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Hello, this is Samantha Shares. This episode covers N C U A’s authority to Involuntarily Liquidate a Credit Union.

The following is an audio version of N.C.U.A.’s Liquidation authorities.    This podcast is educational and is not legal advice.  We are sponsored by Credit Union Exam Solutions Incorporated, whose team has over two hundred and Forty years of National Credit Union  Administration experience.  We assist our clients with N C U A so they save time and money.  If you are worried about a recent, upcoming or in process N C U A examination, reach out to learn how they can assist at Mark Treichel DOT COM.  Also check out our other podcast called With Flying Colors where we provide tips on how to achieve success with N C U A.

And now liquidations.

INVOLUNTARY  LIQUIDATIONS

1.     What is the purpose of this chapter?

This chapter provides guidance in processing involuntary liquidations.

2.    What are the types of involuntary liquidations?

a.     Title I involuntary

Undersection120 of the FCU Act, 12 U.S.C. section1766, the NCUA Board can place a solvent federal credit union into involuntary liquidation for violations of its charter, its bylaws, the FCU Act, or the NCUA Rules and Regulations. Also, under section120, 12 U.S.C. section1766, the NCUA Board can place a federal credit union into involuntary liquidation upon finding that the board or liquidating agent did not conduct a voluntary liquidation in an orderly or efficient manner or in the best interests of the members.

The rules and regulations relating to these administrative proceedings are contained in NCUA Rules and Regulations section747, Subpart E. The effect of this action is the elimination of a federal credit union as a legal entity after due process provided for by section120(b) of the FCU Act, 12 U.S.C. section1766, and Part 747, Subpart E, of the NCUA Rules and Regulations. It is the most drastic enforcement action that can be taken against a solvent federal credit union.

Since Title I liquidation is not a commonly used administrative action, examiner involvement will differ from case-to-case.

b.    Title II involuntary

Section 207 of the FCU Act, 12 U.S.C. section1787, requires the NCUA Board to close for liquidation any federal credit union it deems bankrupt or insolvent. In these cases, the NCUA Board must also appoint itself as liquidating agent. In addition, the NCUA

Board can accept appointment as liquidating agent of a bankrupt or insolvent federally-insured, state-chartered credit union.

c.     Purchase and assumption

A purchase and assumption (P&A) is an action similar to a merger, but unlike a merger the NCUA Board places the credit union into involuntary liquidation first. In a P&A, another credit union or another financial institution assumes all or part of the assets, liabilities, and shares.

3.    What are the goals for an involuntary liquidation?

The primary goals of an involuntary liquidation are:

►   Prompt return of members' shares.

►   Payment to the creditors.

►   Disposition of the remaining assets to the NCUSIF.

4.    What are the grounds for an involuntary liquidation of an insolvent credit union pursuant to section207 of FCU Act?

The grounds for this most severe action is insolvency or bankruptcy as defined in

section700.2(e) of NCUA Rules and Regulations.

For a liquidation pursuant to section207, 12 U.S.C. 1787, of the FCU Act, the credit union has no right to a pre-closure administrative hearing. Th