Appendix A to Part 704 - Capital Prioritization and Model Forms
12:7.0.2.3.5.0.11.23.13 : Appendix A
Appendix A to Part 704 - Capital Prioritization and Model Forms
Part I - Optional Capital Prioritization
Notwithstanding any other provision in this chapter, a corporate
credit union, at its option, may determine that capital contributed
to the corporate credit union on or after January 18, 2011 will
have priority, for purposes of availability to absorb losses and
payout in liquidation, over capital contributed to the corporate
credit union before that date. The board of directors at a
corporate credit union that desires to make this determination
must:
(a) On or before January 18, 2011, adopt a resolution
implementing its determination.
(b) Inform the credit union's members and NCUA, in writing and
as soon as practicable after adoption of the resolution, of the
contents of the board resolution.
(c) Ensure the credit union uses the appropriate initial and
periodic Model Form disclosures in Part II below.
Part II - Model Forms
Part II contains model forms intended for use by corporate
credit unions to aid in compliance with the capital disclosure
requirements of § 704.3 and Part I of this Appendix.
Model Form A Terms and Conditions of Nonperpetual Capital Note:
This form is for use on and after October 20, 2011 in the
circumstances where the credit union has determined NOT to give
newly issued capital priority over older capital as described in
Part I of this Appendix. Also, corporate credit unions should
ensure that existing membership capital accounts that do not meet
the qualifying conditions for nonperpetual capital are modified so
as to meet those conditions.
Terms and Conditions of Nonperpetual Capital Account
(1) A nonperpetual capital account is not subject to share
insurance coverage by the NCUSIF or other deposit insurer.
(2) A nonperpetual capital account is not releasable due solely
to the merger, charter conversion or liquidation of the member
credit union. In the event of a merger, the nonperpetual capital
account transfers to the continuing credit union. In the event of a
charter conversion, the nonperpetual capital account transfers to
the new institution. In the event of liquidation, the nonperpetual
capital account may be released to facilitate the payout of shares
with the prior written approval of NCUA.
(3) If the nonperpetual capital account is a notice account, a
member credit union may withdraw the nonperpetual capital with a
minimum of five years' notice. If the nonperpetual capital account
is a term instrument it may be redeemed only at maturity. The
corporate credit union may not redeem any account prior to the
expiration of the notice period, or maturity, without the prior
written approval of the NCUA.
(4) Nonperpetual capital cannot be used to pledge
borrowings.
(5) Nonperpetual capital is available to cover losses that
exceed retained earnings and perpetual contributed capital. Any
such losses will be distributed pro rata among nonperpetual
capital account holders at the time the loss is realized. To the
extent that NCA funds are used to cover losses, the corporate
credit union is prohibited from restoring or replenishing the
affected accounts under any circumstances.
(6) Where the corporate credit union is liquidated, nonperpetual
capital accounts are payable only after satisfaction of all
liabilities of the liquidation estate including uninsured
obligations to shareholders and the NCUSIF. However, nonperpetual
capital that is used to cover losses in a calendar year previous to
the year of liquidation has no claim against the liquidation
estate.
(7) Where the corporate credit union is merged into another
corporate credit union, the nonperpetual capital account will
transfer to the continuing corporate credit union. For notice
accounts, the five-year notice period for withdrawal of the
nonperpetual capital account will remain in effect. For term
accounts, the original term will remain in effect.
(8) If a term certificate - : The nonperpetual capital account
is a term certificate that will mature on - (date) - (insert date
with a minimum five-year original maturity).
I have read the above terms and conditions and I understand
them.
I further agree to maintain in the credit union's files the
annual notice of terms and conditions of the nonperpetual capital
account.
The notice form must be signed by either all of the directors of
the member credit union or, if authorized by board resolution, the
chair and secretary of the board of the credit union.
The annual disclosure notice form must be signed by the chair of
the corporate credit union. The chair must then sign a statement
that certifies that the notice has been sent to member credit
unions with nonperpetual capital accounts. The certification must
be maintained in the corporate credit union's files and be
available for examiner review.
Model Form B Terms and Conditions of Nonperpetual Capital Note:
This form is for use on and after October 20, 2011, in the
circumstances where the corporate credit union has determined that
it will give newly issued capital priority over older capital as
described in Part I of this Appendix.
Terms and Conditions of Nonperpetual Capital Account
(1) A nonperpetual capital account is not subject to share
insurance coverage by the NCUSIF or other deposit insurer.
(2) A nonperpetual capital account is not releasable due solely
to the merger, charter conversion or liquidation of the member
credit union. In the event of a merger, the nonperpetual capital
account transfers to the continuing credit union. In the event of a
charter conversion, the nonperpetual capital account transfers to
the new institution. In the event of liquidation, the nonperpetual
capital account may be released to facilitate the payout of shares
with the prior written approval of NCUA.
(3) If the nonperpetual capital account is a notice account, a
member credit union may withdraw the nonperpetual capital with a
minimum of five years' notice. If the nonperpetual capital account
is a term instrument it may be redeemed only at maturity. The
corporate credit union may not redeem any account prior to the
expiration of the notice period, or maturity, without the prior
written approval of the NCUA.
(4) Nonperpetual capital cannot be used to pledge
borrowings.
(5)(a) Nonperpetual capital that is issued on or after January
18, 2011 is available to cover losses that exceed retained
earnings, all contributed capital issued before January 18, 2011,
and perpetual capital issued on or after January 18, 2011. Any such
losses will be distributed pro rata, at the time the loss is
realized, among nonperpetual capital account holders with accounts
issued on or after January 18, 2011. To the extent that NCA funds
are used to cover losses, the corporate credit union is prohibited
from restoring or replenishing the affected accounts under any
circumstances.
(b) Nonperpetual capital that is issued before January 18, 2011,
is available to cover losses that exceed retained earnings and
perpetual capital issued before January 18, 2011. Any such losses
will be distributed pro rata, at the time the loss is
realized, among nonperpetual capital account holders with accounts
issued before January 18, 2011. To the extent that NCA funds are
used to cover losses, the corporate credit union is prohibited from
restoring or replenishing the affected accounts under any
circumstances.
(c) Attached to this disclosure is a statement that describes
the amount of NCA the credit union has with the corporate credit
union in each of the categories described in paragraphs (5)(a) and
(5)(b) above.
(6) If the corporate credit union is liquidated:
(a) Nonperpetual capital accounts issued on or after January 18,
2011 are payable only after satisfaction of all liabilities of the
liquidation estate including uninsured obligations to shareholders
and the NCUSIF, but not including contributed capital accounts
issued before January 18, 2011 or perpetual capital accounts issued
on or after January 18, 2011. However, nonperpetual capital that is
used to cover losses in a calendar year previous to the year of
liquidation has no claim against the liquidation estate.
(b) Nonperpetual capital accounts issued before January 18, 2011
are payable only after satisfaction of all liabilities of the
liquidation estate including uninsured obligations to shareholders
and the NCUSIF, but not including perpetual capital accounts issued
before January 18, 2011. However, nonperpetual capital that is used
to cover losses in a calendar year previous to the year of
liquidation has no claim against the liquidation estate.
(7) Where the corporate credit union is merged into another
corporate credit union, the nonperpetual capital account will
transfer to the continuing corporate credit union. For notice
accounts, the five-year notice period for withdrawal of the
nonperpetual capital account will remain in effect. For term
accounts, the original term will remain in effect.
(8) If a term certificate - : The nonperpetual capital account
is a term certificate that will mature on - (date) - (insert date
with a minimum five-year original maturity).
I have read the above terms and conditions and I understand
them.
I further agree to maintain in the credit union's files the
annual notice of terms and conditions of the nonperpetual capital
account.
The notice form must be signed by either all of the directors of
the member credit union or, if authorized by board resolution, the
chair and secretary of the board of the credit union.
The annual disclosure notice form must be signed by the chair of
the corporate credit union. The chair must then sign a statement
that certifies that the notice has been sent to member credit
unions with nonperpetual capital accounts. The certification must
be maintained in the corporate credit union's files and be
available for examiner review.
Model Form C Terms and Conditions of Perpetual Contributed Capital
Note:
This form is for use on and after October 20, 2011 in the
circumstances where the credit union has determined NOT to give
newly issued capital priority over older capital as described in
Part I of this Appendix.
(1) A perpetual contributed capital account is not subject to
share insurance coverage by the NCUSIF or other deposit
insurer.
(2) A perpetual contributed capital account is not releasable
due solely to the merger, charter conversion or liquidation of the
member credit union. In the event of a merger, the perpetual
contributed capital account transfers to the continuing credit
union. In the event of a charter conversion, the perpetual
contributed capital account transfers to the new institution. In
the event of liquidation, the perpetual contributed capital account
may be released to facilitate the payout of shares with the prior
written approval of NCUA.
(3) The funds are callable only at the option of the corporate
credit union and only if the corporate credit union meets its
minimum required capital and NEV ratios after the funds are called.
The corporate credit union must also obtain the prior, written
approval of the NCUA before releasing any perpetual contributed
capital funds.
(4) Perpetual contributed capital cannot be used to pledge
borrowings.
(5) Perpetual contributed capital is perpetual maturity and
noncumulative dividend.
(6) Perpetual contributed capital is available to cover losses
that exceed retained earnings. Any such losses must be distributed
pro rata among perpetual contributed capital holders at the
time the loss is realized. To the extent that perpetual contributed
capital funds are used to cover losses, the corporate credit union
is prohibited from restoring or replenishing the affected accounts
under any circumstances.
(7) Where the corporate credit union is liquidated, perpetual
contributed capital accounts are payable only after satisfaction of
all liabilities of the liquidation estate including uninsured
obligations to shareholders and the NCUSIF, and nonperpetual
capital holders. However, perpetual contributed capital that is
used to cover losses in a calendar year previous to the year of
liquidation has no claim against the liquidation estate.
I have read the above terms and conditions and I understand
them. I further agree to maintain in the credit union's files the
annual notice of terms and conditions of the perpetual contributed
capital instrument.
The notice form must be signed by either all of the directors of
the credit union or, if authorized by board resolution, the chair
and secretary of the board of the credit union.
Model Form D Terms and Conditions of Perpetual Contributed Capital
Note:
This form is for use on and after October 20, 2011, in the
circumstances where the corporate credit union has determined that
it will give newly issued capital priority over older capital as
described in Part I of this Appendix.
(1) A perpetual contributed capital account is not subject to
share insurance coverage by the NCUSIF or other deposit
insurer.
(2) A perpetual contributed capital account is not releasable
due solely to the merger, charter conversion or liquidation of the
member credit union. In the event of a merger, the perpetual
contributed capital account transfers to the continuing credit
union. In the event of a charter conversion, the perpetual
contributed capital account transfers to the new institution. In
the event of liquidation, the perpetual contributed capital account
may be released to facilitate the payout of shares with the prior
written approval of NCUA.
(3) The funds are callable only at the option of the corporate
credit union and only if the corporate credit union meets its
minimum required capital and NEV ratios after the funds are called.
The corporate credit union must also obtain the prior, written
approval of the NCUA before releasing any perpetual contributed
capital funds.
(4) Perpetual contributed capital cannot be used to pledge
borrowings.
(5) Perpetual contributed capital is perpetual maturity and
noncumulative dividend.
(6) Availability to cover losses.
(a) Perpetual contributed capital issued before January 18, 2011
is available to cover losses that exceed retained earnings. Any
such losses must be distributed pro rata, at the time the
loss is realized, among holders of perpetual contributed capital
issued before January 18, 2011. To the extent that perpetual
contributed capital funds are used to cover losses, the corporate
credit union is prohibited from restoring or replenishing the
affected accounts under any circumstances.
(b) Perpetual contributed capital issued on or after January 18,
2011 is available to cover losses that exceed retained earnings and
any contributed capital issued before January 18, 2011. Any such
losses must be distributed pro rata, at the time the loss is
realized, among holders of perpetual contributed capital issued on
or after January 18, 2011. To the extent that perpetual contributed
capital funds are used to cover losses, the corporate credit union
is prohibited from restoring or replenishing the affected accounts
under any circumstances.
(c) Attached to this disclosure is a statement that describes
the amount of perpetual capital the credit union has with the
corporate credit union in each of the categories described in
paragraphs (6)(a) and (6)(b) above.
(7) Where the corporate credit union is liquidated:
(a) Perpetual contributed capital accounts issued on or after
January 18, 2011 are payable only after satisfaction of all
liabilities of the liquidation estate including uninsured
obligations to shareholders and the NCUSIF, but not including
contributed capital accounts issued before January 18, 2011.
However, perpetual contributed capital that is used to cover losses
in a calendar year previous to the year of liquidation has no claim
against the liquidation estate.
(b) Perpetual contributed capital accounts issued before January
18, 2011 are payable only after satisfaction of all liabilities of
the liquidation estate including uninsured obligations to
shareholders and the NCUSIF, nonperpetual capital accounts issued
before January 18, 2011, and all contributed capital accounts
issued on or after January 18, 2011. However, perpetual contributed
capital that is used to cover losses in a calendar year previous to
the year of liquidation has no claim against the liquidation
estate.
I have read the above terms and conditions and I understand
them. I further agree to maintain in the credit union's files the
annual notice of terms and conditions of the perpetual contributed
capital instrument.
The notice form must be signed by either all of the directors of
the credit union or, if authorized by board resolution, the chair
and secretary of the board of the credit union.
[75 FR 64848, Oct. 20, 2010, as amended at 75 FR 71528, Nov. 24,
2010; 76 FR 79534, Dec. 22, 2011; 80 FR 25939, May 6, 2015; 85 FR
62211, Oct. 2, 2020]