Simplification of Share Insurance Rules

<RULE> NATIONAL CREDIT UNION ADMINISTRATION <CFR>12 CFR Part 745</CFR> <DEPDOC>[NCUA-2023-0082]</DEPDOC> <RIN>RIN 3133-AF53</RIN> <SUBJECT>Simplification of Share Insurance Rules</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> National Credit Union Administration (NCUA). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The NCUA Board (Board) is amending its regulations governing share insurance coverage. The final rule simplifies the share insurance regulations by establishing a “trust accounts” category that will provide for coverage of funds of both revocable trusts and irrevocable trusts deposited at federally insured credit unions (FICUs), provides consistent share insurance treatment for all mortgage servicing account balances held to satisfy principal and interest obligations to a lender, and increases flexibility for the NCUA to consider various records in determining share insurance coverage in liquidations. The changes also increase consistency between the FDIC's Federal deposit insurance rules and the NCUA's share insurance rules. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective on December 1, 2026, except for the amendments to 12 CFR 745.2(c)(2) (instruction 5), 745.3 (instruction 7), and 745.14 (instruction 13), which are effective October 30, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> <E T="03">Office of General Counsel:</E> Thomas Zells and Rachel Ackmann, Senior Staff Attorneys; or Robert Leonard, Compliance Officer at (703) 518-6540 or by mail at National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314. <E T="03">Office of Credit Union Resources and Expansion (CURE):</E> Paul Dibble, Consumer Access Program Officer; or Rita Woods, Director of Consumer Access at (703) 518-1150 or by mail at National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Table of Contents</HD> <EXTRACT> <FP SOURCE="FP-2">I. General Background and Legal Authority</FP> <FP SOURCE="FP1-2">A. General Background</FP> <FP SOURCE="FP1-2">B. Legal Authority</FP> <FP SOURCE="FP-2">II. Simplification of Share Insurance Trust Rules</FP> <FP SOURCE="FP1-2">A. Notice of Proposed Rulemaking</FP> <FP SOURCE="FP1-2">B. Policy Objectives</FP> <FP SOURCE="FP1-2">C. Background and Need for Rulemaking</FP> <FP SOURCE="FP1-2">1. Evolution of Insurance Coverage of Funds Held in Trust Accounts</FP> <FP SOURCE="FP1-2">2. Current Rules for Coverage of Funds Held in Trust Accounts</FP> <FP SOURCE="FP1-2">3. Need for Further Rulemaking</FP> <FP SOURCE="FP1-2">D. Final Rule</FP> <FP SOURCE="FP1-2">E. Examples Demonstrating Coverage Under Current and Final Rules</FP> <FP SOURCE="FP1-2">F. Discussion of Comments</FP> <FP SOURCE="FP-2">III. Amendments to Mortgage Servicing Account Rule</FP> <FP SOURCE="FP1-2">A. Policy Objectives</FP> <FP SOURCE="FP1-2">B. Background and Need for Rulemaking</FP> <FP SOURCE="FP1-2">C. Final Rule</FP> <FP SOURCE="FP1-2">D. Discussion of Comments</FP> <FP SOURCE="FP-2">IV. Recordkeeping Requirements</FP> <FP SOURCE="FP1-2">A. Policy Objectives</FP> <FP SOURCE="FP1-2">B. Background and Need for Rulemaking</FP> <FP SOURCE="FP1-2">C. Final Rule</FP> <FP SOURCE="FP1-2">D. Discussion of Comments</FP> <FP SOURCE="FP-2">V. Regulatory Procedures</FP> <FP SOURCE="FP1-2">A. Regulatory Flexibility Act</FP> <FP SOURCE="FP1-2">B. Paperwork Reduction Act</FP> <FP SOURCE="FP1-2">C. Executive Order 13132 on Federalism</FP> <FP SOURCE="FP1-2">D. Assessment of Federal Regulations and Policies on Families</FP> <FP SOURCE="FP1-2">E. Small Business Regulatory Enforcement Fairness Act (Congressional Review Act)</FP> </EXTRACT> <HD SOURCE="HD1">I. General Background and Legal Authority</HD> <HD SOURCE="HD2">A. General Background</HD> The NCUA is an independent Federal agency that insures funds maintained in accounts of members or those otherwise eligible to maintain insured accounts (member accounts) at FICUs, protects the members who own FICUs, and charters and regulates Federal credit unions (FCUs). The NCUA protects the safety and soundness of the credit union system by identifying, monitoring, and reducing risks to the National Credit Union Share Insurance Fund (Share Insurance Fund). Backed by the full faith and credit of the United States, the Share Insurance Fund provides Federal share insurance to account holders in all FCUs and the majority of state-chartered credit unions. <HD SOURCE="HD2">B. Legal Authority</HD> The Board has issued this final rule pursuant to its authority under the FCU Act. Under the Federal Credit Union Act (FCU Act), in the event of a FICU's failure the NCUA is responsible for paying share insurance to any member, or to any person with funds lawfully held in a member account, <SU>1</SU> <FTREF/> up to the standard maximum share insurance amount (SMSIA), which is currently set at $250,000. <SU>2</SU> <FTREF/> The FCU Act provides that the NCUA Board must determine the amount payable consistently with actions taken by the FDIC under its deposit insurance rules. <SU>3</SU> <FTREF/> The FCU Act also grants the NCUA express authority to issue regulations on the determination of the net amount of share insurance paid. <SU>4</SU> <FTREF/> The FCU Act further provides that “in determining the amount payable to any member, there shall be added together all accounts in the credit union maintained by that member for that member's own benefit, either in the member's own name or in the names of others.”  <SU>5</SU> <FTREF/> However, the FCU Act also specifically authorizes the Board to “define, with such classifications and exceptions as it may prescribe, the extent of the share insurance coverage provided for member accounts, including member accounts in the name of a minor, in trust, or in joint tenancy.”  <SU>6</SU> <FTREF/> <FTNT> <SU>1</SU>   <E T="03">See</E> 12 U.S.C. 1752(5). </FTNT> <FTNT> <SU>2</SU>  12 U.S.C. 1787(k)(1)(A), (k)(6). </FTNT> <FTNT> <SU>3</SU>  12 U.S.C. 1787(k)(1)(A). </FTNT> <FTNT> <SU>4</SU>  12 U.S.C. 1787(k)(1)(B). The FCU Act states that “[d]etermination of the net amount of share insurance . . . “shall be in accordance with such regulations as the Board may prescribe.” </FTNT> <FTNT> <SU>5</SU>  12 U.S.C. 1787(k)(1)(B). </FTNT> <FTNT> <SU>6</SU>  12 U.S.C. 1787(k)(1)(C). </FTNT> The NCUA has implemented these requirements by issuing regulations recognizing particular categories of accounts, such as single ownership accounts, joint ownership accounts, revocable trust accounts, and irrevocable trust accounts. <SU>7</SU> <FTREF/> If an account meets the requirements for a particular category, the account is insured, up to the $250,000 limit, separately from shares held by the member in a different account category at the same FICU. For example, provided all requirements are met, shares in the single ownership category will be separately insured from shares in the joint ownership category held by the same member at the same FICU. <FTNT> <SU>7</SU>  12 CFR part 745. </FTNT> The NCUA's share insurance categories have been defined through both statute and regulation. Certain categories, such as the accounts held by government depositors  <SU>8</SU> <FTREF/> and certain retirement accounts, including individual retirement accounts, have been expressly defined by Congress. <SU>9</SU> <FTREF/> Other categories, such as joint accounts  <SU>10</SU> <FTREF/> and corporate accounts, have been based on statutory interpretation; these accounts have been recognized through regulations issued in 12 CFR part 745 pursuant to the NCUA's rulemaking authority. In addition to defining the insurance categories, the share insurance regulations in part 745 provide the criteria used to determine insurance coverage for shares in each category. <FTNT> <SU>8</SU>   <E T="03">See</E> 12 U.S.C. 1787(k)(2). </FTNT> <FTNT> <SU>9</SU>   <E T="03">See</E> 12 U.S.C. 1787(k)(3). </FTNT> <FTNT> <SU>10</SU>  12 CFR 745.8. </FTNT> <FTNT> <SU>11</SU>  12 CFR 745.6. </FTNT> Notably, the FCU Act also defines the term “member account.” The NCUA insures member accounts at all FICUs. <SU>12</SU> <FTREF/> Importantly, this term is not limited to those persons enumerated in the credit union's field of membership who have become members. It also includes as member accounts certain nonmembers, such as other nonmember credit unions; nonmember public units and political subdivisions; and, in the case of credit unions serving predominantly low-income members, deposits of nonmembers generally. In other words, the NCUA provides share insurance coverage to members and those otherwise eligible to maintain insured accounts at FICUs. <FTNT> <SU>12</SU>  12 U.S.C. 1752(5). </FTNT> Finally, in addition to specific authority to draft share insurance regulations under § 1787 of the FCU Act, the NCUA also has general rulemaking authority. Under the FCU Act, the NCUA is the chartering and supervisory authority for FCUs and the Federal supervisory authority for FICUs. <SU>13</SU> <FTREF/> The FCU Act grants the NCUA a broad mandate to issue regulations governing both FCUs and FICUs. Section 120 of the FCU Act is a general grant of regulatory authority, and it authorizes the Board to prescribe rules and regulations for the administration of the FCU Act. <SU>14</SU> <FTREF/> Section 207 of the FCU Act is a specific grant of authority over share insurance coverage, conservatorships, and liquidations. <SU>15</SU> <FTREF/> Section 209 of the FCU Act is a plenary grant of regulatory authority to the NCUA to issue rules and regulations necessary or appropriate to carry out its role as share insure ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 149k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━