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CHAPTER VII-NATIONAL CREDIT UNION

ADMINISTRATION

NOTE: For nomenclature changes in this Chapter, see 36 FR 18637, Sept. 18,

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706

707

708

Conversion from Federal to State credit unions.....
Conversion from State to Federal credit unions
Mergers of credit unions

953

955

956

709 710

715

720

Division of assets, liabilities, and capital....
Voluntary liquidation of Federal credit unions......
Involuntary liquidation of Federal credit unions....
Description of office, disclosure of official rec-
ords-availability of information, promulgation
of regulations ........................................

959

961

964

973

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745

Clarification and definition of account insurance
coverage.....................

......... 1005

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As used in this chapter:

(a) "Act" means the Federal Credit Union Act (73 Stat. 628, 84 Stat. 944, 12 U.S.C. 1751-1790).

(b) "Administration" means the National Credit Union Administration.

(c) "Administrator" means the Administrator of the National Credit Union Administration.

(d) "Credit Union" means a credit union chartered under the Federal Credit Union Act or, as the context permits, under the laws of any State.

(e) "Regional Director" means the representative of the Administration in the designated geographical area in which the office of the Federal credit union is located.

(f) "Regional Office" means the office of the Administration located in the designated geographical areas in which the office of the Federal credit union is located.

(g) "State" means a State of the United States, the District of Columbia, any of the several Territories and possessions of the United States, the Panama Canal Zone, and the Commonwealth of Puerto Rico.

(h) Pursuant to section 101(4) of the Federal Credit Union Act, the term "low income members" shall include (1) those members whose annual income falls at or below the lower level Standard of Living classification as established by the Bureau of Labor Statistics, U.S. Department of Labor, (2) those members who are residents of a public housing project who qualify for such residency because of low income, and (3) members who qualify as recipients in a community action program.

(i) As used in section 101(4) of the Federal Credit Union Act, the term "predominantly" is defined as a simple majority.

(j) For the purpose of establishing the reserves required by section 116 of the Federal Credit Union Act, all assets except the following shall be considered risk assets:

(1) Cash on hand.

(2) Deposits and/or shares in Federally or State insured banks, savings

and loan associations, and credit unions.

(3) Assets which are insured by, fully guaranteed as to principal and interest by, or due from the U.S. Government, its agencies, the Federal National Mortgage Association, or the Government National Mortgage Association. (4) Loans to other credit unions.

(5) Loans to students insured under the provisions of title IV, part B of the Higher Education Act of 1965 (20 U.S.C. 1071 et seq.) or similar State insurance programs.

(6) Loans insured under title I of the National Housing Act (12 U.S.C. 1703) by the Federal Housing Administration.

(7) Shares or deposits in central credit unions. A central credit union is defined as a credit union whose membership primarily consists of:

(i) Other credit unions organized under State or Federal law,

(ii) Officials, committee members, and employees of any credit union organized under State or Federal law, or

(iii) Any combination of the categories described in paragraphs (j)(7)() and (ii) of this section.

(8) Common trust investments which deal in investments authorized by the Federal Credit Union Act.

(9) Prepaid expenses.

(10) Accrued interest on nonrisk investments.

(11) Furniture and equipment. (12) Land and buildings.

(13) Loans fully secured by a pledge of shares in the lending Federal credit union, equal to and maintained to at least the amount of the loan outstanding.

(14) Loans which are purchased from liquidating credit unions and guaranteed by the National Credit Union Administration.

(k)(1) Insolvency. A credit union will be determined to be insolvent when the total amount of its shares exceeds the present cash value of its assets after providing for liabilities unless:

(i) It is determined by the Administrator that the facts that caused the deficient share-asset ratio no longer exist; and

(ii) The likelihood of further depreciation of the share-asset ratio is not probable; and

(iii) The return of the share-asset ratio to its normal limits within a reasonable time for the credit union concerned is probable; and

(iv) The probability of a further potential loss to the insurance fund is negligible.

(2) For purposes of this section, the following definitions are used:

(i) "Cash value of assets". Recorded value will be considered the cash value of any asset account providing accepted accounting principles and practices are followed and the provisions of law, regulation, and bylaws are met.

(ii) “Liabilities". Recorded liabilities which are due and payable, excluding shares of members and non-members, are considered liabilities.

(Sec. 16, 48 Stat. 1221, as amended, sec. 120, 73 Stat. 635; 12 U.S.C. 1766)

[36 FR 23794, Dec. 15, 1971; 37 FR 329, Jan. 11, 1972, as amended at 37 FR 10342, May 20, 1972; 39 FR 45256, Dec. 31, 1974; 40 FR 60069, Dec. 31, 1975]

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701.26 Credit union service center. 701.27-1 Purchase and sale of accounting services.

701.27-2 Participation in Accounting Service Center.

701.28 Joint operations and activities. 701.29 Purchase of notes of a liquidating credit union.

701.30 Safe deposit box service.

701.31 Nondiscrimination requirements. 701.32 Payments on shares by public units. 701.33 Compensation of officials. 701.34 Share drafts. 701.35

Share Accounts and Share Certificate Accounts.

701.36 FCU ownership of fixed assets. AUTHORITY: Sec. 21, 73 Stat. 635; 12 U.S.C. 1766, unless otherwise noted.

SOURCE: 25 FR 5286, June 14, 1960; 36 FR 18637, Sept. 18, 1971, unless otherwise noted. Redesignated at 35 FR 17398, Nov. 13, 1970.

§ 701.1 Organization of Federal credit unions.

(a) Persons desiring to form a Federal credit union shall, in conjunction with the preparation of a proposed Organization Certificate in accordance with paragraph (b) of this section, accomplish the following:

(1) Arrange a meeting and sufficiently advertise the meeting so as to afford all persons in the field of membership an opportunity to attend;

(2) Provide that an investigator shall be present at the meeting; it is not necessary that the investigator be an employee of the National Credit Union Administration;

(3) Prior to the convening of the meeting, accomplish the following:

(i) Selection of at least seven but not more than 10 persons who will be the subscribers and who will be from and

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