12 C.F.R. PART 713—FIDELITY BOND AND INSURANCE COVERAGE FOR FEDERAL CREDIT UNIONS
Title 12 - Banks and Banking
Authority: 12 U.S.C. 1761a, 1761b, 1766(a), 1766(h), 1789(a)(11).
Source: 64 FR 28720, May 27, 1999, unless otherwise noted.
This section provides the requirements for fidelity bonds for Federal credit union employees and officials and for other insurance coverage for losses such as theft, holdup, vandalism, etc., caused by persons outside the credit union. The board of directors of each Federal credit union must at least annually review its fidelity and other insurance coverage to ensure that it is adequate in relation to the potential risks facing the credit union and the minimum requirements set by the Board. [64 FR 28720, May 27, 1999, as amended at 64 FR 57365, Oct. 25, 1999] At a minimum, your bond coverage must: (a) Be purchased in an individual policy from a company holding a certificate of authority from the Secretary of the Treasury; and (b) Include fidelity bonds that cover fraud and dishonesty by all employees, directors, officers, supervisory committee members, and credit committee members. (a) A current listing of basic bond forms that may be used without prior NCUA Board approval is on NCUA's Web site, http://www.ncua.gov. If you are unable to access the NCUA Web site, you can get a current listing of approved bond forms by contacting NCUA's Public and Congressional Affairs Office, at (703) 518–6330. (b) To use any of the following, you need prior written approval from the Board: (1) Any other basic bond form; or (2) Any rider or endorsement that limits coverage of approved basic bond forms. [64 FR 28720, May 27, 1999, as amended at 70 FR 61716, Oct. 26, 2005] (a) The minimum required amount of fidelity bond coverage for any single loss is computed based on a federal credit union's total assets. (b) This is the minimum coverage required, but a federal credit union's board of directors should purchase additional or enhanced coverage when its circumstances warrant. In making this determination, a board of directors should consider its own internal risk assessment, its fraud trends and loss experience, and factors such as its cash on hand, cash in transit, and the nature and risks inherent in any expanded services it offers such as wire transfer and remittance services. (c) While the above is the required minimum amount of bond coverage, credit unions should maintain increased coverage equal to the greater of either of the following amounts within thirty days of discovery of the need for such increase: (1) The amount of the daily cash fund, i.e. daily cash plus anticipated daily money receipts on the credit union's premises, or (2) The total amount of the credit union's money in transit in any one shipment. (3) Increased coverage is not required pursuant to paragraph (c) of this section, however, when the credit union temporarily increased its cash fund because of unusual events which cannot reasonably be expected to recur. (d) Any aggregate limit of liability provided for in a fidelity bond policy must be at least twice the single loss limit of liability. This requirement does not apply to optional insurance coverage. (e) Any proposal to reduce your required bond coverage must be approved in writing by the NCUA Board at least twenty days in advance of the proposed effective date of the reduction. [64 FR 28720, May 27, 1999, as amended at 70 FR 61716, Oct. 26, 2005] (a)(1) The maximum amount of allowable deductible is computed based on a federal credit union's asset size and capital level, as follows: (2) The deductibles may apply to one or more insurance clauses in a policy. Any deductibles in excess of the above amounts must receive the prior written permission of the NCUA Board. (b) A deductible may not exceed 10 percent of a credit union's Regular Reserve unless a separate Contingency Reserve is set up for the excess. In computing the maximum deductible, valuation accounts such as the allowance for loan losses cannot be considered. (c) A credit union's eligibility to qualify for a deductible in excess of $200,000 is determined based on it having assets in excess of $1 million as reflected in its most recent year-end 5300 call report and, as of that same year-end, qualifying for NCUA's Regulatory Flexibility Program under part 742 of this title as determined by its most recent examination report. A credit union that previously qualified for a deductible in excess of $200,000, but that subsequently fails to qualify based on its most recent year-end 5300 call report because either its assets have decreased or it no longer meets the net worth requirements of part 742 of this title or fails to meet the CAMEL rating requirements of part 742 of this title as determined by its most recent examination report, must obtain the coverage otherwise required by paragraph (b) of this section within 30 days of filing its year-end call report and must notify the appropriate NCUA regional office in writing of its changed status and confirm that it has obtained the required coverage. [64 FR 28720, May 27, 1999, as amended at 70 FR 61716, Oct. 26, 2005] The NCUA Board may require additional coverage when the Board determines that a credit union's current coverage is inadequate. The credit union must purchase this additional coverage within 30 days.
Title 12: Banks and Banking
PART 713—FIDELITY BOND AND INSURANCE COVERAGE FOR FEDERAL CREDIT UNIONS
Section Contents
§ 713.1 What is the scope of this section?
§ 713.2 What are the responsibilities of a credit union's board of directors under this section?
§ 713.3 What bond coverage must a credit union have?
§ 713.4 What bond forms may be used?
§ 713.5 What is the required minimum dollar amount of coverage?
§ 713.6 What is the permissible deductible?
§ 713.7 May the NCUA Board require a credit union to secure additional insurance coverage?
§ 713.1 What is the scope of this section?
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§ 713.2 What are the responsibilities of a credit union's board of directors under this section?
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§ 713.3 What bond coverage must a credit union have?
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§ 713.4 What bond forms may be used?
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§ 713.5 What is the required minimum dollar amount of coverage?
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------------------------------------------------------------------------ Assets Minimum bond------------------------------------------------------------------------$0 to $4,000,000....................... Lesser of total assets or $250,000.$4,000,001 to $50,000,000.............. $100,000 plus $50,000 for each million or fraction thereof over $1,000,000.$50,000,000 to $500,000,000............ $2,550,000 plus $10,000 for each million or fraction thereof over $50,000,000, to a maximum of $5,000,000.Over $500,000,000...................... One percent of assets, rounded to the nearest hundred million, to a maximum of $9,000,000.------------------------------------------------------------------------
§ 713.6 What is the permissible deductible?
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------------------------------------------------------------------------ Assets Maximum deductible------------------------------------------------------------------------$0 to $100,000......................... No deductible allowed.$100,001 to $250,000................... $1,000.$250,000 to $1,000,000................. $2,000.Over $1,000,000........................ $2,000 plus 1/1000 of total assets up to a maximum of $200,000; for credit unions over $1 million in assets that qualify for NCUA's Regulatory Flexibility Program in Part 742, the maximum deductible is $1,000,000.------------------------------------------------------------------------
§ 713.7 May the NCUA Board require a credit union to secure additional insurance coverage?
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