In the Senate of the United States,
July 28, 1998.
Resolved, That the bill from the House of Representa-
tives (H.R. 1151) entitled ‘‘An Act to amend the Federal
Credit Union Act to clarify existing law with regard to the
field of membership of Federal credit unions, to preserve the
integrity and purpose of Federal credit unions, to enhance
supervisory oversight of insured credit unions, and for other
purposes.’’, do pass with the following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Credit Union Membership Access Act’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.
TITLE I—CREDIT UNION MEMBERSHIP
Sec. 101. Fields of membership.
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Sec. 102. Criteria for approval of expansion of membership of multiple common-
bond credit unions.
Sec. 103. Geographical guidelines for community credit unions.
TITLE II—REGULATION OF CREDIT UNIONS
Sec. 201. Financial statement and audit requirements.
Sec. 202. Conversion of insured credit unions.
Sec. 203. Limitation on member business loans.
Sec. 204. National Credit Union Administration Board membership.
Sec. 205. Report and congressional review requirement for certain regulations.
TITLE III—CAPITALIZATION AND NET WORTH OF CREDIT UNIONS
Sec. 301. Prompt corrective action.
Sec. 302. National credit union share insurance fund equity ratio, available as-
sets ratio, and standby premium charge.
Sec. 303. Access to liquidity.
TITLE IV—MISCELLANEOUS PROVISIONS
Sec. 401. Study and report on differing regulatory treatment.
Sec. 402. Update on review of regulations and paperwork reductions.
Sec. 403. Treasury report on reduced taxation and viability of small banks.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The American credit union movement began
as a cooperative effort to serve the productive and
provident credit needs of individuals of modest
means.
(2) Credit unions continue to fulfill this public
purpose, and current members and membership
groups should not face divestiture from the financial
services institution of their choice as a result of recent
court action.
(3) To promote thrift and credit extension, a
meaningful affinity and bond among members, mani-
fested by a commonality of routine interaction, shared
and related work experiences, interests, or activities,
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or the maintenance of an otherwise well-understood
sense of cohesion or identity is essential to the fulfill-
ment of the public mission of credit unions.
(4) Credit unions, unlike many other partici-
pants in the financial services market, are exempt
from Federal and most State taxes because they are
member-owned, democratically operated, not-for-profit
organizations generally managed by volunteer boards
of directors and because they have the specified mis-
sion of meeting the credit and savings needs of con-
sumers, especially persons of modest means.
(5) Improved credit union safety and soundness
provisions will enhance the public benefit that citizens
receive from these cooperative financial services insti-
tutions.
SEC. 3. DEFINITIONS.
As used in this Act—
(1) the term ‘‘Administration’’ means the Na-
tional Credit Union Administration;
(2) the term ‘‘Board’’ means the National Credit
Union Administration Board;
(3) the term ‘‘Federal banking agencies’’ has the
same meaning as in section 3 of the Federal Deposit
Insurance Act;
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(4) the terms ‘‘insured credit union’’ and ‘‘State-
chartered insured credit union’’ have the same mean-
ings as in section 101 of the Federal Credit Union
Act; and
(5) the term ‘‘Secretary’’ means the Secretary of
the Treasury.
TITLE I—CREDIT UNION
MEMBERSHIP
SEC. 101. FIELDS OF MEMBERSHIP.
Section 109 of the Federal Credit Union Act (12
U.S.C. 1759) is amended—
(1) in the first sentence—
(A) by striking ‘‘Federal credit union mem-
bership shall consist of’’ and inserting ‘‘(a) IN
GENERAL.—Subject to subsection (b), Federal
credit union membership shall consist of’’; and
(B) by striking ‘‘, except that’’ and all that
follows through ‘‘rural district’’; and
(2) by adding at the end the following new sub-
sections:
‘‘(b) MEMBERSHIP FIELD.—Subject to the other provi-
sions of this section, the membership of any Federal credit
union shall be limited to the membership described in 1 of
the following categories:
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‘‘(1) SINGLE COMMON-BOND CREDIT UNION.—1
group that has a common bond of occupation or asso-
ciation.
‘‘(2) MULTIPLE COMMON-BOND CREDIT UNION.—
More than 1 group—
‘‘(A) each of which has (within the group)
a common bond of occupation or association;
and
‘‘(B) the number of members of each of
which (at the time the group is first included
within the field of membership of a credit union
described in this paragraph) does not exceed any
numerical limitation applicable under subsection
(d).
‘‘(3) COMMUNITY CREDIT UNION.—Persons or or-
ganizations within a well-defined local community,
neighborhood, or rural district.
‘‘(c) EXCEPTIONS.—
‘‘(1) 
GRANDFATHERED
MEMBERS
AND
GROUPS.—
‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (b)—
‘‘(i) any person or organization that is
a member of any Federal credit union as of
the date of enactment of the Credit Union
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Membership Access Act may remain a mem-
ber of the credit union after that date of en-
actment; and
‘‘(ii) a member of any group whose
members constituted a portion of the mem-
bership of any Federal credit union as of
that date of enactment shall continue to be
eligible to become a member of that credit
union, by virtue of membership in that
group, after that date of enactment.
‘‘(B) SUCCESSORS.—If the common bond of
any group referred to in subparagraph (A) is de-
fined by any particular organization or business
entity, subparagraph (A) shall continue to apply
with respect to any successor to the organization
or entity.
‘‘(2) EXCEPTION FOR UNDERSERVED AREAS.—
Notwithstanding subsection (b), in the case of a Fed-
eral credit union, the field of membership category of
which is described in subsection (b)(2), the Board
may allow the membership of the credit union to in-
clude any person or organization within a local com-
munity, neighborhood, or rural district if—
‘‘(A) the Board determines that the local
community, neighborhood, or rural district—
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‘‘(i) is an ‘investment area’, as defined
in section 103(16) of the Community Devel-
opment Banking and Financial Institutions
Act of 1994 (12 U.S.C. 4703(16)), and
meets such additional requirements as the
Board may impose; and
‘‘(ii) is underserved, based on data of
the Board and the Federal banking agencies
(as defined in section 3 of the Federal De-
posit Insurance Act), by other depository
institutions 
(as 
defined 
in 
section
19(b)(1)(A) of the Federal Reserve Act); and
‘‘(B) the credit union establishes and main-
tains an office or facility in the local commu-
nity, neighborhood, or rural district at which
credit union services are available.
‘‘(d) MULTIPLE COMMON-BOND CREDIT UNION GROUP
REQUIREMENTS.—
‘‘(1) NUMERICAL LIMITATION.—Except as pro-
vided in paragraph (2), only a group with fewer than
3,000 members shall be eligible to be included in the
field of membership category of a credit union de-
scribed in subsection (b)(2).
‘‘(2) EXCEPTIONS.—In the case of any Federal
credit union, the field of membership category of
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which is described in subsection (b)(2), the numerical
limitation in paragraph (1) of this subsection shall
not apply with respect to—
‘‘(A) any group that the Board determines,
in writing and in accordance with the guidelines
and regulations issued under paragraph (3),
could not feasibly or reasonably establish a new
single common-bond credit union, the field of
membership category of which is described in
subsection (b)(1) because—
‘‘(i) the group lacks sufficient volunteer
and other resources to support the efficient
and effective operation of a credit union;
‘‘(ii) the group does not meet the cri-
teria that the Board has determined to be
important for the likelihood of success in es-
tablishing and managing a new credit
union, including demographic characteris-
tics such as geographical location of mem-
bers, diversity of ages and income levels,
and other factors that may affect the finan-
cial viability and stability of a credit
union; or
‘‘(iii) the group would be unlikely to
operate a safe and sound credit union;
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‘‘(B) any group transferred from another
credit union—
‘‘(i) in connection with a merger or
consolidation recommended by the Board or
any appropriate State credit union super-
visor based on safety and soundness con-
cerns with respect to that other credit
union; or
‘‘(ii) by the Board in the Board’s ca-
pacity as conservator or liquidating agent
with respect to that other credit union; or
‘‘(C) any group transferred in connection
with a voluntary merger, having received condi-
tional approval by the Administration of the
merger application prior to October 25, 1996,
but not having consummated the merger prior to
October 25, 1996, if the merger is consummated
not later than 180 days after the date of enact-
ment of the Credit Union Membership Access
Act.
‘‘(3) 
REGULATIONS
AND
GUIDELINES.—The
Board shall issue guidelines or regulations, after no-
tice and opportunity for comment, setting forth the
criteria that the Board will apply in determining
under this subsection whether or not an additional
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group may be included within the field of membership
category of an existing credit union described in sub-
section (b)(2).
‘‘(e) ADDITIONAL MEMBERSHIP ELIGIBILITY PROVI-
SIONS.—
‘‘(1) MEMBERSHIP ELIGIBILITY LIMITED TO IM-
MEDIATE FAMILY OR HOUSEHOLD MEMBERS.—No in-
dividual shall be eligible for membership in a credit
union on the basis of the relationship of the individ-
ual to another person who is eligible for membership
in the credit union, unless the individual is a member
of the immediate family or household (as those terms
are defined by the Board, by regulation) of the other
person.
‘‘(2) RETENTION OF MEMBERSHIP.—Except as
provided in section 118, once a person becomes a
member of a credit union in accordance with this
title, that person or organization may remain a mem-
ber of that credit union until the person or organiza-
tion chooses to withdraw from the membership of the
credit union.’’.
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SEC. 102. CRITERIA FOR APPROVAL OF EXPANSION OF MEM-
BERSHIP OF MULTIPLE COMMON-BOND CRED-
IT UNIONS.
Section 109 of the Federal Credit Union Act (12
U.S.C. 1759) is amended by adding at the end the following
new subsection:
‘‘(f) CRITERIA FOR APPROVAL OF EXPANSION OF MUL-
TIPLE COMMON-BOND CREDIT UNIONS.—
‘‘(1) IN GENERAL.—The Board shall—
‘‘(A) encourage the formation of separately
chartered credit unions instead of approving an
application to include an additional group with-
in the field of membership of an existing credit
union whenever practicable and consistent with
reasonable standards for the safe and sound op-
eration of the credit union; and
‘‘(B) if the formation of a separate credit
union by the group is not practicable or consist-
ent with the standards referred to in subpara-
graph (A), require the inclusion of the group in
the field of membership of a credit union that is
within reasonable proximity to the location of
the group whenever practicable and consistent
with reasonable standards for the safe and sound
operation of the credit union.
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‘‘(2) APPROVAL CRITERIA.—The Board may not
approve any application by a Federal credit union,
the field of membership category of which is described
in subsection (b)(2) to include any additional group
within the field of membership of the credit union (or
an application by a Federal credit union described in
subsection (b)(1) to include an additional group and
become a credit union described in subsection (b)(2)),
unless the Board determines, in writing, that—
‘‘(A) the credit union has not engaged in
any unsafe or unsound practice (as defined in
section 206(b)) that is material during the 1-
year period preceding the date of filing of the
application;
‘‘(B) the credit union is adequately capital-
ized;
‘‘(C) the credit union has the administra-
tive capability to serve the proposed membership
group and the financial resources to meet the
need for additional staff and assets to serve the
new membership group;
‘‘(D) any potential harm that the expansion
of the field of membership of the credit union
may have on any other insured credit union and
its members is clearly outweighed in the public
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interest by the probable beneficial effect of the ex-
pansion in meeting the convenience and needs of
the members of the group proposed to be included
in the field of membership; and
‘‘(E) the credit union has met such addi-
tional requirements as the Board may prescribe,
by regulation.’’.
SEC. 103. GEOGRAPHICAL GUIDELINES FOR COMMUNITY
CREDIT UNIONS.
Section 109 of the Federal Credit Union Act (12
U.S.C. 1759) is amended by adding at the end the following
new subsection:
‘‘(g) REGULATIONS REQUIRED FOR COMMUNITY CRED-
IT UNIONS.—
‘‘(1) DEFINITION OF WELL-DEFINED LOCAL COM-
MUNITY, NEIGHBORHOOD, OR RURAL DISTRICT.—The
Board shall prescribe, by regulation, a definition for
the term ‘well-defined local community, neighborhood,
or rural district’ for purposes of—
‘‘(A) making any determination with re-
gard to the field of membership of a credit union
described in subsection (b)(3); and
‘‘(B) establishing the criteria applicable
with respect to any such determination.
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‘‘(2) SCOPE
OF
APPLICATION.—The definition
prescribed by the Board under paragraph (1) shall
apply with respect to any application to form a new
credit union, or to alter or expand the field of mem-
bership of an existing credit union, that is filed with
the Board after the date of enactment of the Credit
Union Membership Access Act.’’.
TITLE II—REGULATION OF
CREDIT UNIONS
SEC. 201. FINANCIAL STATEMENT AND AUDIT REQUIRE-
MENTS.
(a) IN GENERAL.—Section 202(a)(6) of the Federal
Credit Union Act (12 U.S.C. 1782(a)(6)) is amended by
adding at the end the following new subparagraphs:
‘‘(C) ACCOUNTING PRINCIPLES.—
‘‘(i) IN
GENERAL.—Accounting prin-
ciples applicable to reports or statements re-
quired to be filed with the Board by each
insured credit union shall be uniform and
consistent with generally accepted account-
ing principles.
‘‘(ii) BOARD DETERMINATION.—If the
Board determines that the application of
any generally accepted accounting principle
to any insured credit union is not appro-
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priate, the Board may prescribe an ac-
counting principle for application to the
credit union that is no less stringent than
generally accepted accounting principles.
‘‘(iii) DE MINIMUS EXCEPTION.—This
subparagraph shall not apply to any in-
sured credit union, the total assets of which
are less than $10,000,000, unless prescribed
by the Board or an appropriate State credit
union supervisor.
‘‘(D) LARGE
CREDIT
UNION
AUDIT
RE-
QUIREMENT.—
‘‘(i) IN GENERAL.—Each insured cred-
it union having total assets of $500,000,000
or more shall have an annual independent
audit of the financial statements of the cred-
it union, performed in accordance with gen-
erally accepted auditing standards by an
independent certified public accountant or
public accountant licensed by the appro-
priate State or jurisdiction to perform those
services.
‘‘(ii) VOLUNTARY AUDITS.—If a Fed-
eral credit union that is not required to
conduct an audit under clause (i), and that
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has total assets of more than $10,000,000
conducts such an audit for any purpose,
using an independent auditor who is com-
pensated for his or her audit services with
respect to that audit, the audit shall be per-
formed consistent with the accountancy
laws of the appropriate State or jurisdic-
tion, including licensing requirements.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 202(a)(6)(B) of the Federal Credit Union Act (12
U.S.C. 1782(a)(6)(B)) is amended by striking ‘‘subpara-
graph (A)’’ and inserting ‘‘subparagraph (A) or (D)’’.
SEC. 202. CONVERSION OF INSURED CREDIT UNIONS.
Section 205(b) of the Federal Credit Union Act (12
U.S.C. 1785(b)) is amended—
(1) in paragraph (1), by striking ‘‘Except with
the prior written approval of the Board, no insured
credit union shall’’ and inserting ‘‘Except as provided
in paragraph (2), no insured credit union shall, with-
out the prior approval of the Board’’;
(2) by redesignating paragraph (2) as para-
graph (3); and
(3) by inserting after paragraph (1) the follow-
ing new paragraph:
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‘‘(2) CONVERSION OF INSURED CREDIT UNIONS
TO MUTUAL SAVINGS BANKS.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), an insured credit union may convert
to a mutual savings bank or savings association
(if the savings association is in mutual form), as
those terms are defined in section 3 of the Fed-
eral Deposit Insurance Act, without the prior
approval of the Board, subject to the require-
ments and procedures set forth in the laws and
regulations governing mutual savings banks and
savings associations.
‘‘(B) CONVERSION PROPOSAL.—A proposal
for a conversion described in subparagraph (A)
shall first be approved, and a date set for a vote
thereon by the members (either at a meeting to
be held on that date or by written ballot to be
filed on or before that date), by a majority of the
directors of the insured credit union. Approval of
the proposal for conversion shall be by the af-
firmative vote of a majority of the members of
the insured credit union who vote on the pro-
posal.
‘‘(C) NOTICE OF PROPOSAL TO MEMBERS.—
An insured credit union that proposes to convert
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to a mutual savings bank or savings association
under subparagraph (A) shall submit notice to
each of its members who is eligible to vote on the
matter of its intent to convert—
‘‘(i) 90 days before the date of the
member vote on the conversion;
‘‘(ii) 60 days before the date of the
member vote on the conversion; and
‘‘(iii) 30 days before the date of the
member vote on the conversion.
‘‘(D) NOTICE OF PROPOSAL TO BOARD.—
The Board may require an insured credit union
that proposes to convert to a mutual savings
bank or savings association under subparagraph
(A) to submit a notice to the Board of its intent
to convert during the 90-day period preceding
the date of the completion of the conversion.
‘‘(E) INAPPLICABILITY OF ACT UPON CON-
VERSION.—Upon completion of a conversion de-
scribed in subparagraph (A), the credit union
shall no longer be subject to any of the provisions
of this Act.
‘‘(F) LIMIT
ON
COMPENSATION
OF
OFFI-
CIALS.—
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‘‘(i) IN GENERAL.—No director or sen-
ior management official of an insured credit
union may receive any economic benefit in
connection with a conversion of the credit
union as described in subparagraph (A),
other than—
‘‘(I) director fees; and
‘‘(II) compensation and other ben-
efits paid to directors or senior man-
agement officials of the converted insti-
tution in the ordinary course of busi-
ness.
‘‘(ii) 
SENIOR
MANAGEMENT
OFFI-
CIAL.—For purposes of this subparagraph,
the term ‘senior management official’ means
a chief executive officer, an assistant chief
executive officer, a chief financial officer,
and any other senior executive officer (as
defined by the appropriate Federal banking
agency pursuant to section 32(f) of the Fed-
eral Deposit Insurance Act).
‘‘(G) CONSISTENT RULES.—
‘‘(i) IN GENERAL.—Not later than 6
months after the date of enactment of the
Credit Union Membership Access Act, the
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Administration shall promulgate final rules
applicable to charter conversions described
in this paragraph that are consistent with
rules promulgated by other financial regu-
lators, including the Office of Thrift Super-
vision and the Office of the Comptroller of
the Currency. The rules required by this
clause shall provide that charter conversion
by an insured credit union shall be subject
to regulation that is no more or less restric-
tive than that applicable to charter conver-
sions by other financial institutions.
‘‘(ii) OVERSIGHT OF MEMBER VOTE.—
The member vote concerning charter conver-
sion under this paragraph shall be adminis-
tered by the Administration, and shall be
verified by the Federal or State regulatory
agency that would have jurisdiction over the
institution after the conversion. If either the
Administration or that regulatory agency
disapproves of the methods by which the
member vote was taken or procedures appli-
cable to the member vote, the member vote
shall be taken again, as directed by the Ad-
ministration or the agency.’’.
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SEC. 203. LIMITATION ON MEMBER BUSINESS LOANS.
(a) IN GENERAL.—The Federal Credit Union Act (12
U.S.C. 1701 et seq.) is amended by inserting after section
107 the following new section:
‘‘SEC. 107A. LIMITATION ON MEMBER BUSINESS LOANS.
‘‘(a) IN GENERAL.—On and after the date of enact-
ment of this section, no insured credit union may make any
member business loan that would result in a total amount
of such loans outstanding at that credit union at any one
time equal to more than the lesser of—
‘‘(1) 1.75 times the actual net worth of the credit
union; or
‘‘(2) 1.75 times the minimum net worth required
under section 216(c)(1)(A) for a credit union to be
well capitalized.
‘‘(b) EXCEPTIONS.—Subsection (a) does not apply in
the case of—
‘‘(1) an insured credit union chartered for the
purpose of making, or that has a history of primarily
making, member business loans to its members, as de-
termined by the Board; or
‘‘(2) an insured credit union that—
‘‘(A) 
serves 
predominantly 
low-income
members, as defined by the Board; or
‘‘(B) is a community development financial
institution, as defined in section 103 of the Com-
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munity Development Banking and Financial In-
stitutions Act of 1994.
‘‘(c) DEFINITIONS.—As used in this section—
‘‘(1) the term ‘member business loan’—
‘‘(A) means any loan, line of credit, or let-
ter of credit, the proceeds of which will be used
for a commercial, corporate or other business in-
vestment property or venture, or agricultural
purpose; and
‘‘(B) does not include an extension of cred-
it—
‘‘(i) that is fully secured by a lien on
a 1- to 4-family dwelling that is the pri-
mary residence of a member;
‘‘(ii) that is fully secured by shares in
the credit union making the extension of
credit or deposits in other financial institu-
tions;
‘‘(iii) that is described in subpara-
graph (A), if it was made to a borrower or
an associated member that has a total of all
such extensions of credit in an amount
equal to less than $50,000;
‘‘(iv) the repayment of which is fully
insured or fully guaranteed by, or where
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there is an advance commitment to pur-
chase in full by, any agency of the Federal
Government or of a State, or any political
subdivision thereof; or
‘‘(v) that is granted by a corporate
credit union (as that term is defined by the
Board) to another credit union.
‘‘(2) the term ‘net worth’—
‘‘(A) with respect to any insured credit
union, means the credit union’s retained earn-
ings balance, as determined under generally ac-
cepted accounting principles; and
‘‘(B) with respect to a credit union that
serves predominantly low-income members, as
defined by the Board, includes secondary capital
accounts that are—
‘‘(i) uninsured; and
‘‘(ii) subordinate to all other claims
against the credit union, including the
claims of creditors, shareholders, and the
Fund; and
‘‘(3) the term ‘associated member’ means any
member having a shared ownership, investment, or
other pecuniary interest in a business or commercial
endeavor with the borrower.
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‘‘(d) EFFECT ON EXISTING LOANS.—An insured credit
union that has, on the date of enactment of this section,
a total amount of outstanding member business loans that
exceeds the amount permitted under subsection (a) shall,
not later than 3 years after that date of enactment, reduce
the total amount of outstanding member business loans to
an amount that is not greater than the amount permitted
under subsection (a).
‘‘(e) CONSULTATION AND COOPERATION WITH STATE
CREDIT UNION SUPERVISORS.—In implementing this sec-
tion, the Board shall consult and seek to work cooperatively
with State officials having jurisdiction over State-chartered
insured credit unions.’’.
(b) STUDY AND REPORT.—
(1) STUDY.—The Secretary shall conduct a study
of member business lending by insured credit unions,
including—
(A) an examination of member business
lending over $500,000 and under $50,000, and a
breakdown of the types and sizes of businesses
that receive member business loans;
(B) a review of the effectiveness and enforce-
ment of regulations applicable to insured credit
union member business lending;
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(C) whether member business lending by in-
sured credit unions could affect the safety and
soundness of insured credit unions or the Na-
tional Credit Union Share Insurance Fund;
(D) the extent to which member business
lending by insured credit unions helps to meet fi-
nancial services needs of low- and moderate-in-
come individuals within the field of membership
of insured credit unions;
(E) whether insured credit unions that en-
gage in member business lending have a competi-
tive advantage over other insured depository in-
stitutions, and if any such advantage could af-
fect the viability and profitability of such other
insured depository institutions; and
(F) the effect of enactment of this Act on the
number of insured credit unions involved in
member business lending and the overall amount
of commercial lending.
(2) NCUA COOPERATION.—The National Credit
Union Administration shall, upon request, provide
such information as the Secretary may require to
conduct the study required under paragraph (1).
(3) REPORT.—Not later than 12 months after the
date of enactment of this Act, the Secretary shall sub-
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mit a report to the Congress on the results of the
study conducted under paragraph (1).
SEC. 204. NATIONAL CREDIT UNION ADMINISTRATION
BOARD MEMBERSHIP.
Section 102(b) of the Federal Credit Union Act (12
U.S.C. 1752a(b)) is amended—
(1) by striking ‘‘(b) The Board’’ and inserting
‘‘(b) MEMBERSHIP AND APPOINTMENT OF BOARD.—
‘‘(1) IN GENERAL.—The Board’’; and
(2) by adding at the end the following new para-
graph:
‘‘(2) APPOINTMENT CRITERIA.—
‘‘(A) EXPERIENCE
IN
FINANCIAL
SERV-
ICES.—In considering appointments to the
Board under paragraph (1), the President shall
give consideration to individuals who, by virtue
of their education, training, or experience relat-
ing to a broad range of financial services, finan-
cial services regulation, or financial policy, are
especially qualified to serve on the Board.
‘‘(B) LIMIT
ON
APPOINTMENT
OF
CREDIT
UNION OFFICERS.—Not more than 1 member of
the Board may be appointed to the Board from
among individuals who, at the time of the ap-
pointment, are, or have recently been, involved
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with any insured credit union as a committee
member, director, officer, employee, or other in-
stitution-affiliated party.’’.
SEC. 205. REPORT AND CONGRESSIONAL REVIEW REQUIRE-
MENT FOR CERTAIN REGULATIONS.
A regulation prescribed by the Board shall be treated
as a major rule for purposes of chapter 8 of title 5, United
States Code, if the regulation defines, or amends the defini-
tion of—
(1) the term ‘‘immediate family or household’’
for purposes of section 109(e)(1) of the Federal Credit
Union Act (as added by section 101 of this Act); or
(2) the term ‘‘well-defined local community,
neighborhood, or rural district’’ for purposes of sec-
tion 109(g) of the Federal Credit Union Act (as added
by section 103 of this Act).
TITLE III—CAPITALIZATION AND
NET WORTH OF CREDIT UNIONS
SEC. 301. PROMPT CORRECTIVE ACTION.
(a) IN GENERAL.—Title II of the Federal Credit
Union Act (12 U.S.C. 1781 et seq.) is amended by adding
at the end the following new section:
‘‘SEC. 216. PROMPT CORRECTIVE ACTION.
‘‘(a) RESOLVING PROBLEMS TO PROTECT FUND.—
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‘‘(1) PURPOSE.—The purpose of this section is to
resolve the problems of insured credit unions at the
least possible long-term loss to the Fund.
‘‘(2) PROMPT CORRECTIVE ACTION REQUIRED.—
The Board shall carry out the purpose of this section
by taking prompt corrective action to resolve the
problems of insured credit unions.
‘‘(b) REGULATIONS REQUIRED.—
‘‘(1) INSURED CREDIT UNIONS.—
‘‘(A) IN
GENERAL.—The Board shall, by
regulation, prescribe a system of prompt correc-
tive action for insured credit unions that is—
‘‘(i) consistent with this section; and
‘‘(ii) comparable to section 38 of the
Federal Deposit Insurance Act.
‘‘(B) COOPERATIVE CHARACTER OF CREDIT
UNIONS.—The Board shall design the system re-
quired under subparagraph (A) to take into ac-
count that credit unions are not-for-profit co-
operatives that—
‘‘(i) do not issue capital stock;
‘‘(ii) must rely on retained earnings to
build net worth; and
‘‘(iii) have boards of directors that con-
sist primarily of volunteers.
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‘‘(2) NEW CREDIT UNIONS.—
‘‘(A) IN GENERAL.—In addition to regula-
tions under paragraph (1), the Board shall, by
regulation, prescribe a system of prompt correc-
tive action that shall apply to new credit unions
in lieu of this section and the regulations pre-
scribed under paragraph (1).
‘‘(B) CRITERIA
FOR
ALTERNATIVE
SYS-
TEM.—The Board shall design the system pre-
scribed under subparagraph (A)—
‘‘(i) to carry out the purpose of this
section;
‘‘(ii) to recognize that credit unions (as
cooperatives that do not issue capital stock)
initially have no net worth, and give new
credit unions reasonable time to accumulate
net worth;
‘‘(iii) to create adequate incentives for
new credit unions to become adequately
capitalized by the time that they either—
‘‘(I) have been in operation for
more than 10 years; or
‘‘(II) have more than $10,000,000
in total assets;
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‘‘(iv) to impose appropriate restric-
tions and requirements on new credit
unions that do not make sufficient progress
toward becoming adequately capitalized;
and
‘‘(v) to prevent evasion of the purpose
of this section.
‘‘(c) NET WORTH CATEGORIES.—
‘‘(1) IN GENERAL.—For purposes of this section
the following definitions shall apply:
‘‘(A) 
WELL
CAPITALIZED.—An 
insured
credit union is ‘well capitalized’ if—
‘‘(i) it has a net worth ratio of not less
than 7 percent; and
‘‘(ii) it meets any applicable risk-based
net worth requirement under subsection (d).
‘‘(B) ADEQUATELY
CAPITALIZED.—An in-
sured credit union is ‘adequately capitalized’
if—
‘‘(i) it has a net worth ratio of not less
than 6 percent; and
‘‘(ii) it meets any applicable risk-based
net worth requirement under subsection (d).
‘‘(C) 
UNDERCAPITALIZED.—An 
insured
credit union is ‘undercapitalized’ if—
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‘‘(i) it has a net worth ratio of less
than 6 percent; or
‘‘(ii) it fails to meet any applicable
risk-based net worth requirement under sub-
section (d).
‘‘(D) SIGNIFICANTLY UNDERCAPITALIZED.—
An insured credit union is ‘significantly under-
capitalized’—
‘‘(i) if it has a net worth ratio of less
than 4 percent; or
‘‘(ii) if—
‘‘(I) it has a net worth ratio of
less than 5 percent; and
‘‘(II) it—
‘‘(aa) fails to submit an ac-
ceptable net worth restoration
plan within the time allowed
under subsection (f); or
‘‘(bb) materially fails to im-
plement a net worth restoration
plan accepted by the Board.
‘‘(E) CRITICALLY UNDERCAPITALIZED.—An
insured credit union is ‘critically undercapital-
ized’ if it has a net worth ratio of less than 2
percent (or such higher net worth ratio, not to
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exceed 3 percent, as the Board may specify by
regulation).
‘‘(2) ADJUSTING NET WORTH LEVELS.—
‘‘(A) IN GENERAL.—If, for purposes of sec-
tion 38(c) of the Federal Deposit Insurance Act,
the Federal banking agencies increase or decrease
the required minimum level for the leverage limit
(as those terms are used in that section 38), the
Board may, by regulation, and subject to sub-
paragraph (B) of this paragraph, correspond-
ingly increase or decrease 1 or more of the net
worth ratios specified in subparagraphs (A)
through (D) of paragraph (1) of this subsection
in an amount that is equal to not more than the
difference between the required minimum level
most recently established by the Federal banking
agencies and 4 percent of total assets (with re-
spect to institutions regulated by those agencies).
‘‘(B) 
DETERMINATIONS
REQUIRED.—The
Board may increase or decrease net worth ratios
under subparagraph (A) only if the Board—
‘‘(i) determines, in consultation with
the Federal banking agencies, that the rea-
son for the increase or decrease in the re-
quired minimum level for the leverage limit
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also justifies the adjustment in net worth
ratios; and
‘‘(ii) determines that the resulting net
worth ratios are sufficient to carry out the
purpose of this section.
‘‘(C) TRANSITION
PERIOD
REQUIRED.—If
the Board increases any net worth ratio under
this paragraph, the Board shall give insured
credit unions a reasonable period of time to meet
the increased ratio.
‘‘(d) RISK-BASED NET WORTH REQUIREMENT FOR
COMPLEX CREDIT UNIONS.—
‘‘(1) IN
GENERAL.—The regulations required
under subsection (b)(1) shall include a risk-based net
worth requirement for insured credit unions that are
complex, as defined by the Board based on the port-
folios of assets and liabilities of credit unions.
‘‘(2) STANDARD.—The Board shall design the
risk-based net worth requirement to take account of
any material risks against which the net worth ratio
required for an insured credit union to be adequately
capitalized may not provide adequate protection.
‘‘(e) EARNINGS-RETENTION REQUIREMENT APPLICA-
BLE TO CREDIT UNIONS THAT ARE NOT WELL CAPITAL-
IZED.—
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‘‘(1) IN GENERAL.—An insured credit union that
is not well capitalized shall annually set aside as net
worth an amount equal to not less than 0.4 percent
of its total assets.
‘‘(2) BOARD’S AUTHORITY TO DECREASE EARN-
INGS-RETENTION REQUIREMENT.—
‘‘(A) IN
GENERAL.—The Board may, by
order, decrease the 0.4 percent requirement in
paragraph (1) with respect to a credit union to
the extent that the Board determines that the de-
crease—
‘‘(i) is necessary to avoid a significant
redemption of shares; and
‘‘(ii) would further the purpose of this
section.
‘‘(B) PERIODIC
REVIEW
REQUIRED.—The
Board shall periodically review any order issued
under subparagraph (A).
‘‘(f) NET WORTH RESTORATION PLAN REQUIRED.—
‘‘(1) IN GENERAL.—Each insured credit union
that is undercapitalized shall submit an acceptable
net worth restoration plan to the Board within the
time allowed under this subsection.
‘‘(2) ASSISTANCE TO SMALL CREDIT UNIONS.—
The Board (or the staff of the Board) shall, upon
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timely request by an insured credit union with total
assets of less than $10,000,000, and subject to such
regulations or guidelines as the Board may prescribe,
assist that credit union in preparing a net worth res-
toration plan.
‘‘(3) DEADLINES FOR SUBMISSION AND REVIEW
OF PLANS.—The Board shall, by regulation, establish
deadlines for submission of net worth restoration
plans under this subsection that—
‘‘(A) provide insured credit unions with
reasonable time to submit net worth restoration
plans; and
‘‘(B) require the Board to act on net worth
restoration plans expeditiously.
‘‘(4) FAILURE
TO
SUBMIT
ACCEPTABLE
PLAN
WITHIN TIME ALLOWED.—
‘‘(A) FAILURE TO SUBMIT ANY PLAN.—If an
insured credit union fails to submit a net worth
restoration plan within the time allowed under
paragraph (3), the Board shall—
‘‘(i) promptly notify the credit union
of that failure; and
‘‘(ii) give the credit union a reasonable
opportunity to submit a net worth restora-
tion plan.
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‘‘(B) 
SUBMISSION
OF
UNACCEPTABLE
PLAN.—If an insured credit union submits a net
worth restoration plan within the time allowed
under paragraph (3) and the Board determines
that the plan is not acceptable, the Board shall—
‘‘(i) promptly notify the credit union
of why the plan is not acceptable; and
‘‘(ii) give the credit union a reasonable
opportunity to submit a revised plan.
‘‘(5) ACCEPTING PLAN.—The Board may accept
a net worth restoration plan only if the Board deter-
mines that the plan is based on realistic assumptions
and is likely to succeed in restoring the net worth of
the credit union.
‘‘(g) RESTRICTIONS ON UNDERCAPITALIZED CREDIT
UNIONS.—
‘‘(1) RESTRICTION ON ASSET GROWTH.—An in-
sured credit union that is undercapitalized shall not
generally permit its average total assets to increase,
unless—
‘‘(A) the Board has accepted the net worth
restoration plan of the credit union for that ac-
tion;
‘‘(B) any increase in total assets is consist-
ent with the net worth restoration plan; and
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‘‘(C) the net worth ratio of the credit union
increases at a rate that is consistent with the net
worth restoration plan.
‘‘(2) 
RESTRICTION
ON
MEMBER
BUSINESS
LOANS.—Notwithstanding section 107A(a), an in-
sured credit union that is undercapitalized may not
make any increase in the total amount of member
business loans (as defined in section 107A(c)) out-
standing at that credit union at any one time, until
such time as the credit union becomes adequately cap-
italized.
‘‘(h) MORE STRINGENT TREATMENT BASED ON OTHER
SUPERVISORY CRITERIA.—With respect to the exercise of
authority by the Board under regulations comparable to
section 38(g) of the Federal Deposit Insurance Act—
‘‘(1) the Board may not reclassify an insured
credit union into a lower net worth category, or treat
an insured credit union as if it were in a lower net
worth category, for reasons not pertaining to the safe-
ty and soundness of that credit union; and
‘‘(2) the Board may not delegate its authority to
reclassify an insured credit union into a lower net
worth category or to treat an insured credit union as
if it were in a lower net worth category.
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‘‘(i) ACTION
REQUIRED
REGARDING
CRITICALLY
UNDERCAPITALIZED CREDIT UNIONS.—
‘‘(1) IN GENERAL.—The Board shall, not later
than 90 days after the date on which an insured cred-
it union becomes critically undercapitalized—
‘‘(A) appoint a conservator or liquidating
agent for the credit union; or
‘‘(B) take such other action as the Board de-
termines would better achieve the purpose of this
section, after documenting why the action would
better achieve that purpose.
‘‘(2) 
PERIODIC
REDETERMINATIONS
RE-
QUIRED.—Any determination by the Board under
paragraph (1)(B) to take any action with respect to
an insured credit union in lieu of appointing a con-
servator or liquidating agent shall cease to be effective
not later than the end of the 180-day period begin-
ning on the date on which the determination is made,
and a conservator or liquidating agent shall be ap-
pointed for that credit union under paragraph (1)(A),
unless the Board makes a new determination under
paragraph (1)(B) before the end of the effective period
of the prior determination.
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‘‘(3) APPOINTMENT OF LIQUIDATING AGENT RE-
QUIRED IF OTHER ACTION FAILS TO RESTORE NET
WORTH.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graphs (1) and (2), the Board shall appoint a
liquidating agent for an insured credit union if
the credit union is critically undercapitalized on
average during the calendar quarter beginning
18 months after the date on which the credit
union became critically undercapitalized.
‘‘(B) EXCEPTION.—Notwithstanding sub-
paragraph (A), the Board may continue to take
such other action as the Board determines to be
appropriate in lieu of appointment of a liquidat-
ing agent if—
‘‘(i) the Board determines that—
‘‘(I) the insured credit union has
been in substantial compliance with an
approved net worth restoration plan
that requires consistent improvement
in the net worth of the credit union
since the date of the approval of the
plan; and
‘‘(II) the insured credit union has
positive net income or has an upward
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‘‘(k) APPEALS PROCESS.—Material supervisory deter-
minations, including decisions to require prompt corrective
action, made pursuant to this section by Administration
officials other than the Board may be appealed to the Board
pursuant to the independent appellate process required by
section 309 of the Riegle Community Development and Reg-
ulatory Improvement Act of 1994 (or, if the Board so speci-
fies, pursuant to separate procedures prescribed by regula-
tion).
‘‘(l) CONSULTATION AND COOPERATION WITH STATE
CREDIT UNION SUPERVISORS.—
‘‘(1) IN GENERAL.—In implementing this sec-
tion, the Board shall consult and seek to work coop-
eratively with State officials having jurisdiction over
State-chartered insured credit unions.
‘‘(2) EVALUATING
NET
WORTH
RESTORATION
PLAN.—In evaluating any net worth restoration plan
submitted by a State-chartered insured credit union,
the Board shall seek the views of the State official
having jurisdiction over the credit union.
‘‘(3) DECIDING
WHETHER
TO
APPOINT
CON-
SERVATOR OR LIQUIDATING AGENT.—With respect to
any decision by the Board on whether to appoint a
conservator or liquidating agent for a State-chartered
insured credit union—
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‘‘(A) the Board shall—
‘‘(i) seek the views of the State official
having jurisdiction over the credit union;
and
‘‘(ii) give that official an opportunity
to take the proposed action;
‘‘(B) the Board shall, upon timely request of
an official referred to in subparagraph (A),
promptly provide the official with—
‘‘(i) a written statement of the reasons
for the proposed action; and
‘‘(ii) reasonable time to respond to that
statement;
‘‘(C) if the official referred to in subpara-
graph (A) makes a timely written response that
disagrees with the proposed action and gives rea-
sons for that disagreement, the Board shall not
appoint a conservator or liquidating agent for
the credit union, unless the Board, after consid-
ering the views of the official, has determined
that—
‘‘(i) the Fund faces a significant risk
of loss with respect to the credit union if a
conservator or liquidating agent is not ap-
pointed; and
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‘‘(ii) the appointment is necessary to
reduce—
‘‘(I) the risk that the Fund would
incur a loss with respect to the credit
union; or
(II) any loss that the Fund is ex-
pected to incur with respect to the
credit union; and
‘‘(D) the Board may not delegate any deter-
mination under subparagraph (C).
‘‘(m) CORPORATE CREDIT UNIONS EXEMPTED.—This
section does not apply to any insured credit union that—
‘‘(1) operates primarily for the purpose of serv-
ing credit unions; and
‘‘(2) permits individuals to be members of the
credit union only to the extent that applicable law re-
quires that such persons own shares.
‘‘(n) OTHER AUTHORITY NOT AFFECTED.—This sec-
tion does not limit any authority of the Board or a State
to take action in addition to (but not in derogation of) that
required under this section.
‘‘(o) DEFINITIONS.—For purposes of this section the
following definitions shall apply:
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‘‘(1) FEDERAL
BANKING
AGENCY.—The term
‘Federal banking agency’ has the same meaning as in
section 3 of the Federal Deposit Insurance Act.
‘‘(2) NET WORTH.—The term ‘net worth’—
‘‘(A) with respect to any insured credit
union, means retained earnings balance of the
credit union, as determined under generally ac-
cepted accounting principles; and
‘‘(B) with respect to a low-income credit
union, includes secondary capital accounts that
are—
‘‘(i) uninsured; and
‘‘(ii) subordinate to all other claims
against the credit union, including the
claims of creditors, shareholders, and the
Fund.
‘‘(3) NET WORTH RATIO.—The term ‘net worth
ratio’ means, with respect to a credit union, the ratio
of the net worth of the credit union to the total assets
of the credit union.
‘‘(4) NEW CREDIT UNION.—The term ‘new credit
union’ means an insured credit union that—
‘‘(A) has been in operation for less than 10
years; and
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‘‘(B) has not more than $10,000,000 in
total assets.’’.
(b) CONSERVATORSHIP
AND LIQUIDATION AMEND-
MENTS TO FACILITATE PROMPT CORRECTIVE ACTION.—
(1) CONSERVATORSHIP.—Section 206(h) of the
Federal Credit Union Act (12 U.S.C. 1786(h)) is
amended—
(A) in paragraph (1)—
(i) in subparagraph (D), by striking
‘‘or’’ at the end;
(ii) in subparagraph (E), by striking
the period at the end and inserting a semi-
colon; and
(iii) by adding at the end the following
new subparagraphs:
‘‘(F) the credit union is significantly under-
capitalized, as defined in section 216, and has no rea-
sonable prospect of becoming adequately capitalized,
as defined in section 216; or
‘‘(G) the credit union is critically undercapital-
ized, as defined in section 216.’’; and
(B) in paragraph (2)—
(i) in subparagraph (A), by striking
‘‘In the case’’ and inserting ‘‘Except as pro-
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vided in subparagraph (C), in the case’’;
and
(ii) by adding at the end the following
new subparagraph:
‘‘(C) In the case of a State-chartered insured
credit union, the authority conferred by subpara-
graphs (F) and (G) of paragraph (1) may not be ex-
ercised unless the Board has complied with section
216(l).’’.
(2) LIQUIDATION.—Section 207(a) of the Federal
Credit Union Act (12 U.S.C. 1787(a)) is amended—
(A) in paragraph (1)(A), by striking ‘‘him-
self’’ and inserting ‘‘itself’’; and
(B) by adding at the end the following new
paragraph:
‘‘(3) LIQUIDATION TO FACILITATE PROMPT COR-
RECTIVE ACTION.—The Board may close any credit
union for liquidation, and appoint itself or another
(including, in the case of a State-chartered insured
credit union, the State official having jurisdiction
over the credit union) as liquidating agent of that
credit union, if—
‘‘(A) the Board determines that—
‘‘(i) the credit union is significantly
undercapitalized, as defined in section 216,
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and has no reasonable prospect of becoming
adequately capitalized, as defined in section
216; or
‘‘(ii) the credit union is critically
undercapitalized, as defined in section 216;
and
‘‘(B) in the case of a State-chartered in-
sured credit union, the Board has complied with
section 216(l).’’.
(c) CONSULTATION REQUIRED.—In developing regula-
tions to implement section 216 of the Federal Credit Union
Act (as added by subsection (a) of this section), the Board
shall consult with the Secretary, the Federal banking agen-
cies, and the State officials having jurisdiction over State-
chartered insured credit unions.
(d) DEADLINES FOR REGULATIONS.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the Board shall—
(A) publish in the Federal Register pro-
posed regulations to implement section 216 of the
Federal Credit Union Act (as added by sub-
section (a) of this section) not later than 270
days after the date of enactment of this Act; and
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(B) promulgate final regulations to imple-
ment that section 216 not later than 18 months
after the date of enactment of this Act.
(2) RISK-BASED NET WORTH REQUIREMENT.—
(A) ADVANCE NOTICE OF PROPOSED RULE-
MAKING.—Not later than 180 days after the date
of enactment of this Act, the Board shall publish
in the Federal Register an advance notice of pro-
posed rulemaking, as required by section 216(d)
of the Federal Credit Union Act, as added by
this Act.
(B) FINAL REGULATIONS.—The Board shall
promulgate final regulations, as required by that
section 216(d) not later than 2 years after the
date of enactment of this Act.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), section 216 of the Federal Credit Union
Act (as added by this section) shall become effective
2 years after the date of enactment of this Act.
(2) RISK-BASED NET WORTH REQUIREMENT.—
Section 216(d) of the Federal Credit Union Act (as
added by this section) shall become effective on Janu-
ary 1, 2001.
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(f) REPORT
TO CONGRESS REQUIRED.—When the
Board publishes proposed regulations pursuant to sub-
section (d)(1)(A), or promulgates final regulations pursu-
ant to subsection (d)(1)(B), the Board shall submit to the
Congress a report that specifically explains—
(1) how the regulations carry out section
216(b)(1)(B) of the Federal Credit Union Act (as
added by this section), relating to the cooperative
character of credit unions; and
(2) how the regulations differ from section 38 of
the Federal Deposit Insurance Act, and the reasons
for those differences.
(g) CONFORMING AMENDMENTS.—
(1) AMENDMENTS RELATING TO ENFORCEMENT
OF PROMPT CORRECTIVE ACTION.—Section 206(k) of
the Federal Credit Union Act (12 U.S.C. 1786(k)) is
amended—
(A) in paragraph (1), by inserting ‘‘or sec-
tion 216’’ after ‘‘this section’’ each place it ap-
pears; and
(B) in paragraph (2)(A)(ii), by inserting ‘‘,
or any final order under section 216’’ before the
semicolon.
(2) CONFORMING
AMENDMENT
REGARDING
AP-
POINTMENT OF STATE CREDIT UNION SUPERVISOR AS
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CONSERVATOR.—Section 206(h)(1) of the Federal
Credit Union Act (12 U.S.C. 1786(h)(1)) is amended
by inserting ‘‘or another (including, in the case of a
State-chartered insured credit union, the State official
having jurisdiction over the credit union)’’ after ‘‘ap-
point itself’’.
(3) AMENDMENT REPEALING SUPERSEDED PRO-
VISION.—Section 116 of the Federal Credit Union Act
(12 U.S.C. 1762) is repealed.
SEC. 302. NATIONAL CREDIT UNION SHARE INSURANCE
FUND EQUITY RATIO, AVAILABLE ASSETS
RATIO, AND STANDBY PREMIUM CHARGE.
(a) IN GENERAL.—Section 202 of the Federal Credit
Union Act (12 U.S.C. 1782) is amended—
(1) by striking subsection (b) and inserting the
following:
‘‘(b) CERTIFIED STATEMENT.—
‘‘(1) STATEMENT REQUIRED.—
‘‘(A) IN GENERAL.—For each calendar year,
in the case of an insured credit union with total
assets of not more than $50,000,000, and for
each semi-annual period in the case of an in-
sured 
credit 
union 
with 
total 
assets 
of
$50,000,000 or more, an insured credit union
shall file with the Board, at such time as the
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Board prescribes, a certified statement showing
the total amount of insured shares in the credit
union at the close of the relevant period and both
the amount of its deposit or adjustment of de-
posit and the amount of the insurance charge
due to the Fund for that period, both as com-
puted under subsection (c).
‘‘(B) EXCEPTION
FOR
NEWLY
INSURED
CREDIT
UNION.—Subparagraph (A) shall not
apply with respect to a credit union that became
insured during the reporting period.
‘‘(2) FORM.—The certified statements required to
be filed with the Board pursuant to this subsection
shall be in such form and shall set forth such support-
ing information as the Board shall require.
‘‘(3) CERTIFICATION.—The president of the cred-
it union or any officer designated by the board of di-
rectors shall certify, with respect to each statement re-
quired to be filed with the Board pursuant to this
subsection, that to the best of his or her knowledge
and belief the statement is true, correct, complete, and
in accordance with this title and the regulations
issued under this title.’’;
(2) in subsection (c)(1)(A), by striking clause
(iii) and inserting the following: