CUNA Regulatory Comment Call

August 4, 2005

Purchase of Assets and Assumption of Liabilities & Nonconforming Investments


Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Associate General Counsel Mary Dunn at and to Senior Assistant General Counsel Jeff Bloch; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you would like a copy of the proposed rule, or you may access it here.


The proposed rule is intended to clarify the current rules regarding the purchase of assets and assumption of liabilities by federally insured credit unions. These rules identify certain transactions that require NCUA approval, along with certain exceptions.

Until now, there has been confusion because the Federal Credit Union Act requires NCUA approval for transactions that are not specifically addressed in the rules and requires prior approval for an insured credit union to “acquire the assets of, or assume liability to pay any member accounts in, any other insured credit union.” The current rules, however, only specifically require approval for “acquiring loans or assuming or receiving an assignment of deposits, shares or liabilities” from credit unions or other institutions that are not insured by the National Credit Union Share Insurance Fund. There are exceptions for the purchase of student loans and real estate secured loans that facilitate the packaging of loans sold in the secondary market, as well as the assumption of assets associated with member retirement accounts or in which the credit union has a security interest.


The proposed rule will clarify that transactions involving the sale or purchase of loans or other assets between federally insured credit unions do not require NCUA approval. For those transactions that do require approval, the proposed rule requires that the request for approval be submitted to the appropriate NCUA Regional Office. The request must outline the nature of the transaction and include copies of the relevant transaction documents.

NCUA is also requesting comments on revisions to the rules involving special reserves for nonconforming and credit union service organization (CUSO) investments by FISCUs. NCUA is considering removing the requirement for FISCUs to establish special reserves for nonconforming investments and, instead, requiring these nonconforming investments to be of “investment grade,” which means a security that at the time of purchase is rated in one of four highest rating categories by at least one nationally recognized statistical rating organization.

NCUA is also considering extending some of the limits in the CUSO rule to FISCUs, which are currently not subject to these requirements and limitations. For example, under these rules, federal credit unions can invest and lend to a CUSO only if it is structured as a corporation, limited liability company, or limited partnership and primarily serves credit unions or their membership. In addition, NCUA requires corporate separateness between the federal credit union and a CUSO. NCUA is considering whether these rules should also require FISCUs investing in CUSOs to comply with the limits on the structure, accounting, audits, NCUA access, and corporate separateness that are outlined in the CUSO rules for federal credit unions.

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Lilly Thomas • Assistant General Counsel • (202) 508-6733 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •