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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Rules and Regulations secondary capital has been on deposit for two years. If the secondary capital was accepted under conditions that required matching secondary capital from a source other than the Federal Government, the matching secondary capital may also be redeemed in the manner set forth in the preceding sentence. For purposes of obtaining NCUAs approval, all secondary capital a LICU accepts from the United States Government or any of its subdivisions, as well as its matching secondary capital, if any, is eligible for early redemption regardless of whether any part of the secondary capital has been discounted pursuant to paragraph b2
of this section.
Appendix A to Subpart D of Part 702
Disclosure and Acknowledgement Form A LICU that is authorized to accept uninsured secondary capital accounts and each investor in such an account must have executed and dated the following Disclosure and Acknowledgment form, a signed original of which must be retained by the credit union:
Disclosure and Acknowledgment Name of CU and Name of investor hereby acknowledge and agree that Name of investor has committed amount of funds to a secondary capital account with name of credit union under the following terms and conditions:
1. Term. The funds committed to the secondary capital account are committed for a period of _y years.
2. Redemption prior to maturity. Subject to the conditions set forth in 12 CFR 702.414, the funds committed to the secondary capital account are redeemable prior to maturity only at the option of the LICU and only with the prior written approval of NCUA.
3. Uninsured, non-share account. The secondary capital account is not a share account and the funds committed to the secondary capital account are not insured by the National Credit Union Share Insurance Fund or any other governmental or private entity.
4. Prepayment risk. Redemption of U.S.C.
prior to the accounts original maturity date may expose the account investor to the risk of being unable to reinvest the repaid funds at the same rate of interest for the balance of the period remaining until the original maturity date. The investor acknowledges that it understands and assumes responsibility for prepayment risk associated with the name of credit unions redemption of the investors U.S.C. account prior to the original maturity date.

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5. Availability to cover losses. The funds committed to the secondary capital account and any interest paid into the account may be used by name of credit union to cover any and all operating losses that exceed the credit unions net worth exclusive of allowance accounts for loan losses, and in the event the funds are so used, name of credit union will under no circumstances restore or replenish those funds to name of institutional investor. Dividends are not considered operating losses and are not eligible to be paid out of secondary capital.
6. Accrued interest. By initialing below, name of credit union and name of institutional investor agree that accrued interest will be:
__Paid into and become part of the secondary capital account;
__Paid directly to the investor;
__Paid into a separate account from which the investor may make withdrawals; or __Any combination of the above provided the details are specified and agreed to in writing.
7. Subordination of claims. In the event of liquidation of name of credit union, the funds committed to the secondary capital account will be subordinate to all other claims on the assets of the credit union, including claims of member shareholders, creditors and the National Credit Union Share Insurance Fund.
8. Prompt Corrective Action. Under certain net worth classifications see 12 CFR
702.204b11, 702.304b and 702.305b, as the case may be, the NCUA may prohibit name of credit union from paying principal, dividends or interest on its uninsured secondary capital accounts established after August 7, 2000, except that unpaid dividends or interest will continue to accrue under the terms of the account to the extent permitted by law.
ACKNOWLEDGED AND AGREED TO this lld day of month and year by:
lllllllllllllllllllll name of investors official title of official name of investor address and phone number of investor investors tax identification number lllllllllllllllllllll name of credit union official title of official
PART 709INVOLUNTARY
LIQUIDATION OF FEDERAL CREDIT
UNIONS AND ADJUDICATION OF
CREDITOR CLAIMS INVOLVING
FEDERALLY INSURED CREDIT
UNIONS IN LIQUIDATION
15. The authority citation for part 709
continues to read as follows:

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Authority: 12 U.S.C. 1757, 1766, 1767, 1786h, 1786t, and 1787b4, 1788, 1789, 1789a.

16. Amend 709.5 by revising paragraph b8 to read as follows:

709.5 Payout priorities in involuntary liquidation.

b
8 Outstanding Subordinated Debt as defined in part 702 of this chapter or outstanding Grandfathered Secondary Capital as defined in part 702 of this chapter; and

PART 741REQUIREMENTS FOR
INSURANCE
17. The authority citation for part 741
continues to read as follows:

Authority: 12 U.S.C. 1757, 1766a, 1781
1790, and 1790d; 31 U.S.C. 3717.

18. Amend 741.204 by revising paragraph c and removing paragraph d to read as follows:

741.204 Maximum public unit and nonmember accounts, and low-income designation.

c Follow the requirements of 702.414 of this chapter for any Grandfathered Secondary Capital as defined in part 702 of this chapter issued before January 1, 2022.
19. Add 741.226 and 741.227 to read as follows:

741.226

Subordinated Debt.

Any credit union that is insured, or that makes application for insurance, pursuant to title II of the Act must follow the requirements of subpart D of part 702 of this chapter before it may issue Subordinated Debt, as that term is defined in 702.402 of this chapter, and to the extent not inconsistent with applicable state law and regulation.
741.227

Loans to credit unions.

Any credit union that is insured pursuant to Title II of the Act must adhere to the requirements in 701.25
of this chapter.
FR Doc. 202028281 Filed 22221; 8:45 am BILLING CODE 753501P

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