part 741 

continues to read as follows: 

Authority: 12 U.S.C. 1757, 1766(a), 1781– 

1790, and 1790d: 31 U.S.C. 3717. 

4. Revise § 741.4 to read as follows: 


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36626 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 

§ 741.4 Insurance premium and one 

percent deposit. 

(a) Scope. This section implements 

the requirements of Section 202 of the 

Act (12 U.S.C. 1782) providing for 

capitalization of the NCUSIF through 

the maintenance of a deposit by each 

insured credit union in an amount 

equaling one percent of its insured 

shares and payment of an insurance 

premium. 

(b) Definitions. For purposes of this 

section: 

Available assets ratio means the ratio 

of: 

(i) The amount determined by 

subtracting all liabilities of the NCUSIF, 

including contingent liabilities for 

which no provision for losses has been 

made, from the sum of cash and the 

market value of unencumbered 

investments authorized under Section 

203(c) of the Act (12 U.S.C. 1783(c)), to: 

(ii) The aggregate amount of the 

insured shares in all insured credit 

unions. 

(iii) Shown as an abbreviated 

mathematical formula, the available 

assets ratio is: 

(cash + market value of unencumbered investments) − (liabilities + contingent liabilities for which no provision for losses has been made)

aggregate amount of all insured shares from final reporting period of calendar year

Equity ratio means the ratio of: 

(i) The amount of NCUSIF’s 

capitalization, meaning insured credit 

unions’ one percent capitalization 

deposits plus the retained earnings 

balance of the NCUSIF (less contingent 

liabilities for which no provision for 

losses has been made) to: 

(ii) The aggregate amount of the 

insured shares in all insured credit 

unions. 

(iii) Shown as an abbreviated 

mathematical formula, the equity ratio 

is: 

(insured credit unions’ 1.0% capitalization deposits + (NCUSIF’s retained earnings 

contingent liabilities for whic − h no provision for losses has been made)

aggregate amount of all insured shares

Insured shares means the total 

amount of a federally-insured credit 

union’s share, share draft and share 

certificate accounts, or their equivalent 

under State law (which may include 

deposit accounts), authorized to be 

issued to members, other credit unions, 

public units, or nonmembers (where 

permitted under the Act or equivalent 

State law), but does not include 

amounts in excess of insurance coverage 

as provided in part 745 of this chapter. 

For a credit union or other entity that 

is not federally insured, ‘‘insured 

shares’’ means, for purposes of this 

section only, the amount of deposits or 

shares that would have been insured by 

the NCUSIF under part 745 had the 

institution been federally insured on the 

date of measurement. 

Modified premium/distribution ratio 

means one minus the premium/ 

distribution ratio. 

Normal operating level means an 

equity ratio not less than 1.2 percent 

and not more than 1.5 percent, as 

established by action of the NCUA 

Board. 

Premium/distribution ratio means the 

number of full remaining months in the 

calendar year following the date of the 

institution’s conversion or merger 

divided by 12. 

Reporting period means calendar year 

for credit unions with total assets of less 

than $50,000,000 and means 

semiannual period for credit union with 

total assets of $50,000,000 or more. 

(c) One percent deposit. Each insured 

credit union must maintain with the 

NCUSIF during each reporting period a 

deposit in an amount equaling one 

percent of the total of the credit union’s 

insured shares at the close of the 

preceding reporting period. For credit 

unions with total assets of less than 

$50,000,000, insured shares will be 

measured and adjusted annually based 

on the insured shares reported in the 

credit union’s semiannual 5300 report 

due in January of each year. For credit 

unions with total assets of $50,000,000 

or more, insured shares will be 

measured and adjusted semiannually 

based on the insured shares reported in 

the credit union’s quarterly 5300 reports 

due in January and July of each year. 

(d) Insurance premium charges. (1) In 

general. Each insured credit union will 

pay to the NCUSIF, on dates the NCUA 

Board determines, but not more than 

twice in any calendar year, an insurance 

premium in an amount stated as a 

percentage of insured shares, which will 

be the same percentage for all insured 

credit unions. 

(2) Relation of premium charge to 

equity ratio of NCUSIF. (i) The NCUA 

Board may assess a premium charge 

only if the NCUSIF’s equity ratio is less 

than 1.3 percent and the premium 

charge does not exceed the amount 

necessary to restore the equity ratio to 

1.3 percent. 

(ii) If the equity ratio of the NCUSIF 

falls to between 1.0 and 1.2 percent, the 

NCUA Board is required to assess a 

premium in an amount it determines is 

necessary to restore the equity ratio to, 

and maintain that ratio at, at least 1.2 

percent. If the equity ratio of the 

NCUSIF falls below 1.0 percent, the 

NCUA Board is required to assess a 

deposit replenishment charge in an 

amount it determines is necessary to 

restore the equity ratio to 1.0 percent 

and to assess a premium charge in an 

amount it determines is necessary to 

restore the equity ratio to, and maintain 

the ratio at, at least 1.2 percent. 

(e) Distribution of NCUSIF equity. If, 

as of the end of a calendar year, the 

NCUSIF exceeds its normal operating 

level and its available assets ratio 

exceeds 1.0 percent, the NCUA Board 

will make a proportionate distribution 

of NCUSIF equity to insured credit 

unions. The distribution will be the 

maximum amount possible that does 

not reduce the NCUSIF’s equity ratio 

below its normal operating level and 

does not reduce its available assets ratio 

below 1.0 percent. The distribution will 

be after the calendar year and in the 

form determined by the NCUA Board. 

The form of the distribution may 

include a waiver of insurance 

premiums, premium rebates, or 

distributions from NCUSIF equity in the 


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Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 36627 

form of dividends. The NCUA Board 

will use the aggregate amount of the 

insured shares from all insured credit 

unions from the final reporting period of 

the calendar year in calculating the 

NCUSIF’s equity ratio and available 

assets ratio for purposes of this 

paragraph. 

(f) Invoices. The NCUA provides 

invoices to all federally insured credit 

unions stating any change in the amount 

of a credit union’s one percent deposit 

and the computation and funding of any 

premium or deposit replenishment 

assessments due. Invoices for Federal 

credit unions also include any annual 

operating fees that are due. Invoices are 

calculated based on a credit union’s 

insured shares as of the most recently 

ended reporting period. The invoices 

may also provide for any distribution 

the NCUA Board declares in accordance 

with paragraph (e) of this section, 

resulting in a single net transfer of funds 

between a credit union and the NCUA. 

(g) New charters. A newly-chartered 

credit union that obtains share 

insurance coverage from the NCUSIF 

during the calendar year in which it has 

obtained its charter will not be required 

to pay an insurance premium for that 

calendar year. The credit union will 

fund its one percent deposit on a date 

to be determined by the NCUA Board in 

the following calendar year, but will not 

participate in any distribution from 

NCUSIF equity related to the period 

prior to the credit union’s funding of its 

deposit. 

(h) Depletion of one percent deposit. 

All or part of the one percent deposit 

may be used by the NCUSIF if necessary 

to meet its expenses, and the fund will 

expense the amount so used. The 

NCUSIF may invoice credit unions in an 

amount necessary to replenish the one 

percent deposit at any time following 

the effective date of the depletion, but 

must invoice credit unions no later than 

the adjustment described in paragraph 

(c) of this section based on insured 

shares as of December 31 of the year of 

the depletion. 

(i) Conversion to Federal insurance. 

(1) A credit union or other institution 

that converts to insurance coverage with 

the NCUSIF will: 

(i) Immediately fund its one percent 

deposit based on the total of its insured 

shares as of the last day of the most 

recently ended reporting period prior to 

the date of conversion; 

(ii) If the NCUSIF assesses a premium 

in the calendar year of conversion, pay 

a premium based on the institution’s 

insured shares as of the last day of the 

most recently ended reporting period 

preceding the invoice date times the 

institution’s premium/distribution ratio; 

(iii) If the NCUSIF declares, in the 

calendar year of conversion on or before 

the date of conversion, an assessment to 

replenish the one-percent deposit, pay 

nothing related to that assessment; 

(iv) If the NCUSIF declares, at any 

time after the date of conversion 

through the end of that calendar year, an 

assessment to replenish the one-percent 

deposit, pay a replenishment amount 

based on the institution’s insured shares 

as of the last day of the most recently 

ended reporting period preceding the 

invoice date; and 

(v) If the NCUSIF declares a 

distribution in the year following 

conversion based the NCUSIF’s equity 

at the end of the year of conversion, 

receive a distribution based on the 

institution’s insured shares as of the end 

of the year of conversion times the 

institution’s premium/distribution ratio. 

With regard to distributions declared in 

the calendar year of conversion but 

based on the NCUSIF’s equity from the 

end of the preceding year, the 

converting institution will receive no 

distribution. 

(2) A federally insured credit union 

that merges with a nonfederally-insured 

credit union or other non-federally 

insured institution (the ‘‘merging 

institution’’), where the federallyinsured credit union is the continuing 

institution, will: 

(i) Immediately on the date of merger 

increase the amount of its NCUSIF 

deposit by an amount equal to one 

percent of the merging institution’s 

insured shares as of the last day of the 

merging institution’s most recently 

ended reporting period preceding the 

date of merger; 

(ii) With regard to any NCUSIF 

premiums assessed in the calendar year 

of merger, pay a two-part premium, with 

one part calculated on the merging 

institution’s insured shares as described 

in subparagraph (1)(ii) above, and the 

other part calculated on the continuing 

institution’s insured shares as of the last 

day of its most recently ended reporting 

period preceding the date of merger; and 

(iii) If the NCUSIF declares a 

distribution in the year following the 

merger based the NCUSIF’s equity at the 

end of the year of merger, receive a 

distribution based on the continuing 

institution’s insured shares as of the end 

of the year of merger. With regard to 

distributions declared in the calendar 

year of merger but based on the 

NCUSIF’s equity from the end of the 

preceding year, the institution will 

receive a distribution based on its 

insured shares as of the end of the 

preceding year. 

(j) Conversion from, or termination of, 

Federal share insurance. 

(1) A federally insured credit union 

whose insurance coverage with the 

NCUSIF terminates, including through a 

conversion to, or merger into, a 

nonfederally insured credit union or a 

non-credit union entity, will: 

(i) Receive the full amount of its 

NCUSIF deposit, less any announced 

depletion, immediately after the final 

date on which any shares of the credit 

union are NCUSIF-insured; 

(ii) If the NCUSIF declares a 

distribution at the end of the calendar 

year of conversion, receive a 

distribution based on the institution’s 

insured shares as of the last day of the 

most recently ended reporting period 

preceding the date of conversion times 

the institution’s modified premium/ 

distribution ratio; and 

(iii) If the NCUSIF assesses a premium 

in the calendar year of conversion or 

merger on or before the day in which 

the conversion or merger is completed, 

pay a premium based on the 

institution’s insured shares as of the last 

day of the most recently ended reporting 

period preceding the conversion or 

merger date times the institution’s 

modified premium/distribution ratio. If 

the institution has previously paid a 

premium based on this same assessment 

that exceeds this amount, the institution 

will receive a refund of the difference 

following completion of the conversion 

or merger. 

(2) Notwithstanding the requirements 

of paragraph (j)(1) of this section: 

(i) Any insolvent credit union that is 

closed for involuntary liquidation will 

not be entitled to a return of its deposit; 

(ii) Any solvent credit union that is 

closed due to voluntary or involuntary 

liquidation will be entitled to a return 

of its deposit, less any announced 

depletion, prior to final distribution of 

member shares; and 

(iii) The Board reserves the right to 

delay return of the deposit to any credit 

union converting from or terminating its 

Federal insurance, or voluntarily 

liquidating, for up to one year if the 

Board determines that immediate 

repayment would jeopardize the 

NCUSIF. 

(k) Assessment of interest and 

penalties for delinquent payment. 

(1) Each federally insured credit 

union must pay to the NCUA interest on 

any delinquent payment of its 

capitalization deposit, including any 

delinquent deposit replenishment, and 

on any delinquent insurance premium. 

A payment will be considered 

delinquent if it is postmarked later than 

the date stated in the invoice provided 

to the credit union. The interest rate 

charged on any delinquent payment is 

six percent per annum of the unpaid 


srobinson on DSKHWCL6B1PROD with PROPOSALS
36628 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Proposed Rules 

balance for the number of days after the 

due date the balance remains unpaid. 

The delinquency fee is calculated based 

on a 360-day year, that is, six percent 

times the unpaid balance divided by 

360 times the number of days unpaid. 

The NCUA may waive or abate 

collection of interest, if circumstances 

warrant. 

(2) The Act contains specific penalties 

and other consequences for delinquent 

payments, including, but not limited to: 

(i) Section 202(d)(2)(B) of the Act (12 

U.S.C. 1782(d)(2)(B)) provides that the 

Board may assess and collect a penalty 

from an insured credit union of not 

more than $20,000 for each day the 

credit union fails or refuses to pay any 

deposit or premium due to the fund; 

and 

(ii) Section 202(d)(3) of the Act (12 

U.S.C. 1782(d)(3)) provides, generally, 

that no insured credit union shall pay 

any dividends on its insured shares or 

distribute any of its assets while it 

remains in default in the payment of its 

deposit or any premium charge due to 

the fund. Section 202(d)(3) further 

provides that any director or officer of 

any insured credit union who 

knowingly participates in the 

declaration or payment of any such 

dividend or in any such distribution 

shall, upon conviction, be fined not 

more than $1,000 or imprisoned more 

than one year, or both. 

[FR Doc. E9–17310 Filed 7–23–09; 8:45 am] 

BILLING CODE 7535–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2009–0656; Directorate 

Identifier 2009–NM–038–AD] 

RIN 2120–AA64 

Airworthiness Directives; Bombardier 

Model CL–600–2B19 (Regional Jet 

Series 100 & 440) Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for the 

products listed above that would 

supersede an existing AD. This 

proposed AD results from mandatory 

continuing airworthiness information 

(MCAI) originated by an aviation 

authority of another country to identify 

and correct an unsafe condition on an 

aviation product. The MCAI describes 

the unsafe condition as: There have 

been several cases of wing leading edge 

anti-ice piccolo duct failure reported on 

CL–600–2B19 (CRJ) aircraft. Upon 

investigation, it was determined that 

ducts manufactured since May 2000 are 

susceptible to cracking due to the 

process used to drill holes in the ducts. 

This cracking may cause air leakage, 

with a possible adverse effect on the 

anti-ice air distribution pattern and antiice capability, without annunciation to 

the flight crew [and consequent reduced 

controllability of the airplane]. It has 

subsequently been determined that 

faulty ducts may also have been 

installed in a number of leading edge 

assemblies built as spares and whose 

current locations are not specifically 

known. 

The proposed AD would require 

actions that are intended to address the 

unsafe condition described in the MCAI. 

DATES: We must receive comments on 

this proposed AD by August 24, 2009. 

ADDRESSES: You may send comments by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue, SE., 

Washington, DC 20590. 

• Hand Delivery: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue, SE., 

Washington, DC, between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this proposed AD, contact Bombardier, 

Inc., 400 Coˆte-Vertu Road West, Dorval, 

Que ́bec H4S 1Y9, Canada; telephone 

514–855–5000; fax 514–855–7401; email thd.crj@aero.bombardier.com; 

Internet http://www.bombardier.com. 

You may review copies of the 

referenced service information at the 

FAA, Transport Airplane Directorate, 

1601 Lind Avenue, SW., Renton, 

Washington. For information on the 

availability of this material at the FAA, 

call 425–227–1221 or 425–227–1152. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Operations office between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this proposed AD, the 

regulatory evaluation, any comments 

received, and other information. The 

street address for the Docket Operations 

office (telephone (800) 647–5527) is in 

the ADDRESSES section. Comments will 

be available in the AD docket shortly 

after receipt. 

FOR FURTHER INFORMATION CONTACT: 

Fabio Buttitta, Aerospace Engineer, 

Airframe and Mechanical Systems 

Branch, ANE–171, FAA, New York 

Aircraft Certification Office, 1600 

Stewart Avenue, Suite 410, Westbury, 

New York 11590; telephone (516) 228– 

7303; fax (516) 794–5531. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to send any written 

relevant data, views, or arguments about 

this proposed AD. Send your comments 

to an address listed under the 

ADDRESSES section. Include ‘‘Docket No. 

FAA–2009–0656; Directorate Identifier 

2009–NM–038–AD’’ at the beginning of 

your comments. We specifically invite 

comments on the overall regulatory, 

economic, environmental, and energy 

aspects of this proposed AD. We will 

consider all comments received by the 

closing date and may amend this 

proposed AD based on those comments. 

We will post all comments we 

receive, without change, to http:// 

www.regulations.gov, including any 

personal information you provide. We 

will also post a report summarizing each 

substantive verbal contact we receive 

about this proposed AD. 

Discussion 

On November 4, 2008, we issued AD 

2008–23–16, Amendment 39–15737 (73 

FR 67363, November 14, 2008). That AD 

required actions intended to address an 

unsafe condition on the products listed 

above. The preamble to AD 2008–23–16 

explains that we consider those 

requirements ‘‘interim action’’ and were 

considering further rulemaking. We now 

have determined that further 

rulemaking is indeed necessary to 

require the previously optional 

terminating action, and this proposed 

AD follows from that determination. 

Transport Canada Civil Aviation 

(TCCA), which is the aviation authority 

for Canada, previously issued Canadian 

Airworthiness Directive CF–2008–30, 

dated October 7, 2008 (referred to after 

this as ‘‘the MCAI’’), to correct an unsafe 

condition for the specified products. 

The unsafe condition is cracked 

piccolo ducts, which could result in air 

leakage, a possible adverse effect on the 

anti-ice distribution pattern and anti-ice 

capability without annunciation to the 

flight crew, and consequent reduced 

controllability of the airplane. Required 

actions include revising the airplane 


srobinson on DSKHWCL6B1PROD with PROPOSALS