Part 6.
CREDIT UNION DEPARTMENT
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter E. DIRECTION OF AFFAIRS
7 TAC §91.501
The Credit Union Commission proposes amendments to Subchapter
E, concerning direction of affairs, §91.501, concerning eligibility to
hold office. The proposed amendments to §91.501 change the title of the
section to "Director Eligibility and Disqualification"; clarify eligibility
requirements for serving on the Board of Directors; empower a credit union
to develop its own standard application for candidates seeking or appointed
to director positions; direct each credit union to establish continuing education
requirements for its directors; and delineate conduct that is prohibited for
persons serving on the Board.
The amendments are proposed as a result of the Department's general rule
review.
Betsy Loar, General Counsel, has determined that for the first five year
period the amended rule is in effect there will be no fiscal implications
for state or local government as a result of enforcing or administering the
proposed rule.
Ms. Loar has also determined that for each year of the first five years
the amended rule is in effect, the public benefits anticipated as a result
of enforcing the rule will be greater clarity and ease of use of the rule.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions or
individuals for complying with the amended rule if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Betsy
Loar, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin,
Texas 78752-1699. Oral comments on the proposal can be made at the Commission's
Legislative Advisory Committee meeting on Friday, May 18, 2007 at 9:00 am
at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of the Texas
Finance Code, §15.402, which authorizes the Commission to adopt reasonable
rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the
Texas Finance Code and under Texas Finance Code §122.054, which directs
the commission to establish qualifications for a director.
The specific section affected by the proposed amended rule is Texas Finance
Code, §122.054.
§91.501. Director Eligibility and Disqualification [
(a)
(No change.)
(b)
Qualifications. No member may be elected to or serve on
the board of directors if that member:
(1) - (3)
(No change.)
(4)
has
defaulted on payment of a voluntary obligation
to the credit union or has otherwise
caused the credit union to suffer
a financial loss;
(5)
(No change.)
(6)
has been personally made subject to an operating directive
for cause while serving as an officer, director, or senior executive management
person of a financial institution; or has caused or participated in a prohibited
activity or an unsafe or unsound condition at a financial institution which
resulted in the suspension or revocation of the financial institution's certificate
of incorporation, or authority or license to do business
;
[
(7)
has failed to complete and return a director
application; or
(8)
refuses to take and subscribe to the prescribed
oath or affirmation of office.
(c)
Director application. Any member nominated for, or seeking
election to, the board of directors shall submit a written application in
such form as the
credit union
[
(d)
Director education.
Directors must develop and maintain
a fundamental, ongoing knowledge of the regulations and issues affecting credit
union operations to assure a safe and sound institution.
A credit union
shall
[
(e)
Prohibited conduct. A director shall not:
[
(1)
Divulge or make use of, except in the
performance of office duties, any fact, information, or document not generally
available to the membership that is acquired by virtue of serving on the board
of the credit union.
(2)
Use the director's position to obtain
or attempt to obtain special advantage or favoritism for the director, any
relative of the director, or any person residing in the director's household.
(3)
Accept, directly or indirectly, any gift,
fee, or other present that is offered or could be reasonably be viewed as
being offered to influence official action or to obtain information that the
director has access to by reason of serving on the board of the credit union.
(f) - (g)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 15, 2007.
TRD-200700508
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: April 1, 2007
For further information, please call: (512) 837-9236
7 TAC §91.502
The Credit Union Commission proposes amendments to §91.502
concerning director fees and expenses. The proposed amendments define more
specifically the limitations on the payment of fees to directors or committee
members, clarify that fees may be paid to committee members also, and add
a new subsection for providing insurance to directors or committee members.
The amendments are proposed as a result of the Credit Union Department's
general rule review.
Betsy Loar, General Counsel, has determined that, for the first five-year
period the amended rule is in effect, there will be no fiscal implications
for state or local government as a result of enforcing or administering the
proposed rule.
Ms. Loar has also determined that, for each year of the first five years
the amended rule is in effect, the public benefits anticipated as a result
of enforcing the rule will be greater clarity and ease of use of the rule.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions or
individuals for complying with the amended rule if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Betsy
Loar, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin,
Texas 78752-1699. Oral comments on the proposal can be made at the Commission's
Legislative Advisory Committee meeting on Friday, May 18, 2007 at 9:00 a.m.
at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of the Texas
Finance Code, §15.402, which authorizes the Commission to adopt reasonable
rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the
Texas Finance Code and under Texas Finance Code, §122.062, which limits
the compensation a director may receive for services.
The specific section affected by the proposed amended rule is Texas Finance
Code, §122.062.
§91.502.Director /Committee Member Fees , Insurance, [
(a)
(No change.)
(b)
Payment of fees. A credit union may, by written board policy,
authorize the payment of reasonable fees for directors and/or committee members
attending duly called meetings for the conduct of appropriate credit union
business.
In addition to the limitations of this section, the
[
(1)
(No change.)
(2)
the credit union must not be
subject to a cease and
desist order or removal order issued under Finance Code §122.257 and §122.258
[
(3) - (4)
(No change.)
(c)
(No change.)
(d)
Insurance. A credit union may,
in accordance with written board policy, provide health, life, accident, liability,
or similar personal insurance protection for directors and committee members.
The kind and amount of these insurance protections must be reasonable given
the credit union's size, financial condition, and the duties of the director
or committee member. The insurance protection must cease upon the director
or committee member's leaving office, without providing residual benefits
beyond those earned during the individual's term on the board or committee.
(e)
[
(f)
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 15, 2007.
TRD-200700510
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: April 1, 2007
For further information, please call: (512) 837-9236
7 TAC §91.510
The Credit Union Commission proposes amendments to §91.510
concerning fidelity bond and insurance requirements. The amendments remove
the minimum coverage and maximum deductible requirements and place responsibility
for determining those amounts on the credit union's management and board of
directors. The amendments also make clear that failure to comply with NCUA's
fidelity bond requirements could be deemed an unsafe practice under Finance
Code §122.255.
The amendments are proposed as a result of the Department's general rule
review.
Betsy Loar, General Counsel, has determined that for the first five year
period the amended rule is in effect there will be no fiscal implications
for state or local government as a result of enforcing or administering the
proposed rule.
Ms. Loar has also determined that for each year of the first five years
the amended rule is in effect, the public benefits anticipated as a result
of enforcing the rule will be greater clarity and ease of use of the rule.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions or
individuals for complying with the amended rule if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Betsy
Loar, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin,
Texas 78752-1699. Oral comments on the proposal can be made at the Commission's
Legislative Advisory Committee meeting on Friday, May 18, 2007 at 9:00 am
at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of the Texas
Finance Code, §15.402, which authorizes the Commission to adopt reasonable
rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the
Texas Finance Code and under Texas Finance Code §122.063, which requires
a credit union to provide surety or security bonds for directors, officers,
and employees.
The specific section affected by the proposed amended rule is Texas Finance
Code, §122.063.
§91.510.Bond and Insurance Requirements.
(a)
Fidelity bond. Each credit union shall purchase and maintain
a blanket fidelity bond covering the officers, directors, employees, committee
members, and its agents, against loss caused by dishonesty, burglary, robbery,
larceny, theft, holdup, forgery or alteration of instruments, misplacement
or mysterious disappearance. All carriers writing credit union blanket bonds
must be authorized by the Insurance Commissioner for the state of Texas as
an acceptable fidelity on bonds in this state.
(1)
The amount of coverage to be required for each credit union
shall be determined by the credit union's
management
[
[
(2)
Each credit union may maintain bond coverage in addition
to that provided by the insurance underwriter industry's standard forms, through
the use of endorsements, riders, or other forms of supplemental coverage,
if, in the judgment of the credit union's board of directors, additional coverage
is warranted
[
[(3)
The following maximum amounts of blanket
bond deductibles are authorized according to asset categories:]
[Figure: 7 TAC §91.510(a)(3)]
[(4)
A deductible may be applied separately
to one or more insuring clauses in a blanket bond. No deductible will exceed
ten percent of a credit union's unencumbered reserves and undivided earnings
unless the credit union creates a segregated Contingency Reserve for the amount
of the excess. Valuation allowance accounts, e.g., allowance for loan losses,
may not be considered part of the unencumbered reserves and undivided earnings
when determining the maximum deductible.]
(3)
[
[(6)
After the effective date of this section,
any bond coverage purchased or renewed by any credit union shall conform to
this section.]
(b) - (e)
(No change.)
(f)
Insuring organization's bond requirements.
A
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 15, 2007.
TRD-200700509
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: April 1, 2007
For further information, please call: (512) 837-9236
7 TAC §91.516
The Credit Union Commission proposes amendments to §91.516
concerning audits and verifications. The proposed amendments clarify the timing
and conditions of audits of credit unions. The amendments also provide that
the commissioner can require a credit union to obtain a verification of members'
accounts under certain conditions and narrows the conditions under which the
commissioner can require an opinion audit.
The amendments are proposed as a result of the Credit Union Department's
general rule review.
Betsy Loar, General Counsel, has determined that, for the first five-year
period the amended rule is in effect, there will be no fiscal implications
for state or local government as a result of enforcing or administering the
proposed rule.
Ms. Loar has also determined that, for each year of the first five years
the amended rule is in effect, the public benefits anticipated as a result
of enforcing the rule will be greater clarity and ease of use of the rule.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions or
individuals for complying with the amended rule if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Betsy
Loar, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin,
Texas 78752-1699. Oral comments on the proposal can be made at the Commission's
Legislative Advisory Committee meeting on Friday, May 18, 2007 at 9:00 a.m.
at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of the Texas
Finance Code, §15.402, which authorizes the Commission to adopt reasonable
rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the
Texas Finance Code and under Texas Finance, Code, §122.102, which requires
credit unions to observe accounting principles prescribed by the commission
and authorizes the commission to adopt a rule requiring verification of members'
accounts.
The specific section affected by the proposed amended rule is Texas Finance
Code, §122.102.
§91.516.Audits and Verifications.
(a)
Audit requirements.
At least once every calendar year,
the
[
(b) - (c)
(No change.)
(d)
Remedies. The commissioner may compel a credit union to
obtain an audit
and/or a verification of members' accounts
, performed
by an independent person, for any year in which any of the following three
conditions is present:
(1)
the credit union has not obtained an annual audit or caused
an audit
/verification
to be performed;
(2)
the credit union has obtained an audit
/verification
or performed an audit/verification which does not meet the specified
requirements; or
(3)
(No change.)
(e)
Opinion audit required. The commissioner may compel a credit
union to obtain an opinion audit performed in accordance with Generally Accepted
Auditing Standards by an independent person who is licensed by the state for
any year in which the credit union has experienced [
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 15, 2007.
TRD-200700511
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: April 1, 2007
For further information, please call: (512) 837-9236
7 TAC §91.610
The Credit Union Commission proposes amendments to §91.610
concerning safe deposit box facilities. The amendments remove duplicate language
and make grammatical and technical corrections to the language of the rule.
The amendments are proposed as a result of the Department's general rule
review.
Betsy Loar, General Counsel, has determined that for the first five year
period the amended rule is in effect there will be no fiscal implications
for state or local government as a result of enforcing or administering the
proposed rule.
Ms. Loar has also determined that for each year of the first five years
the amended rule is in effect, the public benefits anticipated as a result
of enforcing the rule will be greater clarity and ease of use of the rule.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions or
individuals for complying with the amended rule if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Betsy
Loar, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin,
Texas 78752-1699. Oral comments on the proposal can be made at the Commission's
Legislative Advisory Committee meeting on Friday, May 18, 2007 at 9:00 am
at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of the Texas
Finance Code, §15.402, which authorizes the Commission to adopt reasonable
rules for administering Title 2, Chapter 15 and Title 3, Subchapter D of the
Texas Finance Code and under Texas Finance Code §125.508.
The specific section affected by the proposed amended rule is Texas Finance
Code, §125.508.
§91.610.Safe Deposit Box Facilities.
(a)
Purpose. Finance Code §59.110 requires credit unions
to imprint keys issued to safe deposit boxes with the institution's routing
number. In addition, it requires a report to the
Department
[
(b)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
(No change.)
(2)
Routing number - The [
(c)
Imprinting requirements. A credit union which has been
issued a routing number shall imprint that routing number on safe deposit
box keys on either the head of the key or the shank of the key if there is
adequate room. The typical locations to be used are indicated in the following
instructions and diagram. The imprint can be made anywhere on the key that
has the required space available. [
Figure: 7 TAC §91.610(c) (No change.)
(d)
Branch designation. A credit union may, but is not required
to, add a three-digit branch designation to its routing number. Thus, the
main credit union facility should receive the designation "001" and branch
facilities should receive numbers consecutively beginning with "002" with
successive numbers as needed. However, the credit union may control the branch
numbering system used provided that the credit union
maintains
[
(e)
Report of defaced or altered key. Within 10 days after
an officer or employee of a credit union observes that a key used to access
a safe deposit box has had the routing number altered or defaced or the tag
removed, a report shall be prepared of such incident. The report shall be
on a form promulgated by the Credit Union Department in the form of the attached
Exhibit A. The report should be submitted to the Department of Public Safety,
Attention
[
(f)
Effective date; applicability to existing keys. A credit
union must imprint all safe deposit box keys on or after September 1, 1992.
Additionally, the
[
(g)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on February 15, 2007.
TRD-200700512
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: April 1, 2007
For further information, please call: (512) 837-9236
Subchapter A. INSURANCE REQUIREMENTS
Eligibility to Hold Office ].
.
]
commissioner
] may prescribe[
, together with any additional information the credit union may request
].
The application shall be submitted either to the nominating committee prior
to [
the determination by the committee of
] its
selection of
nominees; or to the board chair within 30 days following the election
of a member who was not nominated by the nominating committee or who was appointed
by the board to fill a vacancy. The applications of the elected/appointed
directors shall be incorporated into and made part of the minutes of the first
board meeting following the election/appointment of those directors. Applications
of unsuccessful
candidates
[
nominees
] shall be destroyed
or returned [
to the nominee
] upon request.
may
], by written board policy, establish
appropriate
education requirements and provide sufficient resources for elected officials
to achieve and maintain professional competence
[
continuing education
requirements for directors. The purpose of such policy should be to ensure
that every director pursues a plan of education throughout his/her tenure
on the board in order to remain current on the law and other issues effecting
the credit union in the rapidly changing financial services industry
].
The policy should be appropriate to the size and financial condition of the
credit union and the nature and scope of its operations.
Disqualification of director. The failure of an elected/appointed director
to complete and return the application or the failure to take the prescribed
oath of office shall disqualify the director designate from holding office.
]
and ] Reimbursable Expenses , and Other Authorized Expenditures .
The
] policy shall include a schedule of meeting fee amounts and a provision
that fees may be paid only for actual attendance at duly called meetings.
The authority to pay any such fee is subject to the following limitations:
under supervisory sanctions imposed by the commissioner pursuant
to the Act or commission rule
];
(d)
] Review by board. A credit union
shall
implement and
maintain
controls and other
safeguards
to prevent the payment of fees or expenses that are excessive or that could
lead to material financial loss to the institution. At least annually, the
board
, in good faith,
shall review the
director/committee
member
fees and
director/committee member-related
expenses
incurred, paid or reimbursed by the credit union [
as authorized by this
section
]
and determine whether its policy continues to be in the
best interest of the credit union.
Fees and expenses shall be considered
excessive when amounts paid are disproportionate to the services performed
by a director or committee member, or unreasonable considering the financial
condition of the institution and similar practices at credit unions of a comparable
asset size, geographic location, and/or operational complexity.
(e)
] Waiver by commissioner. The
commissioner in the exercise of discretion may grant a waiver in writing of
the limitations described in subsection (b) of this section.
board
of directors
], based on its assessment of the level that would be safe
and sound in view of the credit union's potential exposure to risk
; provided,
such determination shall be subject to approval by the credit union's board
of directors.
[
In making its determination the board shall be guided
by the following minimum required amount of fidelity bond coverage for any
single loss computed according to asset categories:
]
Figure: 7 TAC §91.510(a)(1)
]
Any aggregate limit of liability provided for in
a fidelity bond policy must be at least twice the single limit of liability.
This requirement does not apply to optional insurance coverage
].
(5)
] The commissioner may require
additional coverage of any credit union when, in his opinion, the fidelity
bond in force is insufficient to provide adequate fidelity coverage. It shall
be the duty of the board of directors to obtain the additional coverage within
30 days after the date of written notice of the findings by the commissioner.
As applicable, a
] credit union shall also comply with all bond requirements
imposed by an insuring organization as a condition to maintain insurance on
share and deposit accounts
.
[
, including,
]
Any credit
union that fails to meet
the minimum fidelity bond specifications contained
within Part 741.201 of the NCUA Rules and Regulations
may be deemed to
engaged in an unsafe practice pursuant to Finance Code §122.255
.
The
] board of directors shall obtain or cause to be
performed an [
annual
] audit of the credit union
which must
cover the period elapsed since the last audit period. The audit must be conducted
in accordance with generally accepted auditing standards by a licensee
of the Texas State Board of Public Accountancy or as permitted under the provisions
of part 715 of the National Credit Union Administration's Rules and Regulations
(12 CFR, Chapter VII, Part 715).
serious and
]
persistent
serious
recordkeeping deficiencies. The objective of
such an audit is to obtain an unqualified opinion on the credit union's financial
statements.
Subchapter F. ACCOUNTS AND SERVICES
department
] of
Public Safety
[
public safety
] if
the routing number is altered or defaced so that the correct routing number
is illegible. The purpose of this section is to clarify the requirements of
the noted section of the Finance Code.
routing and transit
] number
printed on the face of a share draft or check in fractional form or in nine-digit
form that identifies a paying financial institution.
[
issued to
the credit union under the auspices of the American Bankers Association and
as listed in the American Bankers Association's "Key to Routing Numbers."
]
It can be either on the head or on
the shank of the key.
] When positioning the die on the key, be careful
to place the die on the key where it will imprint on a flat surface and not
in the area of the key cuts or on any of the shank ridges or grooves. Imprinting
in these areas may interfere with the proper working of the key in the lock
and may cause damage. In the event these standard areas for the location of
the imprint are unavailable, either because of grooves on the key shank or
the fact that the head of the key already has names and other numbers imprinted
on it, then the credit union may attach to the key a tag imprinted with the
routing number. The tag used must be of such a nature as to be secure. Thus,
a paper or cardboard tag or a tag affixed with string will not be acceptable.
However, any other medium such as plastic or metal which can retain an imprint
of a number shall be acceptable. The tag may be attached in any way to assure
its affixation to the key. Typically, this will mean inserting the tag or
a device to affix the tag through the hole in the head of the key normally
used for placing keys on key chains. The tag method shall not be used if there
is adequate room on the key itself for imprinting the numbers. There are four
standard areas for the location of the imprinted routing number. These include:
the head of the key, the shank of the key, and either place on the reverse
side of the key. The standard imprint areas are shown as follows.
must maintain
] a master list of branch designations used for this purpose.
The master list should be maintained at the main office of the credit union
and shall include the [
following information:
] three-digit branch
designation and address of facility. The credit union then may imprint safe
deposit box keys or tags with the routing number plus three-digit branch designation
for full identification of the facility.
attention
]: Criminal Law Enforcement, Box 4087,
Austin, Texas 78773-0001. The report should be mailed no later than ten days
after the incident. The credit union should retain one copy of the incident
report for a period of three years. Nothing in this rule nor in the
Finance Code §59.110
[
Act
] shall require a credit union
to inspect routing numbers imprinted on a key or an attached tag to determine
if the number has been altered or defaced.
Credit unions may begin imprinting keys prior
to that date. The
] imprinting requirement
applies
[
shall apply to all keys currently outstanding as well as
] to all keys
issued
prior to
[
after
] September 1, 1992. However,
keys for boxes rented prior to September 1, 1992, need not be imprinted with
the routing number unless and until a member presents a safe deposit box key
at a credit union for access to a box. Nothing in this rule or the
Finance
Code §59.110
[
Act
] shall be construed to require a credit
union to provide notice to its safe deposit box users or to otherwise require
such members to present their keys for imprinting. However, on the first date
after September 1, 1992, that a member presents a key which has not been imprinted,
the credit union shall imprint the key with the routing numbers as required
by Finance Code §59.110.
Chapter 95.
SHARE AND DEPOSITOR INSURANCE PROTECTION