Union Calendar No. 272
105TH CONGRESS
2D SESSION
H. R. 1151
[Report No. 105–472]
A BILL
To amend the Federal Credit Union Act to clarify
existing law and ratify the longstanding policy of
the National Credit Union Administration Board
with regard to field of membership of Federal
credit unions.
MARCH 30, 1998
Reported with an amendment, committed to the Commit-
tee of the Whole House on the State of the Union, and
ordered to be printed
IB
Union Calendar No. 272
105TH CONGRESS
2D SESSION
H. R. 1151
[Report No. 105–472]
To amend the Federal Credit Union Act to clarify existing law and ratify
the longstanding policy of the National Credit Union Administration
Board with regard to field of membership of Federal credit unions.
IN THE HOUSE OF REPRESENTATIVES
MARCH 20, 1997
Mr. LATOURETTE (for himself, Mr. KANJORSKI, Mr. SOLOMON, Mr. BROWN
of California, Mr. LEWIS of California, Ms. KAPTUR, Mr. MCDADE, Mr.
DINGELL, Mr. BURTON of Indiana, Ms. RIVERS, Mr. LIVINGSTON, Ms.
ROYBAL-ALLARD, Mr. QUINN, Mr. YATES, Mr. WAMP, Mr. SANDERS, Mr.
HINCHEY, and Mr. CARDIN) introduced the following bill; which was re-
ferred to the Committee on Banking and Financial Services
MARCH 30, 1998
Additional sponsors: Mr. KILDEE, Mr. CONYERS, Mr. BARCIA, Mr. KLINK,
Mrs. JOHNSON of Connecticut, Mr. WALSH, Mr. KUCINICH, Mr. FILNER,
Mr. HILLIARD, Mr. GEJDENSON, Mr. LANTOS, Mr. SHERMAN, Mr.
DIXON, Mr. MARKEY, Mr. THOMPSON, Mr. ROTHMAN, Ms. ESHOO, Mr.
BONIOR, Mrs. MINK of Hawaii, Mr. NEAL of Massachusetts, Mr. KEN-
NEDY of Rhode Island, Mr. LIPINSKI, Mr. GONZALEZ, Ms. NORTON, Mr.
LEWIS of Georgia, Mr. STUPAK, Mr. WELDON of Pennsylvania, Mr.
SABO, Mrs. KENNELLY of Connecticut, Mr. GIBBONS, Mr. STARK, Mr.
TOWNS, Mr. BOEHLERT, Mr. DELLUMS, Mr. FALEOMAVAEGA, Mr.
WEYGAND, Mr. CONDIT, Mr. COYNE, Mr. TORRES, Mr. KOLBE, Ms.
STABENOW, Mr. FRANK of Massachusetts, Mr. PALLONE, Mr. STOKES,
Ms. SANCHEZ, Mr. KIM, Mr. BERMAN, Mr. FATTAH, Mr. OLVER, Mr.
EVANS, Mrs. LINDA SMITH of Washington, Mr. SANFORD, Mr. OBER-
STAR, Mr. MASCARA, Mr. FOGLIETTA, Mr. DICKS, Mr. CALVERT, Mr.
GILCHREST, Mr. MCDERMOTT, Mr. MARTINEZ, Mr. PAYNE, Mr. AN-
DREWS, Mr. UNDERWOOD, Mr. PETERSON of Pennsylvania, Mr. FOX of
Pennsylvania, Ms. MCKINNEY, Mr. HOYER, Mr. RODRIQUEZ, Mr. DAVIS
of Illinois, Mr. JOHNSON of Wisconsin, Mr. CLAY, Mr. CAPPS, Mr. HORN,
Mr. MENENDEZ, Mr. SHAYS, Mr. CUMMINGS, Mr. NADLER, Mr. BLUNT,
Mr. BECERRA, Mr. TALENT, Mr. OWENS, Ms. JACKSON-LEE of Texas,
Mr. FAZIO of California, Ms. KILPATRICK, Ms. EDDIE BERNICE JOHN-
SON of Texas, Ms. WATERS, Mr. WYNN, Mr. MILLER of California, Mrs.
MCCARTHY of New York, Mr. HOLDEN, Mr. GILMAN, Mrs. MORELLA,
Mr. ENGLISH of Pennsylvania, Mr. FARR of California, Ms. DELAURO,
Mr. LEVIN, Mr. MCGOVERN, Mr. RANGEL, Mr. MANTON, Mr. RUSH, Mr.
PACKARD, Mrs. TAUSCHER, Mr. BLAGOJEVICH, Mr. CUNNINGHAM, Mr.
SERRANO, Ms. WOOLSEY, Mr. COSTELLO, Mr. DOYLE, Mr. FAWELL, Mr.
ABERCROMBIE, Mr. SESSIONS, Mr. ORTIZ, Mr. HUNTER, Mr. GINGRICH,
Mr. MOLLOHAN, Mr. GREEN, Mr. WAXMAN, Ms. BROWN of Florida, Mrs.
CHENOWETH, Mr. BARR of Georgia, Mr. SHUSTER, Mr. ROYCE, Mr.
YOUNG of Alaska, Mr. WISE, Ms. LOFGREN, Mrs. THURMAN, Mr.
BILBRAY, Mr. MCHUGH, Mr. SOUDER, Mr. MCHALE, Mr. BURR of North
Carolina, Mr. OBEY, Mr. MATSUI, Ms. DEGETTE, Mr. SMITH of Michi-
gan, Mr. JONES, Mr. MCNULTY, Mr. ETHERIDGE, Mr. MEEHAN, Mr.
LEWIS of Kentucky, Mr. WOLF, Mr. GREENWOOD, Mr. KIND, Mr. PE-
TERSON of Minnesota, Ms. PELOSI, Mr. REYES, Mr. KNOLLENBERG, Mr.
TRAFICANT, Mr. PETRI, Mr. CRAMER, Ms. MCCARTHY of Missouri, Mr.
WELDON of Florida, Mr. HALL of Ohio, Mr. FORBES, Mr. RAHALL, Mr.
FOLEY, Mr. HERGER, Mr. ENSIGN, Mr. BISHOP, Mr. FROST, Mr. ALLEN,
Mrs. LOWEY, Mr. CRAPO, Mr. DOOLITTLE, Mr. BALDACCI, Mr. SNYDER,
Mr. METCALF, Mr. ROEMER, Mr. FORD, Mr. GOODLING, Mr. COBLE, Mr.
ROGAN, Mr. ENGEL, Mr. MEEKS of New York, Mr. STRICKLAND, Mr.
PAPPAS, Mr. SPRATT, Mrs. CAPPS, Mr. CLYBURN, Mr. WELLER, Mr.
HASTINGS of Florida, Mr. HILL, Mr. PAUL, Mr. GRAHAM, Mr. PRICE of
North Carolina, Mr. PICKETT, Mr. LAHOOD, Mr. POSHARD, Mr. ADAM
SMITH of Washington, and Mr. MINGE
MARCH 30, 1998
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on March 20, 1997]
A BILL
To amend the Federal Credit Union Act to clarify existing
law and ratify the longstanding policy of the National
Credit Union Administration Board with regard to field
of membership of Federal credit unions.
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 Member-
ship Access Act’’.
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,
or the maintenance of an otherwise well-understood
sense of cohesion or identity is essential to the fulfill-
ment of credit unions’ public mission.
(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
union shall be limited to the membership described in 1 of
the following categories:
‘‘(1) SINGLE COMMON-BOND CREDIT UNION.—1
group which has a common bond of occupation or as-
sociation.
‘‘(2) MULTIPLE COMMON-BOND CREDIT UNION.—
More than 1 group—
‘‘(A) each of which has (within such 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) GRANDFATHERED MEMBERS AND GROUPS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(b)—
‘‘(A) any person or organization who is a
member of any Federal credit union as of the
date of the enactment of the Credit Union Mem-
bership Access Act may remain a member of
such credit union after such date; and
‘‘(B) a member of any group whose mem-
bers constituted a portion of the membership of
any Federal credit union as of such date of en-
actment shall continue to be eligible to become a
member of such credit union, by virtue of mem-
bership in such group, after such date.
‘‘(2) SUCCESSORS.—If the common bond of any
group referred to in paragraph (1) is defined by any
particular organization or business entity, paragraph
(1) shall continue to apply with respect to any succes-
sor to such organization or entity.
‘‘(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 of a credit union described in
subsection (b)(2).
‘‘(2) EXCEPTIONS.—In the case of any Federal
credit union whose field of membership is determined
under subsection (b)(2), the numerical limitation de-
scribed in paragraph (1) shall not apply with respect
to the following:
‘‘(A) CERTAIN LARGER GROUPS INCAPABLE
OF
SUPPORTING
AND
OPERATING
A
SINGLE-
GROUP
CREDIT
UNION.—Any group which the
Board determines, in writing and in accordance
with the guidelines and regulations described in
paragraph (4), could not feasibly or reasonably
establish a new single common-bond credit union
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 which 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 which may affect the fi-
nancial viability and stability of a credit
union; or
‘‘(iii) the group would be unlikely to
operate a safe and sound credit union.
‘‘(B) 
TRANSACTIONS
FOR
SUPERVISORY
REASONS.—Any group transferred from another
credit union—
‘‘(i) in connection with a merger or
consolidation which has been recommended
by the Board or any appropriate State
credit union supervisor for safety and
soundness concerns with respect to such
other credit union; or
‘‘(ii) by the Board in the Board’s ca-
pacity as conservator or liquidating agent
with respect to such other credit union.
‘‘(3) EXCEPTION FOR UNDERSERVED AREAS.—
Notwithstanding subsection (b), in the case of a Fed-
eral credit union described in paragraph (2) of such
subsection, the Board may allow the membership of
the credit union to include any person or organiza-
tion within a local community, neighborhood, or
rural district if—
‘‘(A) the Board determines that such local
community, neighborhood, or rural district—
‘‘(i) meets the requirements of para-
graph (3) and subparagraphs (A) and (B)
of paragraph (4) of section 233(b) of the
Bank Enterprise Act of 1991, and such ad-
ditional requirements as the Board may im-
pose; 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 such local commu-
nity, neighborhood, or rural district at which
credit union services are available.
‘‘(4) 
REGULATIONS
AND
GUIDELINES.—The
Board shall issue guidelines or regulations, after no-
tice and opportunity for comment, setting forth the
criteria the Board will apply in determining whether
or not an additional group may be included within
the field of membership of an existing credit union
pursuant to paragraph (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 such individ-
ual to another person who is eligible for membership
in such credit union unless the individual is a mem-
ber of the immediate family or household (as such
terms are defined by the Board by regulation) of such
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, such person or organization may remain a
member of such credit union until the person or orga-
nization chooses to withdraw from the membership of
the credit union.’’.
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 inserting after subsection (e)
(as added by section 101 of this title) 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 such group is not practicable or con-
sistent with such standards, require the inclusion
of such group in the field of membership of a
credit union which is within reasonable proxim-
ity to the location of the group whenever prac-
ticable and consistent with reasonable standards
for the safe and sound operation of the credit
union.
‘‘(2) APPROVAL CRITERIA.—The Board may not
approve any application by a Federal credit union
described in subsection (b)(2) to include any addi-
tional group within the field of membership of such
credit union (or an application by a Federal credit
union described in paragraph (1) to include an addi-
tional group and become a credit union described in
paragraph (2)) unless the Board determines, in writ-
ing, that—
‘‘(A) such credit union has not engaged in
any unsafe or unsound practice (as defined in
section 206(b)) which is material during the 1-
year period preceding the filing of the applica-
tion;
‘‘(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) pursuant to the most recent evaluation
of such credit union under section 215, the credit
union is satisfactorily providing affordable cred-
it union services to all individuals of modest
means within the field of membership of such
credit union;
‘‘(E) any potential harm 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 in-
terest 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
‘‘(F) the credit union has met such addi-
tional requirements as the Board may prescribe
in regulations.’’.
SEC. 103. GEOGRAPHICAL GUIDELINES FOR COMMUNITY
CREDIT UNIONS.
Section 109 of the Federal Credit Union Act (12
U.S.C. 1759) is amended by inserting after subsection (f)
(as added by section 102 of this title) 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 regulations defining 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.
‘‘(2) SCOPE
OF
APPLICATION.—Paragraph (1)
shall apply with respect to any application to form
a new credit union, or to alter or expand the field of
membership of an existing credit union, which is filed
with the Board after the date of the enactment of
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-
priate, the Board may prescribe an ac-
counting principle for application to such
credit unions which is no less stringent
than generally accepted accounting prin-
ciples.
‘‘(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.—Each insured credit union which
has total assets of $500,000,000 or more shall
have an annual independent audit of the finan-
cial statement of the credit union performed in
accordance with generally accepted auditing
standards by an independent certified public ac-
countant or public accountant licensed by the
appropriate State or jurisdiction to perform such
services.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 202(a)(6)(B) of the Federal Credit Union Act (12
1786(b)(6)(B)) is amended by striking ‘‘subparagraph (A)’’
and inserting ‘‘subparagraph (A) or (D)’’.
SEC. 202. CONVERSIONS OF CREDIT UNIONS INTO OTHER
DEPOSITORY INSTITUTIONS.
(a) REVIEW OF REGULATIONS REQUIRED.—The Na-
tional Credit Union Administration Board shall conduct
a detailed review of all regulations which govern or affect
the conversion of a credit union into any other form of de-
pository institution, including regulations relating to the
form of disclosure required preceding a vote by the members
of a credit union with regard to any such conversion and
the manner in which such vote shall be conducted, to ensure
that such regulations freely and fairly permit any such con-
version after free, fair, and objective disclosure to the mem-
bers of the credit union of the facts and issues involved in
any such conversion.
(b) REPORT TO THE CONGRESS.—
(1) IN
GENERAL.—Before the end of the 12-
month period beginning on the date of the enactment
of this Act, the National Credit Union Administra-
tion Board shall submit a detailed report on the find-
ings and conclusions of the Board in connection with
the review required under subsection (a).
(2) CONTENTS OF REPORT.—The report submit-
ted pursuant to paragraph (1) shall contain—
(A) any recommendation for any adminis-
trative or legislative change which the Board
may determine to be appropriate with regard to
any aspect of the conversion of a credit union
into another form of depository institution; and
(B) the justification for any recommenda-
tion of the Board—
(i) to retain in effect any provision of
the regulations in effect on March 13, 1998,
which govern or affect the conversion of a
credit union into any other form of deposi-
tory institution; or
(ii) to amend or alter any such provi-
sion.
(c) DEFINITIONS.—For purposes of this section, the fol-
lowing definitions shall apply:
(1) CREDIT UNION.—The term ‘‘credit union’’
means any Federal credit union or State credit union
(as such terms are defined in paragraphs (1) and (6),
respectively, of section 101 of the Federal Credit
Union Act).
(2) DEPOSITORY INSTITUTION.—The term ‘‘de-
pository institution’’ has the meaning given such
term in section 3 of the Federal Deposit Insurance
Act.
SEC. 203. FREEZE ON BOARD REGULATIONS RELATING TO
COMMERCIAL 
LOANS 
AND 
CERTAIN 
AP-
PRAISAL REQUIREMENTS RELATING TO SUCH
LOANS.
(a) IN GENERAL.—The regulations of the National
Credit Union Administration Board which are codified in
parts 701.21(h) and 722.3(a) of the Code of Federal Regula-
tions, as in effect on March 13, 1998 (relating to business
loans and lines of credit to members and appraisal require-
ments), including any other regulations which are applica-
ble with respect to loans or lines of credit to which the part
applies, shall remain in effect without amendment or al-
tered application until the end of the 1-year period begin-
ning on such date and, notwithstanding the Federal Credit
Union Act or any other provision of law, any action of the
National Credit Union Administration Board, or the Na-
tional Credit Union Administration, on or after such date
which purports to amend (including an amendment by sub-
stitution) or otherwise apply any such regulation dif-
ferently than in effect on such date shall have no force or
legal effect before the end of such 1-year period.
(b) REVIEW AND REPORT TO THE CONGRESS.—Before
the end of the 1-year period described in subsection (a), the
National Credit Union Administration Board shall conduct
a review of the effectiveness of the regulations referred to
in such subsection as in effect on March 13, 1998, and shall
submit a report to the Congress on the results of such review
before the end of such 1-year period.
SEC. 204. SERVING PERSONS OF MODEST MEANS WITHIN
THE FIELD OF MEMBERSHIP OF CREDIT
UNIONS.
(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. 215. SERVING PERSONS OF MODEST MEANS WITHIN
THE FIELD OF MEMBERSHIP OF CREDIT
UNIONS.
‘‘(a) CONTINUING AND AFFIRMATIVE OBLIGATION.—
The purpose of this section is to reaffirm that insured credit
unions have a continuing and affirmative obligation to
meet the financial services needs of persons of modest means
consistent with safe and sound operation.
‘‘(b) EVALUATION BY THE BOARD.—The Board shall,
before the end of the 12-month period beginning on the date
of the enactment of the Credit Union Membership Access
Act—
‘‘(1) prescribe criteria for periodically reviewing
the record of each insured credit union in providing
affordable credit union services to all individuals of
modest means (including low- and moderate-income
individuals) within the field of membership of such
credit union; and
‘‘(2) provide for making the results of such re-
view publicly available.
‘‘(c) ADDITIONAL CRITERIA FOR COMMUNITY CREDIT
UNIONS REQUIRED.—The Board shall, by regulation—
‘‘(1) prescribe additional criteria for annually
evaluating the record of any insured credit union
which is organized to serve a well-defined local com-
munity, neighborhood, or rural district in meeting the
credit needs and credit union service needs of the en-
tire field of membership of such credit union; and
‘‘(2) prescribe procedures for remedying the fail-
ure of any insured credit union described in para-
graph (1) to meet the criteria established pursuant to
such paragraph, including the disapproval of any ap-
plication by such credit union to expand the field of
membership of such credit union.
‘‘(d) EMPHASIS
ON
PERFORMANCE, NOT
PAPER-
WORK.—In evaluating any insured credit union under this
section, the Board shall—
‘‘(1) focus on the actual performance of the in-
sured credit union; and
‘‘(2) not impose burdensome paperwork or rec-
ordkeeping requirements.’’.
(b) ANNUAL REPORTS.—With respect to each of the 1st
5 years which begin after the date of the enactment of this
Act, the National Credit Union Administration Board shall
include in the annual report to the Congress under section
102(d) of the Federal Credit Union Act a report on the
progress of the Board in implementing section 215 of such
Act (as added by subsection (a) of this section).
SEC. 205. NATIONAL CREDIT UNION ADMINISTRATION
BOARD MEMBERSHIP.
Section 102(b) of the Federal Credit Union Act (12
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 such ap-
pointment, are, or have recently been, involved
with any insured credit union as a committee
member, director, officer, employee, or other in-
stitution-affiliated party.’’.
SEC. 206. REPORT AND CONGRESSIONAL REVIEW REQUIRE-
MENT FOR CERTAIN REGULATIONS.
Any regulation prescribed by the National Credit
Union Administration Board defining, or amending the
definition of—
(1) the term ‘‘immediate family or household’’
for purposes of subsection (e)(1) of section 109 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 sub-
section (g) of such section (as added by section 103
of this Act),
shall be treated as a major rule for purposes of chapter 8
of title 5, United States Code.
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 inserting
after section 215 (as added by section 204 of this Act) the
following new section:
‘‘SEC. 216. PROMPT CORRECTIVE ACTION
‘‘(a) RESOLVING PROBLEMS TO PROTECT FUND.—
‘‘(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 National Credit
Union Share Insurance 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.—The Board shall implement sub-
section (a) of this section by prescribing regulations, after
public notice and opportunity for comment, which—
‘‘(1) establish criteria and procedures for
classifying credit unions as ‘well capitalized’, ‘ade-
quately capitalized’, ‘undercapitalized’, ‘significantly
undercapitalized’, or ‘critically undercapitalized’;
‘‘(2) specify a series of graduated regulatory en-
forcement actions that may be imposed upon any
credit union which fails to meet the requirements for
classification as an adequately capitalized credit
union, including—
‘‘(A) the submission of net worth restoration
plans;
‘‘(B) earnings retention requirements;
‘‘(C) prior written approval by the Board
for certain activities such as branching and
entry into new lines of business; and
‘‘(D) the appointment of a conservator or
liquidating agent in appropriate circumstances;
‘‘(3) establish reasonable net worth requirements,
including risk-based net worth requirements in the
case of complex credit unions, for various categories
of credit unions and prescribe the manner in which
net worth is calculated (for purposes of such require-
ments) with regard to various types of investments,
including investments in corporate credit unions, tak-
ing into account the unique nature and role of credit
unions;
‘‘(4) establish criteria for reclassifying the cap-
ital classifications of credit unions that engage in un-
safe or unsound practices; and
‘‘(5) are generally comparable with the prompt
corrective action provisions set forth in section 38 of
the Federal Deposit Insurance Act, taking into ac-
count the distinct capital structure, cooperative na-
ture, and other characteristics of credit unions.’’.
(b) EFFECTIVE DATE OF REGULATIONS.—
(1) PROPOSED
REGULATIONS.—The National
Credit Union Administration Board shall publish, in
the Federal Register, proposed regulations which meet
the requirements of the amendment made by sub-
section (a) before the end of the 270-day period begin-
ning on the date of the enactment of this Act.
(2) FINAL
REGULATIONS.—The regulations re-
quired by the amendment made by subsection (a)
shall take effect in final form by the end of the 18-
month period beginning on the date of the enactment
of this Act.
(c) REPORT TO CONGRESS.—At the time the proposed
prompt corrective action regulations are published in the
Federal Register by the National Credit Union Administra-
tion Board pursuant to subsection (b)(1), the Board shall
submit a report to the Congress on the differences and simi-
larities between such prompt corrective action regulations
and the regulations prescribed by the Federal bank agencies
under section 38 of the Federal Deposit Insurance Act.
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 amending subsection (b) to read as fol-
lows:
‘‘(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
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 computed
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 such state-
ment, that to the best of his or her knowledge and be-
lief the statement is true, correct, complete, and in ac-
cordance with this title and the regulations issued
under this title.’’;
(2) by amending clause (iii) of subsection
(c)(1)(A) to read as follows:
‘‘(iii) PERIODIC
ADJUSTMENT.—The
amount of each insured credit union’s de-
posit shall be adjusted as follows, in accord-
ance with procedures determined by the
Board, to reflect changes in the credit
union’s insured shares:
‘‘(I) annually, in the case of an
insured credit union with total assets
of not more than $50,000,000; and
‘‘(II) semi-annually, in the case of
an insured credit union with total as-
sets of $50,000,000 or more.’’;
(3) by amending paragraphs (2) and (3) of sub-
section (c) to read as follows:
‘‘(2) INSURANCE PREMIUM CHARGES.—
‘‘(A) IN
GENERAL.—Each insured credit
union shall, at such times as the Board pre-
scribes (but not more than twice in any calendar
year), pay to the fund a premium charge for in-
surance 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 ex-
ceed the amount necessary to restore the eq-
uity ratio to 1.3 percent.
‘‘(C) PREMIUM CHARGE REQUIRED IF EQ-
UITY 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.
‘‘(3) DISTRIBUTIONS FROM FUND REQUIRED.—
‘‘(A) IN GENERAL.—The Board shall effect a
pro rata distribution to insured credit unions
after each calendar year if, as of the end of that
calendar year—
‘‘(i) any loans to the fund from the
Federal Government, and any interest on
those loans, have been repaid;
‘‘(ii) the fund’s equity ratio exceeds the
normal operating level; and
‘‘(iii) the fund’s available assets ratio
exceeds 1.0 percent.
‘‘(B) 
AMOUNT
OF
DISTRIBUTION.—The
Board shall distribute under subparagraph (A)
the maximum possible amount that—
‘‘(i) does not reduce the fund’s equity
ratio below the normal operating level; and
‘‘(ii) does not reduce the fund’s avail-
able assets ratio below 1.0 percent.
‘‘(C) CALCULATION
BASED
ON
CERTIFIED
STATEMENTS.—In calculating the fund’s equity
ratio and available assets ratio for purposes of
this paragraph, the Board shall determine the
aggregate amount of the insured shares in all in-
sured credit unions from insured credit unions
certified statements under subsection (b) for the
final reporting period of the calendar year re-
ferred to in subparagraph (A).’’;
(4) by adding at the end of subsection (c) the fol-
lowing new paragraph:
‘‘(4) TIMELINESS AND ACCURACY OF DATA.—In
calculating the available assets ratio and equity ratio
of the fund, the Board shall use the most current and
accurate data reasonably available.’’; and
(5) by amending subsection (h) to read as fol-
lows:
‘‘(h) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
‘‘(1) AVAILABLE
ASSETS
RATIO.—The term
‘available assets ratio’, when applied to the fund,
means the ratio of—
‘‘(A) the amount determined by subtract-
ing—
‘‘(i) direct liabilities of the fund and
contingent liabilities for which no provision
for losses has been made, from
‘‘(ii) the sum of cash and the market
value of unencumbered investments author-
ized under section 203(c), to
‘‘(B) the aggregate amount of the insured
shares in all insured credit unions.
‘‘(2) EQUITY
RATIO.—The term ‘equity ratio’,
when applied to the fund, means the ratio of—
‘‘(A) the amount of fund capitalization, in-
cluding insured credit unions’ 1 percent capital-
ization deposits and the fund’s retained earnings
balance (net of direct liabilities of the fund and
contingent liabilities for which no provision for
losses has been made), to
‘‘(B) the aggregate amount of the insured
shares in all insured credit unions.
‘‘(3) INSURED
SHARES.—The term ‘insured
shares’, when applied to this section, includes share,
share draft, share certificate, and other similar ac-
counts as determined by the Board, but does not in-
clude amounts exceeding the insured account limit set
forth in section 207(c)(1).
‘‘(4) NORMAL
OPERATING
LEVEL.—The term
‘normal operating level’, when applied to the fund,
means an equity ratio specified by the Board, which
shall be not less than 1.2 percent and not more than
1.5 percent.’’.
(b) EFFECTIVE DATE.—This section shall become effec-
tive on January 1 of the first calendar year beginning more
than 180 days after the date of enactment of this Act.
SEC. 303. ACCESS TO LIQUIDITY.
Section 204 of the Federal Credit Union Act (12
U.S.C. 1784) is amended by adding at the end the following
new subsections:
‘‘(f) ACCESS TO LIQUIDITY.—The Board shall—
‘‘(1) periodically assess the potential liquidity
needs of each insured credit union, and the options
that the credit union has available for meeting those
needs; and
‘‘(2) periodically assess the potential liquidity
needs of insured credit unions as a group, and the op-
tions that insured credit unions have available for
meeting those needs.
‘‘(g) SHARING INFORMATION WITH FEDERAL RE-
SERVE BANKS.—The Board shall, for the purpose of facili-
tating insured credit unions’ access to liquidity, make
available to the Federal reserve banks (subject to appro-
priate assurances of confidentiality) information relevant
to making advances to such credit unions, including the
Board’s reports of examination.’’.
TITLE IV—MISCELLANEOUS
PROVISIONS
SEC. 401. ASSURING INDEPENDENT DECISION MAKING IN
CONNECTION WITH CERTAIN CONVERSIONS.
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by adding at the end the following
new subsection:
‘‘(t) CONVERSIONS
INVOLVING
FORMER
CREDIT
UNIONS.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law—
‘‘(A) an insured credit union may not con-
vert into an insured depository institution; and
‘‘(B) an insured depository institution
which resulted from a prior conversion of an in-
sured credit union into such insured depository
institution may not convert from the mutual
form to the stock form and may not convert from
1 form of depository institution into another,
unless the appropriate Federal banking agency for the
insured depository institution which results from any
such conversion reviews the conversion and determines
that the requirements of paragraphs (2) and (3) have
been met.
‘‘(2) PROHIBITION ON ECONOMIC BENEFIT FROM
CONVERSION FOR CREDIT UNION OFFICERS, DIREC-
TORS, AND
COMMITTEE
MEMBERS.—An individual
who is or, at any time during the 5-year period pre-
ceding any conversion described in paragraph (1),
was a director, committee member, or senior manage-
ment official of an insured credit union described in
subparagraph (A) or (B) of such paragraph (in con-
nection with such conversion) may not receive any
economic benefit as a result of the conversion with re-
gard to the shares or interests of such director, mem-
ber, or officer in the former insured credit union or
in any resulting insured depository institution.
‘‘(3) ACKNOWLEDGEMENT AND ATTESTATION BY
OFFICERS, DIRECTORS, AND COMMITTEE MEMBERS.—
Any insured credit union or insured depository insti-
tution which is seeking to engage in a conversion
which is subject to this subsection shall submit—
‘‘(A) a written acknowledgement, in such
form and manner as the appropriate Federal
banking agency may prescribe, by every individ-
ual who is subject to the prohibition contained in
paragraph (2), that such individual is aware of
such prohibition; and
‘‘(B) an attestation that the conversion
under review will not result in a violation of
such prohibition.
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) INSURED
CREDIT
UNION.—The term
‘insured credit union’ has the meaning given to
such term in section 101(7) of the Federal Credit
Union Act.
‘‘(B) SENIOR MANAGEMENT OFFICIAL.—The
term ‘senior management official’ means a chief
executive officer, an assistant chief executive offi-
cer, a chief financial officer, and any other sen-
ior executive officer (as defined by the appro-
priate Federal banking agency pursuant to sec-
tion 32(f)).’’.
SEC. 402. PAYMENT OF INTEREST ON RESERVES AT FED-
ERAL RESERVE BANKS.
(a) IN GENERAL.—Section 19(b) of the Federal Re-
serve Act (12 U.S.C. 461(b)) is amended by adding at the
end the following new paragraph:
‘‘(12) EARNINGS ON RESERVES.—
‘‘(A) IN
GENERAL.—Balances maintained
at a Federal reserve bank by or on behalf of a
depository institution to meet the reserve require-
ments of this subsection applicable with respect
to such depository institution shall receive earn-
ings to be paid by the Federal reserve bank at
least once each calendar quarter at a rate not to
exceed the rate earned on the securities portfolio
of the Federal Reserve System during the preced-
ing quarter.
‘‘(B) REGULATIONS
RELATING
TO
PAY-
MENTS
AND
DISTRIBUTIONS.—The Board may
prescribe regulations concerning—
‘‘(i) the payment of earnings in ac-
cordance with this paragraph;
‘‘(ii) the distribution of such earnings
to the depository institutions which main-
tain balances at such banks or on whose be-
half such balances are maintained; and
‘‘(iii) the responsibilities of depository
institutions, Federal home loan banks, and
the National Credit Union Administration
Central Liquidity Facility with respect to
the crediting and distribution of earnings
attributable to balances maintained, in ac-
cordance with subsection (c)(1)(B), in a
Federal reserve bank by any such entity on
behalf of depository institutions which are
not member banks.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—
(1) Section 19(b)(4) of the Federal Reserve Act
(12 U.S.C. 461(b)(4)) is amended by striking sub-
paragraph (C).
(2) Section 19(c)(1)(A) of the Federal Reserve
Act (12 U.S.C. 461(c)(1)(A)) is amended by striking
‘‘subsection (b)(4)(C)’’ and inserting ‘‘subsection (b)’’.