President Clinton signed HR 1151, the "Credit Union Membership Access Act," into law Friday. An overview of the bill's key provisions follows.

Title I-Membership limits

Grandfathers all current members and lets federal credit unions enroll new members from employee groups already served.

Simplifies membership description of federal credit unions to three types: single common bond, multiple common bonds, and community.

Lets any federal credit union with multiple common bonds, or membership groups, serve unrelated companies or associations provided they have fewer than 3,000 employees or members. A larger group could be served if the National Credit Union Administration found it could not support its own credit union for either financial or supervisory reasons.

Requires NCUA to encourage the formation of separately chartered credit unions before approving a credit union's application to serve a new group. If a separate charter would be impractical, then the group must affiliate with a credit union within "reasonable proximity" of its location.

Limits community-based federal credit unions to accepting members or organizations within a "well-defined local community, neighborhood, or rural district" based on regulations to be issued by NCUA.

Restricts membership to the "immediate family or household" of an eligible credit union member based on regulations to be issued by NCUA.

Title II-Business limits and other regulations

Caps business lending at 1.75 times a credit union's net worth, not to exceed 12.25% of assets. Credit unions that currently exceed the limit have three years to comply. Loans under $50,000 are not counted toward the cap. Exempted are credit unions chartered primarily to make business loans, to serve low-income members, or as community development financial institutions.

Eases the conversion of credit unions to mutual thrifts. NCUA approval no longer required and conversion only has to be approved by a majority of voting members rather than a majority of all members. It limits the compensation that directors and senior management may earn in connection with the conversion.

Requires credit unions with assets greater than $500 million to have an annual independent audit.

Title III-Capital requirements

Requires credit union to maintain a 7% ratio of capital to total assets to be "well-capitalized."

Requires credit unions falling below 7% to retain at least 0.4% of total assets until ratio is restored.

Defines credit unions below 6% capitalization as "undercapitalized," and prohibits them from increasing assets unless the NCUA has approved a recovery plan. Also, new commercial loans are prohibited until a 6% capital ratio is restored.

Requires NCUA to appoint a conservator or liquidating agency within 90 days of a credit union's capital falling to 2%, although NCUA may raise that threshold to 3%.

Requires NCUA to develop risk-based capital rules for credit unions with "complex" investment portfolios.

Title IV-Studies due within a year

Treasury Department study of regulatory, tax, and other differences between credit unions and other federally insured financial institutions. Includes a review of the potential effect of applying federal tax laws to credit unions.

Treasury Department study recommending legislative and administrative ways to cut taxes for insured depository institutions with less than $1 billion of assets and banks with assets between $1 billion and $10 billion.

Treasury Department study on business lending by credit unions, including whether the competitive advantage produced by credit unions' tax exemption endangers the viability of banks.

Reports by NCUA and each federal banking agency on progress in streamlining rules and reducing regulatory costs and the paperwork burden as mandated by a 1994 federal law.

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