12 Cfr 713 (1-1-18 Ed)

§ 712.9
§ 712.9

12 CFR Ch. VII (1–1–18 Edition)
[Reserved]

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§ 712.10 How can a state supervisory
authority obtain an exemption for
FISCUs from compliance with
§ 712.3(d)(1), (2), and (3)?
(a) The NCUA Board may exempt
FISCUs in a given state from compliance with any or all of § 712.3(d)(1), (2),
and (3) if the NCUA Board determines
the laws in that state are equal to, or
more stringent than, § 712.3(d)(1), (2),
and (3), and the laws and procedures
available to the supervisory authority
in that state are sufficient to provide
NCUA with the degree of access and information it believes is necessary to
evaluate the safety and soundness of
FICUs having business relationships
with CUSOs owned by FISCUs in that
state.
(b) To obtain an exemption, the state
supervisory authority must submit a
copy of the legal authority pursuant to
which it secures the information required in § 712.3(d)(1), (2), and (3) of this
part to NCUA’s regional office having
responsibility for that state, along
with all procedural and operational
documentation supporting and describing the actual practices by which it implements and exercises the authority.
(c) The state supervisory authority
must provide the regional director with
an assurance that NCUA examiners
will be provided with co-extensive authority and will be allowed direct access to CUSO books and records at such
times as NCUA, in its sole discretion,
may determine necessary or appropriate. For purposes of this section, access includes the right to make and retain copies of any CUSO record, as to
which NCUA will accord the same level
of control and confidentiality that it
uses with respect to all other examination-related materials it obtains in the
course of its duties.
(d) The state supervisory authority
must also provide the regional director
with an assurance that NCUA, upon request, will have access to copies of any
financial statements or reports which a
CUSO has provided to the state supervisory authority.
(e) The regional director will review
the applicable authority, procedures
and assurances and forward the exemption request, along with the regional

director’s recommendation, to the
NCUA Board for a final determination.
(f) For purposes of this section,
whether an entity is a CUSO shall be
determined in accordance with the definition set out in § 741.222 of this chapter.
[78 FR 72549, Dec. 3, 2013]

§ 712.11 What requirements apply to
subsidiary CUSOs?
(a) FCUs investing in a CUSO with a
subsidiary CUSO. FCUs may only invest
in or loan to a CUSO, which has a subsidiary CUSO, if the subsidiary CUSO
satisfies all of the requirements of this
part. The requirements of this part
apply to all tiers or levels of a CUSO’s
structure.
(b) FISCUs investing in a CUSO with a
subsidiary CUSO. FISCUs may only invest in or loan to a CUSO which has a
subsidiary CUSO, if the subsidiary
CUSO complies with the following:
(1) All applicable state laws and rules
regarding CUSOs; and
(2) All of the requirements of this
part that apply to FISCUs, which are
listed in § 712.1. The requirements of
this part that apply to FISCUs apply to
all tiers or levels of a CUSO’s structure.
(c) For purposes of this section, a
subsidiary CUSO is any entity in which
a CUSO has an ownership interest of
any amount, if that entity is engaged
primarily in providing products or
services to credit unions or credit
union members.
[78 FR 72549, Dec. 3, 2013]

PART 713—FIDELITY BOND AND INSURANCE COVERAGE FOR FEDERAL CREDIT UNIONS
Sec.
713.1 What is the scope of this section?
713.2 What are the responsibilities of a credit union’s board of directors under this
section?
713.3 What bond coverage must a credit
union have?
713.4 What bond forms may be used?
713.5 What is the required minimum dollar
amount of coverage?
713.6 What is the permissible deductible?
713.7 May the NCUA Board require a credit
union to secure additional insurance coverage?

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National Credit Union Administration

§ 713.5

AUTHORITY: 12 U.S.C. 1761a, 1761b, 1766(a),
1766(h), 1789(a)(11).
SOURCE: 64 FR 28720, May 27, 1999, unless
otherwise noted.

§ 713.1 What is the scope of this section?
This section provides the requirements for fidelity bonds for Federal
credit union employees and officials
and for other insurance coverage for
losses such as theft, holdup, vandalism,
etc., caused by persons outside the
credit union.
§ 713.2 What are the responsibilities of
a credit union’s board of directors
under this section?
The board of directors of each Federal credit union must at least annually review its fidelity and other insurance coverage to ensure that it is adequate in relation to the potential risks
facing the credit union and the minimum requirements set by the Board.
[64 FR 28720, May 27, 1999, as amended at 64
FR 57365, Oct. 25, 1999]

§ 713.3 What bond coverage must a
credit union have?

§ 713.4 What bond forms may be used?
(a) A current listing of basic bond
forms that may be used without prior
NCUA Board approval is on NCUA’s
Web site, http://www.ncua.gov. If you
are unable to access the NCUA website,
you can get a current listing of approved bond forms by contacting
NCUA’s Public and Congressional Affairs Office, at (703) 518–6330.
(b) To use any of the following, you
need prior written approval from the
Board:
(1) Any other basic bond form; or
(2) Any rider or endorsement that
limits coverage of approved basic bond
forms.
[64 FR 28720, May 27, 1999, as amended at 70
FR 61716, Oct. 26, 2005; 73 FR 30478, May 28,
2008]

At a minimum, your bond coverage
must:
(a) Be purchased in an individual policy from a company holding a certifi-

§ 713.5 What is the required minimum
dollar amount of coverage?
(a) The minimum required amount of
fidelity bond coverage for any single
loss is computed based on a federal
credit union’s total assets.

Assets

Minimum bond

$0 to $4,000,000 .........................................................................
$4,000,001 to $50,000,000 .........................................................

Lesser of total assets or $250,000.
$100,000 plus $50,000 for each million or fraction thereof over
$1,000,000.
$2,550,000 plus $10,000 for each million or fraction thereof
over $50,000,000, to a maximum of $5,000,000.
One percent of assets, rounded to the nearest hundred million,
to a maximum of $9,000,000.

$50,000,000 to $500,000,000 .....................................................
Over $500,000,000 ......................................................................

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cate of authority from the Secretary of
the Treasury; and
(b) Include fidelity bonds that cover
fraud and dishonesty by all employees,
directors, officers, supervisory committee members, and credit committee
members.

(b) This is the minimum coverage required, but a federal credit union’s
board of directors should purchase additional or enhanced coverage when its
circumstances warrant. In making this
determination, a board of directors
should consider its own internal risk
assessment, its fraud trends and loss
experience, and factors such as its cash
on hand, cash in transit, and the nature and risks inherent in any expanded services it offers such as wire
transfer and remittance services.

(c) While the above is the required
minimum amount of bond coverage,
credit unions should maintain increased coverage equal to the greater
of either of the following amounts
within thirty days of discovery of the
need for such increase:
(1) The amount of the daily cash
fund, i.e. daily cash plus anticipated
daily money receipts on the credit
union’s premises, or

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§ 713.6

12 CFR Ch. VII (1–1–18 Edition)

(2) The total amount of the credit
union’s money in transit in any one
shipment.
(3) Increased coverage is not required
pursuant to paragraph (c) of this section, however, when the credit union
temporarily increased its cash fund because of unusual events which cannot
reasonably be expected to recur.
(d) Any aggregate limit of liability
provided for in a fidelity bond policy
must be at least twice the single loss
limit of liability. This requirement
does not apply to optional insurance
coverage.
(e) Any proposal to reduce your required bond coverage must be approved
in writing by the NCUA Board at least
twenty days in advance of the proposed
effective date of the reduction.
[64 FR 28720, May 27, 1999, as amended at 70
FR 61716, Oct. 26, 2005]

§ 713.6 What is the permissible deductible?
(a)(1) The maximum amount of allowable deductible is computed based
on a federal credit union’s asset size
and capital level, as follows:
Assets

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$0 to $100,000 .......
$100,001 to
$250,000.
$250,000 to
$1,000,000.
Over $1,000,000 ....

Maximum deductible
No deductible allowed.
$1,000.
$2,000.
$2,000 plus 1⁄1000 of total assets up to
a maximum of $200,000; for credit
unions that have received a composite CAMEL rating of ‘‘1’’ or ‘‘2’’ for
the last two (2) full examinations and
maintained a net worth classification
of ‘‘well capitalized’’ under part 702
of this chapter for the six (6) immediately preceding quarters or, if subject to a risk-based net worth
(RBNW) requirement under part 702
of this chapter, has remained ‘‘well
capitalized’’ for the six (6) immediately preceding quarters after applying the applicable RBNW requirement, the maximum deductible is
$1,000,000.

(2) The deductibles may apply to one
or more insurance clauses in a policy.
Any deductibles in excess of the above
amounts must receive the prior written
permission of the NCUA Board.
(b) A deductible may not exceed 10
percent of a credit union’s Regular Reserve unless a separate Contingency
Reserve is set up for the excess. In

computing the maximum deductible,
valuation accounts such as the allowance for loan losses cannot be considered.
(c) A federal credit union that has received a composite CAMEL rating of
‘‘1’’ or ‘‘2’’ for the last two (2) full examinations and maintained a net
worth classification of ‘‘well capitalized’’ under part 702 of this chapter for
the six (6) immediately preceding quarters or, if subject to a risk-based net
worth (RBNW) requirement under part
702 of this chapter, has remained ‘‘well
capitalized’’ for the six (6) immediately
preceding quarters after applying the
applicable RBNW requirement is eligible to qualify for a deductible in excess
of $200,000. The credit union’s eligibility is determined based on it having
assets in excess of $1 million as reflected in its most recent year-end 5300
call report. A federal credit union that
previously qualified for a deductible in
excess of $200,000, but that subsequently fails to qualify based on its
most recent year-end 5300 call report
because either its assets have decreased or it no longer meets the net
worth requirements of this paragraph
or fails to meet the CAMEL rating requirements of this paragraph as determined by its most recent examination
report, must obtain the coverage otherwise required by paragraph (b) of this
section within 30 days of filing its yearend call report and must notify the appropriate NCUA regional office in writing of its changed status and confirm
that it has obtained the required coverage.
[64 FR 28720, May 27, 1999, as amended at 70
FR 61716, Oct. 26, 2005; 77 FR 31992, May 31,
2012]
EFFECTIVE DATE NOTE: At 80 FR 66723, Oct.
29, 2015, § 713.6 was amended by revising the
table in paragraph (a)(1) and, in paragraph
(c), by removing the words ‘‘net worth’’ each
place they appear and adding in their place
the word ‘‘capital’’, and removing the words
‘‘or, if subject to a risk-based net worth
(RBNW) requirement under part 702 of this
chapter, has remained ’well capitalized’ for
the six (6) immediately preceding quarters
after applying the applicable RBNW requirement,’’, effective Jan. 1, 2019. For the convenience of the user, the revised text is set
forth as follows:

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National Credit Union Administration
§ 713.6

§ 714.3

What is the permissible deductible?

§ 714.1 What does this part cover?
This part covers the standards and
requirements that you, a federal credit
union, must follow when engaged in
the leasing of personal property.

(a)(1) * * *
Assets

Maximum deductible

$0 to $100,000 .......
$100,001 to
$250,000.
$250,000 to
$1,000,000.
Over $1,000,000 ....

*

No deductible allowed.
$1,000.
$2,000.
$2,000 plus 1/1000 of total assets up
to a maximum of $200,000; for credit
unions that have received a composite CAMEL rating of ‘‘1’’ or ‘‘2’’ for
the last two (2) full examinations and
maintained a capital classification of
‘‘well capitalized’’ under part 702 of
this chapter for the six (6) immediately preceding quarters the maximum deductible is $1,000,000.

*

*

*

*

§ 713.7 May the NCUA Board require a
credit union to secure additional insurance coverage?
The NCUA Board may require additional coverage when the Board determines that a credit union’s current
coverage is inadequate. The credit
union must purchase this additional
coverage within 30 days.

PART 714—LEASING

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Sec.
714.1 What does this part cover?
714.2 What are the permissible leasing arrangements?
714.3 Must you own the leased property in
an indirect leasing arrangement?
714.4 What are the lease requirements?
714.5 What is required if you rely on an estimated residual value greater than 25% of
the original cost of the leased property?
714.6 Are you required to retain salvage
powers over the leased property?
714.7 What are the insurance requirements
applicable to leasing?
714.8 Are the early payment provisions, or
interest rate provisions, applicable in
leasing arrangements?
714.9 Are indirect leasing arrangements subject to the purchase of eligible obligation
limit set forth in § 701.23 of this chapter?
714.10 What other laws must you comply
with when engaged in leasing?
AUTHORITY: 12 U.S.C. 1756, 1757, 1766, 1785,
1789.
SOURCE: 65 FR 34585, May 31, 2000, unless
otherwise noted.

§ 714.2 What are the permissible leasing arrangements?
(a) You may engage in direct leasing.
In direct leasing, you purchase personal property from a vendor, becoming the owner of the property at the request of your member, and then lease
the property to that member.
(b) You may engage in indirect leasing. In indirect leasing, a third party
leases property to your member and
you then purchase that lease from the
third party for the purpose of leasing
the property to your member. You do
not have to purchase the leased property if you comply with the requirements of § 714.3.
(c) You may engage in open-end leasing. In an open-end lease, your member
assumes the risk and responsibility for
any difference in the estimated residual value and the actual value of the
property at lease end.
(d) You may engage in closed-end
leasing. In a closed-end lease, you assume the risk and responsibility for
any difference in the estimated residual value and the actual value of the
property at lease end. However, your
member is always responsible for any
excess wear and tear and excess mileage charges as established under the
lease.
§ 714.3 Must you own the leased property in an indirect leasing arrangement?
You do not have to own the leased
property in an indirect leasing arrangement if:
(a) You obtain a full assignment of
the lease. A full assignment is the assignment of all the rights, interests,
obligations, and title in a lease to you,
that is, you become the owner of the
lease;
(b) You are named as the sole
lienholder of the leased property;
(c) You receive a security agreement,
signed by the leasing company, granting you a sole lien in the leased property and the right to take possession
and dispose of the leased property in

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