I 
109TH CONGRESS 
1ST SESSION H. R. 2317
To modernize credit union net worth standards, advance credit union efforts 
to promote economic growth, and modify and ease credit union regulatory 
standards and burdens, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 12, 2005
Mr. ROYCE (for himself, Mr. KANJORSKI, Mr. LATOURETTE, Mrs. MALONEY, 
Mr. TANCREDO, Mr. SANDERS, Mr. BOEHLERT, Mr. GUTIERREZ, Mr. 
BURTON of Indiana, Mr. CASE, Mr. BROWN of South Carolina, Ms. 
JACKSON-LEE of Texas, Mr. PAUL, Mr. CHABOT, Mr. CANNON, Mr. 
CUNNINGHAM, Mr. KUHL of New York, and Mr. SHERMAN) introduced 
the following bill; which was referred to the Committee on Financial Serv-
ices 
A BILL 
To modernize credit union net worth standards, advance 
credit union efforts to promote economic growth, and 
modify and ease credit union regulatory standards and 
burdens, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Credit Union Regu-
latory Improvements Act of 2005’’.
TITLE I—CAPITAL REFORM 
SEC. 101. AMENDMENTS TO NET WORTH CATEGORIES. 
Section 216(c)(1) of the Federal Credit Union Act 
(12 U.S.C. 1790d(c)(1)) is amended as follows: 
(1) WELL CAPITALIZED.—
(A) In subparagraph (A)(i), by striking ‘‘7 
percent’’ and inserting ‘‘5 percent’’. 
(B) In subparagraph (A)(ii), by striking 
‘‘it meets any applicable risk-based net worth 
requirement under subsection (d) of this sec-
tion’’ and inserting ‘‘it has a risk-based net 
worth ratio of not less than 8 percent’’. 
(2) ADEQUATELY CAPITALIZED.—
(A) In subparagraph (B)(i), by striking ‘‘6 
percent’’ and inserting ‘‘4 percent’’. 
(B) In subparagraph (B)(ii), by striking 
‘‘it meets any applicable risk-based net worth 
requirement under subsection (d) of this sec-
tion’’ and inserting ‘‘it has a risk-based net 
worth ratio of not less than 8 percent’’. 
(3) UNDER CAPITALIZED.—
(A) In subparagraph (C)(i), by striking ‘‘6 
percent’’ and inserting ‘‘4 percent’’. 
(B) In subparagraph (C)(ii), by striking 
‘‘it fails to meet any applicable risk-based net
worth requirement under subsection (d)’’ and 
inserting ‘‘it has a risk-based net worth ratio of 
less than 8 percent’’. 
(4) SIGNIFICANTLY UNDERCAPITALIZED.—
(A) In that portion of subparagraph (D) 
that precedes clause (i), by inserting ‘‘if’’ after 
‘‘ ‘significantly undercapitalized’ ’’. 
(B) In subparagraph (D)(i)—
(i) by striking ‘‘if’’; 
(ii) by striking ‘‘4 percent’’ and in-
serting ‘‘3 percent’’; and 
(iii) by striking ‘‘or’’ after the semi-
colon. 
(C) By striking clause (ii) of subparagraph 
(D) and inserting the following new clauses: 
‘‘(ii) the insured credit union has a 
risk-based net worth ratio of less than 6 
percent; or 
‘‘(iii) the insured credit union has a 
net worth ratio of less than 4 percent, 
and—
‘‘(I) fails to submit an acceptable 
net worth restoration plan within the 
time allowed under subsection (f); or
‘‘(II) materially fails to imple-
ment a net worth restoration plan ac-
cepted by the Board.’’. 
(5) RELEVANT
CAPITAL
MEASURES.—Section 
216(c)(2) is amended by striking ‘‘leverage limit’’ 
and inserting ‘‘relevant capital measures’’. 
SEC. 102. AMENDMENTS RELATING TO RISK-BASED NET 
WORTH REQUIREMENTS. 
(a) IN GENERAL.—Section 216(d) of the Federal 
Credit Union Act (12 U.S.C. 1790d(d)) is amended—
(1) in paragraph (1)—
(A) by striking ‘‘that are complex, as de-
fined by the Board’’; and 
(B) by inserting ‘‘, as defined by the 
Board’’ before the period at the end; and 
(2) by striking paragraph (2) and inserting the 
following new paragraph: 
‘‘(2) STANDARD.—The Board shall design the 
risk-based net worth requirement in relation to risk 
assets, as defined by the Board, to take account of 
any material risks to insured credit unions, based on 
comparable standards for taking into account mate-
rial risks to insured depository institutions under the 
Federal Deposit Insurance Act that are applicable to 
credit unions.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—
The heading for subsection (d) of section 216 of the Fed-
eral Credit Union Act (12 U.S.C. 1790d(d)) is amended 
by striking ‘‘FOR COMPLEX CREDIT UNIONS’’. 
SEC. 103. TREATMENT BASED ON OTHER CRITERIA. 
Section 216(h)(2) of the Federal Credit Union Act 
(12 U.S.C. 1790d(h)(2)) is amended by inserting ‘‘, except 
to reclassify an insured credit union into the next lower 
net worth category, based on interest rate risk, to the ex-
tent any such reclassification by a delegatee may be re-
viewed by the Board,’’ after ‘‘to reclassify an insured cred-
it union into a lower net worth category’’. 
SEC. 104. DEFINITIONS RELATING TO NET WORTH. 
(a) NET WORTH.—Section 216(o)(2) of the Federal 
Credit Union Act (12 U.S.C. 1790d(o)(2)) is amended—
(1) in subparagraph (A)—
(A) by inserting ‘‘the’’ before ‘‘retained 
earnings balance’’; and 
(B) by inserting ‘‘, together with any 
amounts that were previously retained earnings 
of any other credit union with which the credit 
union has combined’’ before the semicolon at 
the end; and 
(2) in subparagraph (B), by inserting ‘‘, subject 
to paragraph (6),’’ after ‘‘includes’’.
(b) 
SECONDARY
CAPITAL
ACCOUNTS.—Section 
216(o) of the Federal Credit Union Act (12 U.S.C. 
1790d(o)) is amended by adding at the end the following 
new paragraph: 
‘‘(6) SECONDARY CAPITAL ACCOUNTS FOR PUR-
POSES OF DETERMINING NET WORTH.—The Board 
may establish, by regulation, the following limita-
tions on the secondary capital accounts that may be 
included for purposes of determining the net worth 
of any low-income credit union pursuant to para-
graph (2)(B): 
‘‘(A) A limitation on the initial maturity of 
any such account. 
‘‘(B) A reduction or limitation on the net 
worth valuation of any such account based on 
the remaining period to maturity. 
‘‘(C) Any other limitation the Board deter-
mines to be appropriate, for safety and sound-
ness purposes, with respect to credit unions 
that are not defined as small credit unions by 
the Board.’’. 
(c) NET WORTH RATIO.—Paragraph (3) of section 
216(o) of the Federal Credit Union Act (12 U.S.C. 
1790d(o)(3)) is amended—
(1) by inserting ‘‘minus the credit union’s de-
posit in the Fund’’ after ‘‘net worth of the credit 
union’’; and 
(2) by inserting ‘‘minus the credit union’s de-
posit in the Fund’’ after ‘‘total assets of the credit 
union’’. 
(d) RISK-BASED
NET
WORTH
RATIO.—Section 
216(o) of the Federal Credit Union Act (12 U.S.C. 
1790d)(o)) is amended by inserting after paragraph (4) 
the following new paragraph: 
‘‘(5) RISK-BASED
NET
WORTH
RATIO.—The 
term ‘risk-based net worth ratio’ means, with respect 
to any credit union, the ratio of—
‘‘(A) the sum of the amount of the net 
worth of the credit union and the amount of the 
loan loss reserves held by the credit union (sub-
ject to such limits on the extent to which loan 
loss reserves may be taken into account for pur-
poses of determining such ratio as the Board 
may prescribe), minus the amount of the credit 
union’s deposit in the Fund; to 
‘‘(B) the amount of the risk assets of the 
credit union, 
as defined by the Board by regulation.’’.
SEC. 105. AMENDMENTS RELATING TO NET WORTH RES-
TORATION PLANS. 
(a) SHORT-TERM WAIVER OF REQUIREMENT FOR 
NET WORTH RESTORATION PLAN ALLOWED UNDER 
CERTAIN CIRCUMSTANCES.—
(1) IN GENERAL.—Subsection (f) of section 216 
of the Federal Credit Union Act (12 U.S.C. 
1790d(f)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) SHORT-TERM WAIVER FOR CERTAIN MAR-
GINALLY UNDERCAPITALIZED CREDIT UNIONS.—The 
Board may, by order on a case-by-case basis, waive 
the applicability of the requirement for an under-
capitalized credit union to submit an acceptable net 
worth restoration plan to the Board if the Board de-
termines that—
‘‘(A) the loss of adequately capitalized sta-
tus by the credit union is growth-related; 
‘‘(B) the credit union is only marginally 
undercapitalized; and 
‘‘(C) the credit union will only remain 
undercapitalized for a relatively short period of 
time.’’. 
(2) TECHNICAL
AND
CONFORMING
AMEND-
MENT.—Paragraph (1) of section 216(f) of the Fed-
eral Credit Union Act (12 U.S.C. 1790d(f)(1)) is
amended by inserting ‘‘(other than a credit union for 
which an order under paragraph (6) is in effect)’’ 
after ‘‘credit union that is undercapitalized’’. 
(b) TREATMENT
OF APPROVAL
OF PLAN.—Para-
graph (2) of section 216(e) of the Federal Credit Union 
Act (12 U.S.C. 1790d(e)(2)) is amended by inserting ‘‘, 
or approve a net worth restoration plan of such credit 
union that by its terms provides for such a decrease,’’ 
after ‘‘to a credit union’’. 
(c) BOARD ACTION MAY INCLUDE ORDER TO CREDIT 
UNION.—Subparagraph (B) of section 216(i)(1) of the 
Federal Credit Union Act (12 U.S.C. 1790d(i)(1)(B)) is 
amended—
(1) by inserting ‘‘, in the discretion of the 
Board,’’ after ‘‘as the Board’’; and 
(2) by inserting ‘‘including issuing an order to 
the credit union requiring the credit union to take 
action that the Board determines would achieve such 
purpose,’’ after ‘‘the purpose of this section,’’. 
(d) SUBSTITUTION OF 3-MONTH PERIOD FOR CAL-
ENDAR
QUARTER.—Subparagraph 
(A) 
of 
section 
216(i)(3) of the Federal Credit Union Act (12 U.S.C. 
1790d(i)(3)(A)) is amended—
(1) by striking ‘‘calendar quarter’’ and insert-
ing ‘‘3-month period’’; and
(2) by inserting ‘‘first’’ after ‘‘the date on 
which the credit union’’. 
(e) CLARIFICATION
OF COORDINATION REQUIRE-
MENT.—Clause (ii) of section 216(l)(3)(A) of the Federal 
Credit Union Act (12 U.S.C. 1790d(l)(3)(A)) is amended 
by inserting ‘‘if the Board determines that such action by 
the official will carry out the purposes of this section’’. 
TITLE II—ECONOMIC GROWTH 
SEC. 201. LIMITS ON MEMBER BUSINESS LOANS. 
Section 107A(a) of the Federal Credit Union Act (12 
U.S.C. 1757a(a)) is amended by striking ‘‘the lesser of—
’’ and all that follows and inserting ‘‘20 percent of the 
total assets of the credit union.’’. 
SEC. 202. DEFINITION OF MEMBER BUSINESS LOAN. 
Section 107A(c)(1)(B)(iii) of the Federal Credit 
Union Act (12 U.S.C. 1757a(c)(1)(B)(iii)) is amended by 
striking ‘‘$50,000’’ and inserting ‘‘an amount, not to ex-
ceed $100,000, that the Board shall prescribe by regula-
tion’’. 
SEC. 203. RESTRICTION ON MEMBER BUSINESS LOANS. 
Section 216(g)(2) of the Federal Credit Union Act 
(12 U.S.C. 1790d(g)(2)) is amended by striking ‘‘until 
such time as the credit union becomes adequately capital-
ized’’ and inserting ‘‘unless otherwise approved by the 
Board’’.
SEC. 204. MEMBER BUSINESS LOAN EXCLUSION FOR LOANS 
TO NONPROFIT RELIGIOUS ORGANIZATIONS. 
Section 107A(a) of the Federal Credit Union Act (12 
U.S.C. 1757a(a)) is amended by inserting ‘‘, excluding 
loans made to nonprofit religious organizations,’’ after 
‘‘total amount of such loans’’. 
SEC. 205. CREDIT UNIONS AUTHORIZED TO LEASE SPACE 
IN BUILDINGS IN CREDIT UNION OFFICES IN 
UNDERSERVED AREAS. 
Section 107 of the Federal Credit Union Act (12 
U.S.C. 1757) is amended—
(1) by striking ‘‘and’’ at the end of paragraph 
(16); 
(2) by redesignating paragraph (17) as para-
graph (18); 
(3) by inserting after paragraph (16) the fol-
lowing new paragraph: 
‘‘(17) with regard to any building purchased or 
constructed by the credit union for a credit union of-
fice or credit union operations in an underserved 
area, to lease office space in such building that is 
separate and clearly distinct from any office or oper-
ation of the credit union to any business enterprise, 
subject to such regulations the Board may prescribe, 
taking into account the safety and soundness of the 
credit union; and’’;
(4) in the matter preceding paragraph (1) by 
striking ‘‘A Federal credit union’’ and inserting ‘‘(a) 
IN GENERAL.—Any Federal credit union’’; and 
(5) adding at the end the following new sub-
section: 
‘‘(c) UNDERSERVED AREA DEFINED.—For purposes 
of subsection (a)(17), the term ‘underserved area’ means 
an area consisting of 1 or more census tracts that have—
‘‘(1) a poverty rate of 20 percent or greater, 
based on the most recent census data; or 
‘‘(2) a median family income that does not ex-
ceed 80 percent of the greater of—
‘‘(A) the median family income for the 
metropolitan area in which such census tract or 
tracts are located; or 
‘‘(B) the median family income for the 
State in which such census tract or tracts are 
located.’’. 
TITLE III—REGULATORY 
MODERNIZATION 
SEC. 301. LEASES OF LAND ON FEDERAL FACILITIES FOR 
CREDIT UNIONS. 
(a) IN GENERAL.—Section 124 of the Federal Credit 
Union Act (12 U.S.C. 1770) is amended—
(1) by striking ‘‘Upon application by any credit 
union’’ and inserting ‘‘Notwithstanding any other 
provision of law, upon application by any credit 
union’’; 
(2) by inserting ‘‘on lands reserved for the use 
of, and under the exclusive or concurrent jurisdiction 
of, the United States or’’ after ‘‘officer or agency of 
the United States charged with the allotment of 
space’’; 
(3) by inserting ‘‘lease land or’’ after ‘‘such of-
ficer or agency may in his or its discretion’’; and 
(4) by inserting ‘‘or the facility built on the 
leased land’’ after ‘‘credit union to be served by the 
allotment of space’’. 
(b) CLERICAL AMENDMENT.—The heading for sec-
tion 124 is amended by inserting ‘‘OR ON FEDERAL LAND’’ 
after ‘‘BUILDINGS’’. 
SEC. 302. INVESTMENTS IN SECURITIES BY FEDERAL CRED-
IT UNIONS. 
Section 107 of the Federal Credit Union Act (12 
U.S.C. 1757) (as amended by section 205 of this Act) is 
amended by inserting after subsection (a) the following 
new subsection: 
‘‘(b) INVESTMENT FOR THE CREDIT UNION’S OWN 
ACCOUNT.—
‘‘(1) IN GENERAL.—In addition to the invest-
ments authorized in subsection (a), a Federal credit 
union may purchase and hold for its own account 
such investment securities of investment grade as 
the Board may authorize by regulation, subject to 
such limitations and restrictions as the Board may 
prescribe in the regulations. 
‘‘(2) PERCENTAGE LIMITATIONS.—
‘‘(A) SINGLE OBLIGOR.—In no event may 
the total amount of investment securities of any 
single obligor or maker held by a Federal credit 
union for the credit union’s own account exceed 
at any time an amount equal to 10 percent of 
the net worth of the credit union. 
‘‘(B) AGGREGATE
INVESTMENTS.—In no 
event may the aggregate amount of investment 
securities held by a Federal credit union for the 
credit union’s own account exceed at any time 
an amount equal to 10 percent of the assets of 
the credit union. 
‘‘(3) INVESTMENT SECURITY DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘investment security’ 
means marketable obligations evidencing the in-
debtedness of any person in the form of bonds,
notes, or debentures and other instruments 
commonly referred to as investment securities. 
‘‘(B) FURTHER DEFINITION BY BOARD.—
The Board may further define the term ‘invest-
ment security’. 
‘‘(4) INVESTMENT GRADE DEFINED.—The term 
‘investment grade’ means with respect to an invest-
ment security purchased by a credit union for its 
own account, an investment security that at the time 
of such purchase is rated in one of the 4 highest rat-
ing categories by at least 1 nationally recognized 
statistical rating organization. 
‘‘(5) CLARIFICATION
OF
PROHIBITION
ON 
STOCK OWNERSHIP.—No provision of this subsection 
shall be construed as authorizing a Federal credit 
union to purchase shares of stock of any corporation 
for the credit union’s own account, except as other-
wise permitted by law.’’. 
SEC. 303. INCREASE IN GENERAL 12-YEAR LIMITATION OF 
TERM OF FEDERAL CREDIT UNION LOANS TO 
15 YEARS. 
Section 107(a)(5) of the Federal Credit Union Act 
(12 U.S.C. 1757(5)) (as so designated by section 205 of 
this Act) is amended—
(1) in the matter preceding subparagraph (A), 
by striking ‘‘to make loans, the maturities of which 
shall not exceed twelve years except as otherwise 
provided herein’’ and inserting ‘‘to make loans, the 
maturities of which shall not exceed 15 years or any 
longer maturity as the Board may allow, in regula-
tions, except as otherwise provided in this Act’’; 
(2) in subparagraph (A)—
(A) by striking clause (ii); 
(B) by redesignating clauses (iii) through 
(x) as clauses (ii) through (ix), respectively; and 
(C) by inserting ‘‘and’’ after the semicolon 
at the end of clause (viii) (as so redesignated). 
SEC. 304. INCREASE IN 1 PERCENT INVESTMENT LIMIT IN 
CREDIT UNION SERVICE ORGANIZATIONS. 
Section 107(a)(7)(I) of the Federal Credit Union Act 
(12 U.S.C. 1757(7)(I)) (as so designated by section 205 
of this Act) is amended by striking ‘‘up to 1 per centum 
of the total paid’’ and inserting ‘‘up to 3 percent of the 
total paid’’.