808 KAR 3:050.
Conduct.
RELATES TO: KRS
290.100, 290.225, 290.585, 290.715
STATUTORY
AUTHORITY: KRS 290.070
NECESSITY,
FUNCTION, AND CONFORMITY: KRS 290.070 requires the Department of Financial
Institutions to prescribe rules and regulations for the proper conduct and
regulation of credit unions. This administrative regulation is to assure the
proper conduct of credit unions.
Section 1.
Definition. A corporate credit unit means as a credit union that:
(1) Is operated
primarily for the purpose of serving other credit unions;
(2) Is
designated by the National Credit Union Administration as a corporate credit
union; and
(3) Limits
natural person members to the minimum required by state or federal law to
charter and operate the credit union.
Section 2.
Refund of Interest. When an interest refund is authorized by the board of
directors under KRS 290.225, it shall be recorded in the books of the credit
union as a reduction of interest income from loans for that year or period.
Section 3.
Advertising. No credit union shall represent by any means nor permit any
representation by any means (including any means of advertisement) that it is
under the supervision or regulation of the Department of Financial
Institutions.
Section 4. Fee
for Examination. (1) Each credit union shall pay the department a fee for each
examination in accordance with the schedule of fees fixed by this section.
(2) In
establishing such fees, the commissioner shall consider the anticipated
aggregate cost of the examination program of the department including
supervision, salaries, travel, and all other items which affect the cost of the
examination program along with the ability of credit unions to pay such fees.
(3) The schedule
of examination fees shall be as follows:
(a) Newly organized
credit union. No fee will be charged a newly organized credit union for the
first examination made within a year of the date of its organization being
approved.
(b) Credit union
with assets of less than $25,000; a fee of $50.
(c) Credit union
with assets of $25,000 to $50,000; a fee of $50 plus $2 per $1,000 of assets
over $25,000.
(d) Credit union
with assets of $50,000 to $100,000; a fee of $100 plus $1.90 per $1,000 of
assets over $50,000.
(e) Credit union
with assets of $100,000 to $250,000; a fee of $195 plus $1.75 per $1,000 of
assets over $100,000.
(f) Credit union
with assets of $250,000 to $500,000; a fee of $457.50 plus $1.20 per $1,000 of
assets over $250,000.
(g) Credit union
with assets of $500,000 to $1,000,000; a fee of $757.50 plus $.55 per $1,000 of
assets over $500,000.
(h) Credit union
with assets of $1,000,000 to $2,000,000; a fee of $1,032.50 plus $.45 per
$1,000 of assets over $1,000,000.
(i) Credit union
with assets of $2,000,000 to $5,000,000; a fee of $1,482.50 plus $.30 per
$1,000 of assets over $2,000,000.
(j) Credit union
with assets of $5,000,000 to $20,000,000; a fee of $2,382.50 plus $.15 per
$1,000 of assets over $5,000,000.
(k) Credit union
with assets of $20,000,000 to $50,000,000; a fee of $4,632.50 plus $.13 per
$1,000 of assets over $20,000,000.
(l) Credit union
with assets of $50,000,000 to $100,000,000; a fee of $8,532.50 plus $.10 per
$1,000 of assets over $50,000,000.
(m) Credit union
with assets over $100,000,000; a fee of $11,532.50 plus $.05 per $1,000 of
assets over $100,000,000.
Section 5.
Fidelity Bond. (1) The minimum amount of the blanket fidelity bond required by
KRS 290.225(2) shall be the amount set forth in the following chart based on
the assets of the credit union:
Assets
Minimum Bond
$0 to $10,000
Amount equal to the credit union's assets
$10,001 to $1,000,000
$10,000 for each $100,000 or fraction thereof
$1,000,001 to $50,000,000
$100,000 plus $50,000 for each million or fraction
thereof over $1,000,000
$50,000,001 to $295,000,000
$2,550,000 plus $10,000 for each million or fraction
thereof over $50,000,000
Over $295,000,000
$5,000,000
(2) The board of
directors of every credit union shall review their blanket fidelity bond
coverage at least once each year in order to ascertain its adequacy in relation
to risk exposure.
Section 6.
Stocks and Bonds. A credit union may invest a maximum of five (5) percent of
members shares in:
(1) Stock of a
corporation rated A+ in the current issue of Standard and Poore's Corporation
Security Owners Stock Guide at the date of acquisition of the stock; and
(2) A corporate
bond rated AAA or higher in the current issue of Standard and Poore's
Corporation Bond Guide, or rated AAA in the current issue of Moody's Bond
Record at the date of acquisition of the bond.
Section 7. Risk
Asset. For
the purpose of establishing the regular reserve, an asset is a risk asset
except for the following:
(1) Cash on hand;
(2) A deposit or share in a federally
or state-insured bank, savings and loan association, or credit union that has a
remaining maturity of five (5) years or less;
(3) An asset, including a
collateralized mortgage obligation that is comprised of government guaranteed
mortgage loans, that has a remaining maturity of five (5) years or less and is
insured by, is fully guaranteed as to principal and interest by, or is due from
the U.S. Government, its agencies, the Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation, or the Government National Mortgage
Association;
(4) A loan to another credit union
that has a remaining maturity of five (5) years or less;
(5) A student loan that has a
remaining maturity of five (5) years or less and that is insured under the
provisions of Title IV, Part B of the Higher Education Act of 1965 (20 USC
1071, et seq.) or similar state insurance programs;
(6) A loan that has a remaining
maturity of five (5) years or less and that is fully insured or guaranteed by
the federal or a state government or any agency of either;
(7) A share or deposit in a corporate
credit union that has a remaining maturity of five (5) years or less, other
than a Membership Capital Share Deposit account as defined in 12 USC 704.
(8) A common trust investment,
including a mutual fund, which deals exclusively in investments authorized by
the Federal Credit Union Act that are either carried at the lower cost or
market, or are marked to market value monthly;
(9) A prepaid expense;
(10) Accrued interest on a nonrisk
investment;
(11) A loan fully secured by a pledge
of shares in the lending credit union, equal to and maintained to at least the
amount of the loan outstanding;
(12) A loan which is purchased from a
liquidating credit union and guaranteed by the National Credit Union
Administration;
(13) A National Credit Union Share
Insurance Fund Guaranty Account established with the authorization of the
National Credit Union Administration under the authority of section 208(a)(1)
of the Federal Credit Union Act;
(14) An investment in shares of the
National Credit Union Administration Central Liquidity Facility;
(15) An asset included in subsections
(2), (3), (4), (5), (6), and (7) of this section with a maturity greater than
five (5) years is not a risk asset if the asset is being carried on the credit
union's records at the lower of cost or market, or is being marked to market
value monthly;
(16) An asset included in subsections
(2), (3), (4), (5), (6), and (7) of this section, with a remaining maturity of
greater than five (5) years is not a risk asset, whether or not the asset is
being carried on the credit union's records at the lower of cost or market or
is being marked to market value monthly, provided the asset meets the following
criteria:
(a) The interest rate is reset at
least annually;
(b) The interest rate of the
instrument is less than the maximum allowable interest rate for the instrument
on the date of the required reserve transfer; and
(c) The interest rate of the
instrument varies directly (not inversely) with the index upon which it is
based and is not reset as a multiple of the change in the related index;
(17) A fixed asset which includes an
office, branch office, suboffice, service center, parking lot, or real estate
where the credit union transacts or will transact business; office furnishing,
office machine, computer hardware and software, automated terminal, and heating
and cooling equipment; and
(18) A deposit in the National Credit
Union Share Insurance Fund representing a federally insured credit union's
capitalization account balance of one (1) percent of insured shares.
Section 8.
Charitable Contribution. The board of directors may authorize a contribution to
a civic, charitable or service organization.
Section 9.
Conversion. A state-chartered credit union may convert to another charter by
complying with the following procedures:
(1) The board of
directors shall first put the question of conversion to a vote of the members.
Written notice of the proposed conversion shall be given to all members,
including the reasons for the proposed conversion. The notice may be mailed or
hand delivered to the members. The notice shall set forth the date and place
for this meeting called to vote on the proposed conversion, which shall be at
least fifteen (15) days after the date of the notice.
(2) Approval of
the proposed conversion shall be by a vote of the majority of the members who
vote on the proposed conversion, in person or by absentee ballot if the bylaws
of the credit union allow absentee ballots.
(3) A statement
of the results of the vote, verified by the president and secretary, shall be
filed with the commissioner.
(4) The
commissioner shall issue an order that, on the effective date of the
conversion, the credit union is no longer incorporated under the laws of
Kentucky. A copy of the order shall be forwarded to the Secretary of State. (9
Ky.R. 92; Am. 340; eff. 8-11-82; 11 Ky.R. 266; eff. 9-11-84; 12 Ky.R. 1380;
eff. 3-4-86; 14 Ky.R. 71; eff. 8-5-87; 25 Ky.R. 1183; eff. 1-19-99.)
