12 Cfr 701.14 (1-1-21 Ed)

National Credit Union Administration

§ 701.14

fee based on the average combined total assets of the Federal credit union and any
merged federally insured credit unions as reported on NCUA Forms 5300 or 5310 in the
four quarters immediately preceding the
time the Board approves the agency’s budget
in the merger year.
(B) For purposes of this paragraph (b)(3), a
purchase and assumption transaction where
the continuing Federal credit union purchases all or essentially all of the assets of
another depository institution shall be
deemed a merger.
(ii) A Federal credit union that merges
with a Federal or state-chartered credit
union, or an entity not insured by the NCUA,
will not receive a refund of any operating fee
paid to the NCUA.
(4) Liquidations. A Federal credit union
placed in liquidation will not pay any operating fee after the date of liquidation.

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§§ 701.7–701.13

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[Reserved]

§ 701.14 Change in official or senior
executive officer in credit unions
that are newly chartered or are in
troubled condition.
(a) Statement of scope and purpose.
Section 212 of the Federal Credit Union
Act (12 U.S.C. 1790a) sets forth conditions under which a credit union must
notify NCUA in writing of any proposed changes in its board of directors,
committee members or senior executive staff. The regulation only applies
in cases of newly chartered credit
unions and credit unions in troubled
condition.
(b) Definitions. For the purposes of
this section:
(1) Committee member means any individual who serves as an official of the
credit union in the capacity of a credit
committee member or supervisory
committee member.
(2) Senior executive officer means a
credit union’s chief executive officer
(typically this individual holds the
title of president or treasurer/manager), any assistant chief executive officer (e.g., any assistant president, any
vice president or any assistant treasurer/manager) and the chief financial
officer (controller). The term ‘‘senior
executive officer’’ also includes employees of an entity, such as a consulting firm, hired to perform the functions of positions covered by the regulation.

(3) In the case of an insured natural
person credit union, Troubled condition
means:
(i) A federal credit union that has
been assigned a 4 or 5 CAMEL composite rating by NCUA; or
(ii) A federally insured, state-chartered credit union that has been assigned a 4 or 5 CAMEL composite rating by either NCUA, after an on-site
contact, or its state supervisor; or
(iii) A federal credit union or a federally insured, state-chartered credit
union that has been granted assistance
under section 208 of the Federal Credit
Union Act, 12 U.S.C. 1788, that remains
outstanding and unextinguished.
(4) In the case of an insured corporate
credit union, Troubled condition means:
(i) A Federal credit union that has
been assigned a 4 or 5 CAMEL rating by
NCUA; or
(ii) A federally insured, state-chartered credit union that has been assigned a 4 or 5 CAMEL rating by either
NCUA, after an on-site contact, or its
state supervisor; or
(iii) A Federal credit union or a federally insured, state-chartered credit
union that has been granted assistance
under section 208 of the Federal Credit
Union Act, 12 U.S.C. 1788, that remains
outstanding and unextinguished.
(c) Procedures for Notice of Proposed
Change in Official or Senior Executive Officer—(1) Prior Notice Requirement. An
insured credit union must give NCUA
written notice at least 30 days before
the effective date of any addition or replacement of a member of the board of
directors or committee member or the
employment or change in responsibilities of any individual to a position of
senior executive officer if:
(i) The credit union has been chartered for less than two years; or
(ii) The credit union meets the definition of troubled condition in paragraph (b)(3) or (4) of this section.
(2) Waiver of Prior Notice—(i) Waiver
requests. Parties may petition the appropriate Regional Director for a waiver of the prior notice required under
this section. Waiver may be granted if
it is found that delay could harm the
credit union or the public interest.
(ii) Automatic waiver. In the case of
the election of a new member of the
board of directors or credit committee

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§ 701.14

12 CFR Ch. VII (1–1–21 Edition)

member at a meeting of the members
of a federally insured credit union, the
prior 30-day notice is automatically
waived and the individual may immediately begin serving, provided that a
complete notice is filed with the appropriate Regional Director within 48
hours of the election. If NCUA disapproves a director or credit committee member, the board of directors
of the credit union may appoint its
own alternate, to serve until the next
annual meeting, contingent on NCUA
approval.
(iii) Effect on disapproval authority. A
waiver does not affect the authority of
NCUA to issue a Notice of Disapproval
within 30 days of the waiver or within
30 days of any subsequent required notice.
(3) Filing procedures—(i) Where to file.
Notices will be filed with the appropriate Regional Director or, in the case
of a corporate credit union, with the
Director of the Office of National Examinations and Supervision. All references to Regional Director will, for
corporate credit unions, mean the Director of Office of National Examinations and Supervision. State-chartered
federally insured credit unions will
also file a copy of the notice with their
state supervisor.
(ii) Contents. The notice must contain
information about the competence, experience, character, or integrity of the
individual on whose behalf the notice is
submitted. The Regional Director or
his or her designee may require additional information. The information
submitted must include the identity,
personal history, business background,
and experience of the individual, including material business activities
and affiliations during the past five
years, and a description of any material pending legal or administrative
proceedings in which the individual is a
party and any criminal indictment or
conviction of the individual by a state
or federal court. Each individual on
whose behalf the notice is filed must
attest to the validity of the information filed. At the option of the individual, the information may be forwarded to the Regional Director by the
individual; however, in such cases, the
credit union must file a notice to that
effect.

(iii) Processing. Within ten calendar
days after receiving the notice, the Regional Director will inform the credit
union either that the notice is complete or that additional, specified information is needed and must be submitted within 30 calendar days. If the
initial notice is complete, the Regional
Director will issue a written decision of
approval or disapproval to the individual and the credit union within 30
calendar days of receipt of the notice.
If the initial notice is not complete,
the Regional Director will issue a written decision within 30 calendar days of
receipt of the original notice plus the
amount of time the credit union takes
to provide the requested additional information. If the additional information is not submitted within 30 calendar days of the Regional Director’s
request, the Regional Director may either disapprove the proposed individual
or review the notice based on the information provided. If the credit union
and the individual have submitted all
requested information and the Regional Director has not issued a written decision within the applicable time
period, the individual is approved.
(d) Commencement of Service. A proposed director, committee member, or
senior executive officer may begin
service after the end of the 30-day period or any other additional period as
provided under paragraph (c)(3)(iii) of
this section, unless the NCUA disapproves the notice before the end of
the period.
(e) Notice of disapproval. NCUA may
disapprove the individual serving as a
director, committee member or senior
executive officer if it finds that the
competence, experience, character, or
integrity of the individual with respect
to whom a notice under this section is
submitted indicates that it would not
be in the best interests of the members
of the credit union or of the public to
permit the individual to be employed
by, or associated with, the credit
union. The Notice of Disapproval will
advise the parties of their rights to request reconsideration from the Regional Director and/or file an appeal
with the NCUA Board in accordance

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National Credit Union Administration

§ 701.20

with the procedures set forth in subpart B to part 746 of this chapter.
[55 FR 43086, Oct. 26, 1990, as amended at 59
FR 36042, July 15, 1994; 60 FR 31911, June 19,
1995; 64 FR 28717, May 27, 1999; 66 FR 65624,
Dec. 20, 2001; 69 FR 62562, Oct. 27, 2004; 75 FR
34620, June 18, 2010; 78 FR 4029, Jan. 18, 2013;
78 FR 32544, May 31, 2013; 78 FR 77564, Dec. 26,
2013; 82 FR 50291, Oct. 30, 2017]

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§§ 701.15–701.18

[Reserved]

§ 701.19 Benefits for employees of Federal credit unions.
(a) General authority. A federal credit
union may provide employee benefits,
including retirement benefits, to its
employees and officers who are compensated in conformance with the Act
and the bylaws, individually or collectively with other credit unions. The
kind and amount of these benefits
must be reasonable given the federal
credit union’s size, financial condition,
and the duties of the employees.
(b) Plan trustees and custodians. Where
a federal credit union is the benefit
plan trustee or custodian, the plan
must be authorized and maintained in
accordance with the provisions of part
724 of this chapter. Where the benefit
plan trustee or custodian is a party
other than a federal credit union, the
benefit plan must be maintained in accordance with applicable laws governing employee benefit plans, including any applicable rules and regulations issued by the Secretary of Labor,
the Secretary of the Treasury, or any
other federal or state authority exercising jurisdiction over the plan.
(c) Investment authority. A federal
credit union investing to fund an employee benefit plan obligation is not
subject to the investment limitations
of the Act and part 703 or, as applicable, part 704, of this chapter and may
purchase an investment that would
otherwise be impermissible if the investment is directly related to the federal credit union’s obligation or potential obligation under the employee benefit plan and the federal credit union
holds the investment only for as long
as it has an actual or potential obligation under the employee benefit plan.
(d) Defined benefit plans. Under paragraph (c) of this section, a federal credit union may invest to fund a defined
benefit plan if the investment meets

the conditions provided in that paragraph. If a federal credit union invests
to fund a defined benefit plan that is
not subject to the fiduciary responsibility provisions of part 4 of the Employee Retirement Income Security
Act of 1974, it should diversify its investment portfolio to minimize the
risk of large losses unless it is clearly
prudent not to do so under the circumstances.
(e) Liability insurance. No federal
credit union may occupy the position
of a fiduciary, as defined in the Employee Retirement Income Security
Act of 1974 and the rules and regulations issued by the Secretary of Labor,
unless it has obtained appropriate liability insurance as described and permitted by Section 410(b) of the Employee Retirement Income Security
Act of 1974.
(f) Definitions. For this section, defined benefit plan has the same meaning as in 29 U.S.C. 1002(35) and employee benefit plan has the same meaning as in 29 U.S.C. 1002(3).
[68 FR 23027, Apr. 30, 2003]

§ 701.20 Suretyship and guaranty.
(a) Scope. This section authorizes a
federal credit union to enter into a
suretyship or guaranty agreement as
an incidental powers activity. This section does not apply to the guaranty of
public deposits or the assumption of liability for member accounts.
(b) Definitions. A suretyship binds a
federal credit union with its principal
to pay or perform an obligation to a
third person. Under a guaranty agreement, a federal credit union agrees to
satisfy the obligation of the principal
only if the principal fails to pay or perform. The principal is the person primarily liable, for whose performance of
his obligation the surety or guarantor
has become bound.
(c) Requirements. The suretyship or
guaranty agreement must be for the
benefit of a principal that is a member
and is subject to the following conditions:
(1) The federal credit union limits its
obligations under the agreement to a
fixed dollar amount and a specified duration;
(2) The federal credit union’s performance under the agreement creates

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