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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Rules and Regulations
Religious discrimination, Reporting and recordkeeping requirements, Sex discrimination, Signs and symbols, Surety bonds.
12 CFR Part 702
Credit unions, Reporting and recordkeeping requirements.
12 CFR Part 709
Claims, Credit unions.
12 CFR Part 741
Bank deposit insurance, Credit unions, Reporting and recordkeeping requirements.
By the NCUA Board on December 17, 2020.
Melane Conyers-Ausbrooks, Secretary of the Board.

For the reasons discussed in the preamble, NCUA amends 12 CFR parts 701, 702, 709, and 741 as follows:
PART 701ORGANIZATION AND
OPERATION OF FEDERAL CREDIT
UNIONS
1. The authority citation for part 701
continues to read as follows:

Authority: 12 U.S.C. 17525, 1755, 1756, 1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C.
3717. Section 701.31 is also authorized by 15
U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601
3610. Section 701.35 is also authorized by 42
U.S.C. 43114312.

2. Add 701.25 to read as follows:

701.25

Loans to credit unions.

a Limits. A Federal credit union may make loans, including investments in Subordinated Debt, to other credit unions, including corporate credit unions and privately insured credit unions, subject to the following limits:
1 Aggregate limit. The aggregate principal amount of loans to other credit unions may not exceed 25 percent of the Federal credit unions paid-in and unimpaired capital and surplus.
2 Single borrower limit. The aggregate principal amount of loans made to any one credit union may not exceed the greater of 15 percent of the Federal credit unions net worth, as defined in part 702 of this chapter, at the time of the closing of the loan or $100,000, plus an additional 10 percent of the Federal credit unions net worth if the amount that exceeds the Federal credit unions 15 percent general limit is fully secured at all times with a perfected security interest by readily marketable collateral as defined in 723.2 of this chapter.
b Approval and policies. A Federal credit unions board of directors must approve all loans to other credit unions
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and establish written policies for making such loans. The written policies must, at a minimum, include the following:
1 How the Federal credit union will manage the credit risk of loans to other credit unions; and 2 The limits on the aggregate principal amount of loans the Federal credit union can make to other credit unions. The policies must specify the limits on the aggregate principal amount of loans the Federal credit union can make to all other credit unions and the aggregate principal amount of loans the Federal credit union can make to any single credit union; provided that any limits included in such policies do not exceed the limits in this section.
c Investment in Subordinated Debt 1 Eligibility. A Federal credit union may only invest, directly or indirectly, in the Subordinated Debt of federally insured, natural person credit unions, or in loans or obligations issued by a privately insured credit union that are subordinate to the private insurer;
provided that the investing Federal credit union:
i Has at the time of the investment, a capital classification of well capitalized, as defined in part 702 of this chapter;
ii Does not have any outstanding Subordinated Debt or Grandfathered Secondary Capital, in each case with respect to which it was the Issuing Credit Union as defined in part 702 of this chapter; and iii Is not eligible to issue Subordinated Debt or Grandfathered Secondary Capital pursuant to an unexpired approval from the NCUA
under subpart D of part 702 of this chapter.
2 Aggregate limiti Aggregate limit. A Federal credit unions aggregate investment direct or indirect in the Subordinated Debt and Grandfathered Secondary Capital of any federally insured, natural person credit union, and in loans or obligations issued by a privately insured credit union that are subordinate to the private insurer, may not cause such aggregate investment to exceed, at the time of the investment, the lesser of:
A 25 percent of the investing Federal credit unions net worth at the time of the investment; and B Any amount of net worth in excess of seven percent 7% of total assets.
ii Calculation of aggregate limit. The amount subject to the limit in paragraph c2iA of this section is calculated at the time of investment, and is based on a Federal credit unions aggregate outstanding:
A Investment in Subordinated Debt;

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B Investment in Grandfathered Secondary Capital;
C Investment in loans or obligations issued by a privately insured credit union that are subordinate to the private insurer; and D Loans or portion of loans made by the credit union that is secured by any Subordinated Debt, Grandfathered Secondary Capital, or loans or obligations issued by a privately insured credit union that are subordinate to the private insurer.
3 Indirect investment. A Federal credit union must determine its indirect exposure by calculating its proportional ownership share of each exposure held in a fund, or similar indirect investment. The Federal credit unions exposure to the fund is equal to the exposure held by the fund as if they were held directly by the Federal credit union, multiplied by the Federal credit unions proportional ownership share of the fund.
3. In 701.34:
a. Revise the section heading;
b. Remove and reserve paragraph b;
and c. Remove paragraphs c and d and the appendix to 701.34.
The revision reads as follows:
701.34

Designation of low income status.

4. Revise 701.38 to read as follows:

701.38

Borrowed funds.

a Federal credit unions may borrow funds from any source; provided that:
1 The borrowing is evidenced by a written contract, such as a signed promissory note, that sets forth the terms and conditions including, at a minimum, maturity, prepayment, interest rate, method of computation of interest, and method of payment; and 2 The written contract and any solicitation with respect to such borrowing contain clear and conspicuous language indicating that:
i The funds represent money borrowed by the Federal credit union;
and ii The funds do not represent shares and, therefore, are not insured by the National Credit Union Administration.
b A Federal credit union is subject to the maximum borrowing authority of an aggregate amount not exceeding 50
percent of its paid-in and unimpaired capital and surplus. Provided that any Federal credit union may discount with or sell to any Federal intermediate credit bank any eligible obligations up to the amount of its paid-in and unimpaired capital 12 U.S.C. 17579.

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