BP BHEAD INT H

AN ACT Relating to the dissolution of the Washington credit union share guaranty association; amending RCW 31.12A.050; adding new sections to chapter 31.12A RCW; adding a new section to chapter 31.12 RCW; creating a new section; repealing RCW 31.12A.005, 31.12A.010, 31.12A.020, 31.12A.030, 31.12A.040, 31.12A.050, 31.12A.060, 31.12A.070, 31.12A.080, 31.12A.090, 31.12A.100, 31.12A.110, 31.12A.120, 31.12A.130, 31.12A.140, 31.12A.900, 31.12A.910, 31.12A.920, 31.12A.930, 31.12A.940, 31.12A.--- (section 2 of this act), and 31.12A.--- (section 5 of this act); repealing 1996 c -- s 1 (section 1 of this act); providing effective dates; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The Washington credit union share guaranty association was created by the legislature in 1975. For over twenty years, the association has guaranteed against the loss of credit union customers' share and deposit accounts in a liquidating member credit union, and has provided other services to promote the stability of state-chartered credit unions. Thirty-member credit unions have been assisted by the association to transition their customers to other credit unions. No person has lost any funds in a credit union guaranteed by the association. However, the changing financial services environment that credit unions operate in, consolidation between credit unions, and competitive pressures have caused the membership of the association to review its operations. The membership recommends that a voluntary, orderly dissolution of the association is in the best interest of its member credit unions and their customers.

NEW SECTION. Sec. 2. A new section is added to chapter 31.12A RCW to read as follows:

(1) Each member with a rating by the department of three, four, or five, as of the effective date of this act, shall comply with subsection (2) of this section by September 1, 1996. Each member with a rating of one or two by the department, as of the effective date of this act, shall comply with subsection (2) of this section by December 1, 1996. For purposes of this subsection, "rating" means the composite analysis of capital, asset quality, management, earnings, and liquidity. All unencumbered reserves, including the contingency reserve, shall be included as capital by the department for purposes of determining the rating.

(2) Each member shall file a:

(a) Completed application with the national credit union administration to be insured under the federal share insurance program or file a completed application with an approved private insurer, with a copy forwarded to the director by the applicant within five working days of filing the application;

(b) Detailed notice of voluntary liquidation of the credit union with the director under RCW 31.12.725; or

(c) Completed application to merge into a credit union that is insured under the federal share insurance program or has submitted an application to convert to federal insurance or an approved private insurer with the director under RCW 31.12.695.

(3) Each member shall forward a copy of the application or notice required under subsection (2) of this section to the association within five working days of filing the application or notice.

(4)(a) The guaranty by the association shall terminate upon the member's completion of conversion to insurance of share accounts under the federal share insurance program or an approved private insurer, or liquidation or merger as applicable, with written approval of the director.

(b) If a member fails to complete conversion, liquidation, or merger by December 31, 1998, the director shall appoint a liquidating agent for the involuntary liquidation of the member credit union under RCW 31.12.675 and 31.12.685 as if the member were insolvent.

(5) All credit unions that were members of the association on December 31, 1995, regardless of whether they have notified the association of their intent to withdraw, shall continue to maintain their contingency reserve under RCW 31.12A.050 and any other reserve, and shall continue to be liable for assessments under RCW 31.12A.090 as if they were members, until December 31, 1998.

(6) The association, in cooperation with the department, shall assist members in their efforts to meet the requirements of this section, section 3 of this act, and RCW 31.12A.050, particularly subsection (2) of this section.

(7) Until December 31, 2000, those credit unions that were members of the association as of December 31, 1995, shall maintain governance of the association in accordance with the bylaws of the association in effect that are not in conflict with chapter . . ., Laws of 1996 (this act) and its purpose to effect the association's orderly dissolution.

NEW SECTION. Sec. 3. A new section is added to chapter 31.12 RCW to read as follows:

(1) Except as provided in subsection (2) of this section, a credit union shall be a member of:

(a) The federal share insurance program under the national credit union administration; or

(b) A share deposit insurance provider approved by the director that will assure that deposits are protected at similar risk levels as the federal deposit insurance system.

(2) Credit unions that were members of the Washington credit union share guaranty association on December 31, 1995, may continue to guarantee deposits through the association until those credit unions have terminated their memberships as provided in section 2 of this act.

Sec. 4. RCW 31.12A.050 and 1994 c 92 s 227 are each amended to read as follows:

(1) Funding of the association shall be by transfers to a share guaranty association contingency reserve as follows:

(a) Credit unions approved by the director and ratified by the board for membership subsequent to those initial members shall establish a share guaranty association contingency reserve by transferring from their guaranty fund an amount equal to one-half of one percent of the total guaranteeable outstanding share and deposit balances as of the date of membership. When one member credit union is merged into another member credit union, the continuing credit union shall include in its share guaranty contingency reserve the share guaranty contingency reserve of the merged credit union. A nonmember credit union merging with a member credit union must transfer into the share guaranty contingency reserve of the continuing credit union an amount equal to one-half of one percent of the total guaranteeable outstanding share and deposit balances of the nonmember credit union as of the effective date of the merger, as determined by the director.

(b) On the first business day of each year, member credit unions shall make a transfer of an amount sufficient to adjust the contingency reserve to a level of one-half of one percent of the guaranteeable outstanding share and deposit balances as of December 31st of the previous year. If the member's guaranteeable outstanding share and deposit balances decrease from the previous year, any excess which may then appear in the contingency reserve may be transferred to the guaranty fund.

(c) The board may require one additional transfer during the calendar year of an amount not to exceed one-half of one percent of the guaranteeable outstanding share and deposit balances as of December 31st of the previous year. Credit unions which have merged during the year and credit unions which have joined during the year will be subject to the one additional transfer, even if that required transfer occurred before ratification of the joining member or the merger of the two credit unions. The transfer will be based on the guaranteeable share and deposit balances of those credit unions as of the following dates:

(i) For new members, the balances as of the date of membership;

(ii) For members that merge, the sum of the balances as of December 31st of the previous year;

(iii) For a nonmember merging with a member, the sum of the member's balances as of December 31st of the previous year, and of the nonmember's balances as of the effective date of the merger.

(2) Sums specified in subsection (1) of this section may be offset from the statutory transfer requirement to the guaranty fund and shall be retained in the credit union share guaranty contingency reserve as an integral part of its guaranty fund until such time and if necessary to be drawn for the purposes set forth in this chapter.

(3) Members' share guaranty association contingency reserve funds shall be invested in investments as permitted in the bylaws of the association.

(4) The board, in concurrence with the director, may also suspend or diminish the transfer in any given period after reaching a normal operating sufficiency as provided in the bylaws.

(((5) Membership in this association may be terminated upon approval by a majority of the credit union members responding to such a proposal and subject further to acceptance by the national credit union administration of continued share insurance coverage under the national credit union administration share insurance program. Notice of such intentions shall be in writing to the association's board of directors at least twelve months prior to such contemplated action: PROVIDED, That in the event that the credit union board has voted to recommend to the membership liquidation, conversion from state to federal credit union charter, or merger with or conversion to a credit union organized under the laws of another state, the liquidating, converting, or merging member will notify the association in writing within seven days after the credit union board has taken such action. Share guarantee coverage through the association will terminate with the effective date of the new charter or completion of the liquidation or merger as determined by the director.

(6) Except for a credit union merging with a member credit union, any credit union terminating membership in the association shall be assessed its pro rata share of the difference, if any, between the association's current liability for contracted guarantees and the amount from previous assessments currently held for contracted guarantees by the association. Such difference shall be determined by the director at the time the membership is terminated. If the amount of the assessment exceeds the amount of the actual obligation when finalized, the excess shall be refunded in the same proportion as paid.))

NEW SECTION. Sec. 5. A new section is added to chapter 31.12A RCW to read as follows:

If a member whose application for insurance of share accounts is approved by the national credit union administration or a similar share deposit insurance provider authorized in section 3(1)(b) of this act fails to complete the insurance conversion, the failure will constitute an unsafe and unsound condition or practice that seriously jeopardizes the interests of the member's depositors and shareholders. The failure shall constitute grounds for the director to issue a temporary order under RCW 31.12.595 requiring the member to complete the insurance conversion and to take such other action as the director deems necessary, and shall constitute grounds for the director to issue a notice of charges under RCW 31.12.585.

NEW SECTION. Sec. 6. The following acts or parts of acts are each repealed:

(1) RCW 31.12A.005 and 1982 c 67 s 1 & 1975 1st ex.s. c 80 s 2;

(2) RCW 31.12A.010 and 1994 c 92 s 225, 1985 c 7 s 98, 1983 c 48 s 1, 1982 c 67 s 2, 1980 c 41 s 11, & 1975 1st ex.s. c 80 s 3;

(3) RCW 31.12A.020 and 1975 1st ex.s. c 80 s 4;

(4) RCW 31.12A.030 and 1985 c 7 s 99, 1982 c 67 s 3, & 1975 1st ex.s. c 80 s 5;

(5) RCW 31.12A.040 and 1994 c 92 s 226, 1982 c 67 s 4, & 1975 1st ex.s. c 80 s 6;

(6) RCW 31.12A.050 and 1996 c . . . s 4 (section 4 of this act), 1994 c 92 s 227, 1983 c 48 s 2, 1982 c 67 s 5, 1980 c 41 s 12, & 1975 1st ex.s. c 80 s 7;

(7) RCW 31.12A.060 and 1982 c 67 s 6 & 1975 1st ex.s. c 80 s 8;

(8) RCW 31.12A.070 and 1994 c 92 s 228 & 1975 1st ex.s. c 80 s 9;

(9) RCW 31.12A.080 and 1994 c 92 s 229 & 1975 1st ex.s. c 80 s 10;

(10) RCW 31.12A.090 and 1994 c 92 s 230, 1982 c 67 s 7, & 1975 1st ex.s. c 80 s 11;

(11) RCW 31.12A.100 and 1994 c 92 s 231 & 1975 1st ex.s. c 80 s 12;

(12) RCW 31.12A.110 and 1975 1st ex.s. c 80 s 13;

(13) RCW 31.12A.120 and 1994 c 92 s 232 & 1975 1st ex.s. c 80 s 14;

(14) RCW 31.12A.130 and 1975 1st ex.s. c 80 s 15;

(15) RCW 31.12A.140 and 1994 c 92 s 233 & 1975 1st ex.s. c 80 s 16;

(16) RCW 31.12A.900 and 1975 1st ex.s. c 80 s 17;

(17) RCW 31.12A.910 and 1975 1st ex.s. c 80 s 18;

(18) RCW 31.12A.920 and 1975 1st ex.s. c 80 s 19;

(19) RCW 31.12A.930 and 1975 1st ex.s. c 80 s 21;

(20) RCW 31.12A.940 and 1975 1st ex.s. c 80 s 20;

(21) 1996 c . . . s 1 (section 1 of this act);

(22) RCW 31.12A.--- (section 2 of this act); and

(23) RCW 31.12A.--- (section 5 of this act).

NEW SECTION. Sec. 7. (1) Sections 1 through 4 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.

(2) Section 5 of this act shall take effect January 1, 1998.

(3) Section 6 of this act shall take effect December 31, 2000.