***National Credit Union Administration Issues Final Rule to Amends Voluntary Liquidation Regulation
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Voluntary Liquidation
A Rule by the
Publication Date:
Agency:
Dates: This rule is effective
Effective Date:
Entry Type: Rule
Action: Final rule.
Document Citation: 79 FR 36196
Page: 36196 -36198 (3 pages)
CFR: 12 CFR 710
RIN: 3133-AE30
Document Number: 2014-14885
Shorter URL: https://federalregister.gov/a/2014-14885
Action
Final Rule.
Summary
The NCUA Board (Board) is issuing a final rule to amend its voluntary liquidation regulation to reduce administrative burdens on voluntarily liquidating federal credit unions (FCUs) and recognize technological advances by: Permitting liquidating FCUs to publish required creditor notices in either electronic media or newspapers of general circulation; increasing the asset-size threshold for requiring multiple creditor notices; requiring that preliminary partial distributions to members not exceed the
DATES:
This rule is effective
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
I. Background
What changes does this final rule make?
This final rule amends NCUA's regulation on voluntary liquidations by FCUs. The changes modernize the rule and afford greater procedural flexibility to voluntarily liquidating FCUs. The final rule adopts the proposed changes in the proposed rule on voluntary liquidations issued by the Board in
II. Summary of Public Comments
The public comment period for the proposed rule ended on
First, these two commenters requested that the final rule require NCUA staff to work with credit unions considering liquidation to find ways to continue operations or merge with another credit union to ensure ongoing member access to credit union services.
Second, both disagreed with the proposal to raise asset-size thresholds that determine whether and how many creditor notices must be published by a voluntarily liquidating FCU. These commenters stated that liquidation is a drastic step and that credit unions considering this option should be required to follow all notice and other requirements.
Third, both requested that the final rule adopt provisions similar to the
The Board generally agrees with the rationale the commenters offered to support their proposed changes to the rule. As explained in detail below, however, the Board believes that the proposed rule and the way NCUA administers part 710 in practice already is consistent with the commenters' suggested amendments. Therefore, the Board does not believe it is necessary to amend the proposed rule to address the commenters' concerns.
III. Final Rule
A. Section 710.5(a)(1)
The final rule will allow voluntarily liquidating FCUs to publish any required creditor notice(s) in electronic media. FCUs may continue to publish in newspapers of general circulation, as provided by the current rule.
The final rule also increases the asset-size threshold for requiring multiple creditor notices from FCUs with assets equal to or greater than
The proposed and final rules only affect the asset-size thresholds that govern how a voluntarily liquidating FCU must notify its potential creditors. Notably, the notice and procedural requirements of part 710, including the member vote and notification of the NCUA Regional Director, are unchanged. [2] Likewise, federally insured, state-chartered credit unions are still required to notify the Regional Director of a decision to liquidate, though the remainder of the requirements in part 710 apply solely to FCUs. [3] The final rule does not change the requirement that a voluntarily liquidating FCU of any size must notify its creditors of the liquidation. [4] It simply updates the asset-size thresholds that determine whether and how frequently the notice must be published to reach a broader audience of potential creditors.
The amendment to this provision increases the asset-size threshold applicable to publication requirements. FCUs with assets equal to or greater than
This amendment also increases asset-size thresholds applicable to the publication requirement. FCUs with assets under
The final rule also makes a minor change to the optional, partial pro rata distribution process. The current rule permits voluntarily liquidating FCUs to make a partial pro rata distribution of assets to members before the liquidation is completed. The Regional Director must approve the distribution. [5] The proposed rule limited these preliminary distributions to the insured amount available in any account. The purpose of this limitation is to protect the NCUSIF in case the liquidating FCU becomes insolvent during the process. In that event, NCUA would be required to place the FCU into involuntary liquidation and apply the liquidation payout priorities and share insurance requirements in parts 709 and 745. Any payments of uninsured shares before the completion of the voluntary liquidation might complicate or disrupt the priorities that apply in an involuntary liquidation, which could result in additional cost to the NCUSIF in the unusual case in which the FCU becomes insolvent.
The final rule also adds a minor clarification to the proposed rule. The proposed rule limited preliminary share distributions to the insured amount available in any account. The final rule clarifies that multiple accounts held by the same member or members may sometimes be aggregated to determine share insurance per part 745 of NCUA's regulations. This clarification does not change the current rule for calculating share insurance and is intended to reflect more accurately how NCUA currently applies share insurance to multiple accounts under part 745.
Two commenters disagreed with the proposed change to this provision and requested that NCUA implement a process comparable to the
The Board agrees that credit union members should not be disadvantaged and believes that this amendment to the rule does not harm their interests in any way. If the voluntarily liquidating FCU remains solvent throughout the process, its members receive their full account balances, along with any available liquidating dividend. If the FCU becomes insolvent, NCUA would place it into involuntary liquidation under Section 207(a) of the Federal Credit Union Act and apply the payout priorities and procedures in part 709 of NCUA's regulations. During this process, members would receive their insured balances and a certificate of claim in liquidation for any uninsured balances to allow them to share in the proceeds of the involuntary liquidation. [6] This treatment of uninsured balances is the same as the
The final rule provides greater specificity for the calculation of pro rata distributions to members. For purposes of this calculation, a voluntarily liquidating FCU will use the date that members approve liquidation to compute share balances, subject to adjustment for any share drafts that clear after the liquidation date.
F. Section 710.6(c)
The final rule also allows voluntarily liquidating FCUs to distribute member payouts by wire or other means, if approved by the member, in addition to the existing option of issuing a check.
[*Federal RegisterVJ 2014-06-26]
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