808 Kar 3:050. Conduct

Link to law: http://www.lrc.ky.gov/kar/808/003/050.htm
Published: 2015

      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.)
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