§ 28-7-1-19.2 — Classification as undercapitalized or lower; mandatory supervisory requirements and restrictions; discretionary supervisory actions

Indiana § 28-7-1-19.2

• Jurisdiction: Indiana
• Art. 7: SPECIALIZED FINANCIAL INSTITUTIONS
• Ch. 1: Credit Unions

Text

2. (a) A credit union that is classified as
undercapitalized or lower must do the following:
(1) Increase the credit union's net worth in accordance with
section 19.1 of this chapter.
(2) Submit a net worth restoration plan to the director at the time
and in the manner specified by the director. If the credit union:
(A) has a net worth ratio of less than five percent (5%); and
(B) either:
(i) fails to submit a net worth restoration plan required by this
subdivision; or
(ii) materially fails to implement a net worth restoration plan
submitted under this subdivision and approved by the
director;
the credit union shall be reclassified as significantly
undercapitalized as described in 12 CFR 702.102(a)(4)(ii).
(3) Beginning on the effective date of the credit union's
classification as undercapitalized or lower, not permit the credit
union's assets to increase beyond the credit union's assets as of the
end of the preceding quarter unless one (1) of the following
applies:
(A) The director and the credit union's share insurer have
approved a net worth restoration plan that provides for an
increase in total assets and:
(i) the assets of the credit union are increasing consistent with
the approved plan; and
(ii) the credit union is implementing steps to increase the
credit union's net worth ratio consistent with the approved
plan.
(B) The director and the credit union's share insurer have not
approved a net worth restoration plan, but the credit union's
total assets are increasing because of increases in the balances
(as of the end of the preceding quarter) of one (1) or more of the
following:
(i) The credit union's total accounts receivable and accrued
income on loans and investments.
(ii) Total cash and cash equivalents.
(iii) Total loans outstanding, as long as the amount of the
credit union's total loans outstanding does not exceed the sum
of the credit union's total assets plus the balance, as of the
end of the preceding quarter, of the credit union's unused
commitments to lend and unused lines of credit.
A credit union with one (1) or more increased balances under
this clause may not offer rates on shares that exceed the
prevailing rates on shares in the credit union's relevant market
area, and may not establish or acquire any additional branch
office.
(4) Beginning on the effective date of the credit union's
classification as undercapitalized or lower, not increase the total
dollar amount of member business loans (including loans
outstanding and unused commitments to lend) above the total
dollar amount of member business loans (including loans
outstanding and unused commitments to lend) as of the end of the
preceding quarter, unless the credit union is permitted to do so by
the director and the credit union's share insurer.
(b) Subject to the applicable procedures for issuing, reviewing, and
enforcing directives under this chapter, the director may, by directive,
take one (1) or more of the following actions with respect to an
undercapitalized credit union having a net worth ratio of less than five
percent (5%) (or with respect to a director, officer, or employee of such
a credit union) if the director determines that the action is necessary to
carry out the purposes of section 19(b) of this chapter:
(1) Prohibit the credit union from, directly or indirectly:
(A) acquiring any interest in any business entity or financial
institution;
(B) establishing or acquiring any additional branch office; or
(C) engaging in any new line of business;
unless the director has approved the credit union's net worth
restoration plan, the credit union is implementing the plan, and
the director determines that the proposed action is consistent with
and will further the objectives of the plan.
(2) Restrict the credit union's transactions with a credit union
service organization, or require the credit union to reduce or
divest the credit union's ownership interest in a credit union
service organization.
(3) Restrict the dividend rates that the credit union pays on shares
to the prevailing rates paid on comparable accounts and maturities
in the relevant market area, as determined by the director.
However, the director may not retroactively restrict a dividend
rate already declared with respect to shares acquired before a
restriction is imposed under this subdivision.
(4) Prohibit any growth in the credit union's assets, or in a
category of assets, or require the credit union to reduce the credit
union's assets or a category of the credit union's assets.
(5) Require the credit union or the credit union's credit union
service organization to alter, reduce, or terminate any activity that
poses excessive risk to the credit union, as determined by the
director.
(6) Prohibit the credit union from accepting all or certain
nonmember deposits, as specified by the director.
(7) Require the credit union to dismiss from office one (1) or
more directors or senior executive officers. A dismissal under this
subdivision shall not be construed to be a formal administrative
action for removal.
(8) Require the credit union to employ qualified senior executive
officers, who, if the director and the credit union's share insurer
so specify, shall be subject to the approval of the director and the
credit union's share insurer.
(9) Restrict or require any other action by the credit union, to the
extent the director and the credit union's share insurer determine
that the restriction or requirement will carry out the purposes of
section 19(b) of this chapter better than any of the restrictions or
requirements set forth in subdivisions (1) through (8).
(c) An undercapitalized credit union that:
(1) has a net worth ratio of at least five percent (5%); or
(2) is classified as undercapitalized in accordance with 12 CFR
702.102(a)(3)(ii) for having a risk based capital ratio of less than
eight percent (8%), as calculated under 12 CFR 702.104;
is subject to the discretionary supervisory actions set forth in
subsection (b) if the credit union fails to comply with one (1) or more
mandatory supervisory requirements or restrictions set forth in
subsection (a), or if the credit union fails to timely implement a net
worth restoration plan, as described in 12 CFR 702.111 and approved
by the director, including a failure to meet the prescribed steps to
increase the credit union's net worth ratio.

Legislative History

As added by P.L.197-2023, SEC.16.