12 Cfr 701.32

§ 701.32

12 CFR Ch. VII (1–1–16 Edition)

affect the market value of a property
because the cause of abandonment is
unrelated to high risk. Proper considerations include the condition and utility of the improvement and various
physical factors such as street conditions, amenities such as parks and
recreation areas, availability of public
utilities and municipal services, and
exposure to flooding and land faults.
[54 FR 46223, Nov. 2, 1989, as amended at 59
FR 36041, July 15, 1994; 66 FR 48206, Sept. 19,
2001; 77 FR 16426, Mar. 21, 2012; 77 FR 71084,
Nov. 29, 2012; 79 FR 75748, Dec. 19, 2014]

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§ 701.32 Payment on shares by public
units and nonmembers.
(a) Authority. A Federal credit union
may, to the extent permitted under
Section 107(6) of the Act and this section, receive payments on shares, (regular shares, share certificates, and
share draft accounts) from public units
and political subdivisions thereof (as
those terms are defined in § 745.1) and
nonmember credit unions, and to the
extent permitted under the Act, this
section and § 701.34, receive payments
on shares (regular shares, share certificates, and share draft accounts) from
other nonmembers.
(b) Limitations. (1) Unless a greater
amount has been approved by the Regional Director, the maximum amount
of all public unit and nonmember
shares shall not, at any given time, exceed 20% of the total shares of the federal credit union or $3 million, whichever is greater.
(2) Before accepting any public unit
or nonmember shares in excess of 20%
of total shares, the board of directors
must adopt a specific written plan concerning the intended use of these
shares and forward a copy of the plan
to the Regional Director. The plan
must include:
(i) A statement of the credit union’s
needs, sources and intended uses of
public unit and nonmember shares;
(ii) Provision for matching maturities of public unit and nonmember
shares with corresponding assets, or
justification for any mismatch; and
(iii) Provision for adequate income
spread between public unit and nonmember shares and corresponding assets.

(3) A federal credit union seeking an
exemption from the limits of paragraph (b)(1) of this section must submit
to the Regional Director a written request including:
(i) The new maximum level of public
unit and nonmember shares requested,
either as a dollar amount or a percentage of total shares;
(ii) The current plan adopted by the
credit union’s board of directors concerning the use of new public unit and
nonmember shares;
(iii) A copy of the credit union’s latest financial statement; and
(iv) A copy of the credit union’s loan
and investment policies.
(4) Where the financial condition and
management of the credit union are
sound and the credit union’s plan for
the funds is reasonable, there will be a
presumption in favor of granting the
request. When granted, exemptions will
normally be for a two-year period. The
Regional Director will provide a written explanation for an exemption that
is granted for a lesser time period.
(5) The Regional Director will provide a written determination on an exemption request within 30 calendar
days after receipt of the request. The 30
day period will not begin to run until
all necessary information has been submitted to the Regional Director. All
denials may be appealed to the NCUA
Board in a timely manner. Appeals
should be submitted through the Regional Director.
(6) Upon expiration of an exemption,
nonmember shares currently in the
credit union in excess of the limits established pursuant to (b)(1) of this section will continue to be insured by the
National Credit Union Insurance Fund
within applicable limits. No new shares
in excess of the limits established pursuant to (b)(1) of this section shall be
accepted. Existing share certificates in
excess of the limits established pursuant to (b)(1) of this section may remain
in the credit union only until maturity.
(c) The limitations herein do not
apply to accounts maintained in accordance with § 701.37 (Treasury Tax
and Loan Depositaries; Depositaries
and Financial Agents of the Government) and matching funds required by

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National Credit Union Administration

§ 701.33

§ 705.5(g) (Community Development Revolving Loan Program for Credit
Unions). Once a loan granted pursuant
to part 705 is repaid, nonmember share
deposits accepted to meet the matching requirement are subject to this section.
[54 FR 31184, July 27, 1989, as amended at 54
FR 51384, Dec. 15, 1989; 55 FR 1794, Jan. 19,
1990; 58 FR 21645, Apr. 23, 1993; 59 FR 26102,
May 19, 1994; 61 FR 3790, Feb. 2, 1996; 76 FR
67587, Nov. 2, 2011; 77 FR 31991, May 31, 2012]

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§ 701.33 Reimbursement,
insurance,
and indemnification of officials and
employees.
(a) Official. An official is a person who
is or was a member of the board of directors, credit committee or supervisory committee, or other volunteer
committee established by the board of
directors.
(b) Compensation. (1) Only one board
officer, if any, may be compensated as
an officer of the board. The bylaws
must specify the officer to be compensated, if any, as well as the specific
duties of each of the board officers. No
other official may receive compensation for performing the duties or responsibilities of the board or committee position to which the person
has been elected or appointed.
(2) For purposes of this section, the
term compensation specifically excludes:
(i) Payment (by reimbursement to an
official or direct credit union payment
to a third party) for reasonable and
proper costs incurred by an official in
carrying out the responsibilities of the
position to which that person has been
elected or appointed, if the payment is
determined by the board of directors to
be necessary or appropriate in order to
carry out the official business of the
credit union, and is in accordance with
written policies and procedures, including documentation requirements, established by the board of directors.
Such payments may include the payment of travel costs for officials and
one guest per official;
(ii) Provision of reasonable health,
accident and related types of personal
insurance protection, supplied for officials at the expense of the credit union:
Provided, that such insurance protection must exclude life insurance; must

be limited to areas of risk, including
accidental death and dismemberment,
to which the official is exposed by reason of carrying out the duties or responsibilities of the official’s credit
union position; must cease immediately upon the insured person’s leaving office, without providing residual
benefits other than from pending
claims, if any; except that a credit
union must comply with federal and
state laws providing departing officials
the right to maintain health insurance
coverage at their own expense and
(iii) Indemnification and related insurance consistent with paragraph (c)
of this section.
(c) Indemnification. (1) A Federal credit union may indemnify its officials
and current and former employees for
expenses reasonably incurred in connection with judicial or administrative
proceedings to which they are or may
become parties by reason of the performance of their official duties.
(2) Indemnification shall be consistent either with the standards applicable to credit unions generally in the
state in which the principal or home
office of the credit union is located, or
with the relevant provisions of the
Model Business Corporation Act. A
Federal credit union that elects to provide indemnification shall specify
whether it will follow the relevant
state law or the Model Business Corporation Act. Indemnification and the
method of indemnification may be provided for by charter or bylaw amendment, contract or board resolution,
consistent with the procedural requirements of the applicable state law or
the Model Business Corporation Act, as
specified. A charter or bylaw amendment must be approved by the National
Credit Union Administration.
(3) A Federal credit union may purchase and maintain insurance on behalf
of its officials and employees against
any liability asserted against them and
expenses incurred by them in their official capacities and arising out of the
performance of their official duties to
the extent such insurance is permitted
by the applicable state law or the
Model Business Corporation Act.
(4) Notwithstanding paragraphs (c)(1)
through (3) of this section, a federal
credit union may not indemnify a dual

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