§ 28-7-1-19.4 — Classification as critically undercapitalized; mandatory supervisory requirements and restrictions; discretionary supervisory actions

Indiana § 28-7-1-19.4

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

Text

4. (a) A credit union that is classified as
critically undercapitalized 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.
(3) Beginning sixty (60) days after the effective date of the credit
union's classification as critically undercapitalized, not pay the
principal of or interest on the credit union's subordinated debt (as
defined in 12 CFR 702.402). Unpaid interest shall continue to
accrue under the terms of the related subordinated debt note (as
defined in 12 CFR 702.402), to the extent permitted by law.
(4) Not permit the credit union's total assets to increase, except as
permitted by the director and the credit union's share insurer.
(5) Beginning on the effective date of the credit union's
classification as critically undercapitalized, 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.
(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 a critically
undercapitalized credit union (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;
except as permitted by the director and the credit union's share
insurer.
(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,
as determined by the director and the credit union's share insurer.
(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) Order a new election of the credit union's board of directors.
(8) 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.
(9) 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.
(10) Limit the compensation of one (1) or more senior executive
officers of the credit union to that officer's average rate of
compensation (excluding bonuses and profit sharing) during the
four (4) calendar quarters preceding the effective date of the
credit union's classification as critically undercapitalized, and
prohibit the payment of a bonus or profit share to the officer. If
the director exercises the discretionary supervisory authority
authorized by this subdivision, the director may permit the credit
union to compensate a senior executive officer without the
limitations described in this subdivision, or with less stringent
limitations than those described in this subdivision, with the prior
written approval of the director and the credit union's share
insurer.
(11) Beginning sixty (60) days after the effective date of the credit
union's classification as critically undercapitalized, prohibit
payments of principal, dividends, or interest on the credit union's
grandfathered secondary capital (as defined in 12 CFR 702.402).
Unpaid dividends or interest shall continue to accrue under the
terms of the account, to the extent permitted by law.
(12) Require the credit union to obtain the prior written approval
of the director and the credit union's share insurer before the
credit union does any of the following:
(A) Enter into any material transaction not within the scope of
an approved net worth restoration plan or an approved revised
business plan, as applicable.
(B) Extend credit for transactions determined to be highly
leveraged by the director.
(C) Amend the credit union's charter or bylaws, except to the
extent necessary to comply with any law, regulation, or order.
(D) Make any material change in accounting methods.
(E) Pay dividends or interest on new share accounts at a rate
exceeding the prevailing rates of interest on insured deposits in
the credit union's relevant market area.
(13) 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 (12).
(14) Require the credit union to merge with another financial
institution if one (1) or more grounds exist for placing the credit
union into conservatorship or into liquidation.

Legislative History

As added by P.L.197-2023, SEC.18.