HF4118

Purpose

This bill aims to expand how Minnesota credit unions obtain insurance for member shares and deposits. It allows insurance to be provided by a credit union share guaranty corporation (instead of or in addition to traditional federal insurance), and it updates oversight and requirements related to guaranty corporations and receivership. It also strengthens state authority to ensure all credit unions have insured accounts and to fund examinations and related activities.

Main Provisions

• Section on Receiver appointments

  • Allows, at the request of the commissioner of commerce, the court to appoint the National Credit Union Administration Board (NCUAB) or an approved credit union share insurance provider as receiver of a credit union.
  • This applies when the credit union’s deposits are insured by NCUA or an approved share insurance provider and the credit union has been suspended or subject to a consent order (cease and desist) with the commissioner.
  • If the NCUA Board or approved guaranty provider accepts the appointment, they gain the same powers and privileges as a state receiver under applicable state and federal law; this includes actions affecting the credit union’s board of directors and its members.

• Section on Insurance of member shares and deposits

  • Requires every credit union under the commissioner’s supervision to maintain insurance for member share and deposit accounts either under the National Credit Union Act (Title II) or through a credit union share guaranty corporation approved by the commissioner.
  • If a credit union fails to maintain required insurance, it must dissolve or merge with another insured credit union.

• Section on Credit union share guaranty accounts (new subdivision)

  • Establishes insured accounts through a credit union share guaranty corporation for individual members or nonmembers of a participating credit union.
  • The primary guaranteed amount must be at least the size of the member’s share account but cannot exceed the greater of $250,000 or the amount insured by the NCUA for a share account (i.e., the maximum guarantee is tied to the higher of those two figures).
  • The commissioner may examine a credit union share guaranty corporation and assess reasonable costs incurred for the examination; such assessments are deposited into the financial institutions account in the special revenue fund.
  • A credit union may not voluntarily terminate its insurance with the National Credit Union Administration Share Insurance Program or with a credit union share guaranty corporation without the commissioner’s approval.

• Section on Certificate of approval for insurance arrangements

  • No credit union may receive a certificate of approval from the commissioner unless it has a commitment for insurance of its member share and deposit accounts under Title II of the National Credit Union Act or from an approved credit union share guaranty corporation.

Significant Changes to Existing Law

• Adds authority for appointing the NCUA Board or an approved share insurance provider as a receiver of a Minnesota credit union under specified conditions.
• Codifies a new framework for insuring credit union member shares and deposits through a credit union share guaranty corporation, not just through federal insurance.
• Creates a new subdivision detailing how guaranty corporations must insure member accounts, including guaranteed amounts and oversight mechanisms (examinations and cost recoveries).
• Establishes funding mechanisms for state examinations and related activities (via the special revenue fund).
• Tightens the process for obtaining a state license/approval by requiring a binding insurance commitment (from Title II insurance or an approved guaranty corporation) to obtain a certificate of approval.

Practical Implications and Considerations

• Credit unions will have the option to obtain insurance through a state-approved guaranty corporation, potentially altering coverage terms and oversight compared to traditional federal insurance.
• The state can appoint a federal receiver (NCUA Board) in certain enforcement scenarios, aligning state actions with federal receivership processes.
• Additional oversight and potential costs are introduced for guaranty corporations and for credit unions seeking or maintaining insurance coverage.
• The requirement that all credit unions maintain insured accounts could lead to consolidations if a need arises to use an approved guaranty corporation or to merge with an insured institution.

Relevant Terms

• National Credit Union Administration Board (NCUAB)
• credit union share insurance provider
• credit union share guaranty corporation
• receiver
• consent cease and desist order
• suspension
• Title II of the National Credit Union Act
• National Credit Union Share Insurance Program (NCUSIP) / NCUA insurance
• certificate of approval
• examination
• assessment
• financial institutions account
• special revenue fund
• primary guaranteed amount
• insured share/deposit accounts
• approved guaranty corporation
• section 207 of the Federal Credit Union Act
• premiums/guarantees up to the insured amount (maximums: at least the account size, up to the greater of $250,000 or NCUA-insured amount)