12 U.S.C. § 1781 — Insurance of member accounts

(a) Eligibility. The Board^* must insure the member accounts of all Federal credit^* unions. It may insure the member accounts of (1) credit unions organized and operated under the laws of a State^*, the District of Columbia, a territory or possession of the United States, the trust territories, the Panama Canal Zone, or Puerto Rico; and (2) credit unions organized and operating under the Department of Defense if they comply with subchapter I of this chapter and its regulations.

(b) Application; agreement. Each Federal credit union^* must immediately apply for insurance. A State credit union or a credit union operating under the Department of Defense may apply at any time. The application must use the Board’s form and must include the applicant’s agreement (1) to pay the reasonable cost of examinations the Board considers necessary to decide eligibility, with examinations required under subchapter I conducted so their information can be used for share-insurance purposes and State examinations used by the Board as much as feasible; (2) to permit and pay the reasonable cost of examinations the Board periodically considers necessary to protect the fund and other insured credit unions; (3) to let the Board access information or reports from examinations by public regulatory authorities, including authorities supervising State-chartered credit unions, and provide additional related information the Board requires; (4) to provide burglary, defalcation, and similar insurable-loss protection and indemnity of the type, form, and at least the amount required by the law governing the credit union; (5) for a State credit union, to maintain regular reserves required by its State, district, territory, or other governing jurisdiction, or for a Federal credit union, reserves required by this chapter; (6) to maintain special reserves the Board requires by regulation or in special cases to protect members or ensure that insured credit unions maintain regular reserves at least as large as those required under subchapter I; (7) not to issue or keep outstanding an account^* or security whose form the Board has not approved by regulation or in a special case, except accounts authorized by State law for State credit unions; (8) to pay and maintain its deposit and pay the insurance premiums imposed by this subchapter; and (9) to comply with this subchapter and the Board’s regulations under it.

(c) Approval of application. (1) Before approving an application, the Board must consider (A) the applicant’s history, financial condition, and management policies; (B) whether insuring it is economically advisable without undue risk to the fund; (C) the character and fitness of its management; (D) the convenience and needs of the members it will serve; and (E) whether it is a cooperative association formed to promote thrift among members and create a credit source for provident or productive purposes. (2) The Board must deny the application if it finds that reserves are inadequate, financial condition or policies are unsafe or unsound, management is unfit, insurance would otherwise create undue risk to the fund, or the applicant’s powers and purposes conflict with promoting member thrift and creating a credit source for provident or productive purposes. (3) Repealed.

(d) Certificate of insurance. After approving an application, the Board must notify the applicant and issue a certificate showing that, on the certificate’s issue date, it is an insured credit union^* under this subchapter.

(e) Prohibition on certain associations. (1) In general. An insured credit union may not be sponsored by, or receive financial support directly or indirectly from, a “Government-sponsored enterprise” if the credit union includes that enterprise’s customers in its membership field. (2) Routine business financing. Paragraph (1) does not cover advances or other financial assistance that the enterprise generally provides in its ordinary business. (3) “Government-sponsored enterprise” defined. For this subsection, the term “Government-sponsored enterprise” has the meaning given to that term in section 1404(e)(1)(A) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. (4) Employee credit union. This subsection does not prohibit an enterprise employee from joining a credit union whose membership field is the enterprise’s employees.