Permissibility Of A Federally-Chartered Corporate Credit Union To Offer A Paid-In Capital Offering To Member State-Chartered Credit Unions - Q2 1999

By the Division of Banks

A federally-chartered corporate credit union seeks to offer a Paid-In Capital Offering to natural person state-chartered credit unions ("credit union") which are its members. Mass. Gen. Laws chapter 171, section 67(b) allows a credit union to invest in the shares of any federally-chartered corporate credit union. The statute further requires that the shares be limited in the aggregate to 25% of the assets of the credit union. The Division requires that all investments, including regular shares and restricted shares, constitute no more than 25% of a credit union's assets. As with any investment, a credit union will be required to review investments under the provisions of Regulatory Bulletin 2.2-101, which is entitled "Investment Policy Minimum Requirements". This Regulatory Bulletin establishes guidelines relative to minimum requirements for investment policies. Issues that must be addressed within the policy, and followed by credit union management, include quality, maturity, diversification, marketability, and income of all investments. In addition, Part 704 of the National Credit Union Administration's Regulations (Title 12 CFR Part 704) has been amended. Those changes, effective January 1998, set certain capital level requirements for corporate credit unions. Those changes also established specific characteristics, such as the long-term nature and subordination features.