704.18—Fidelity bond coverage.
(a) Scope.
This section provides the fidelity bond requirements for employees and officials in corporate credit unions.
(b) Review of coverage.
The board of directors of each corporate credit union shall, at least annually, carefully review the bond coverage in force to determine its adequacy in relation to risk exposure and to the minimum requirements in this section.
(c) Minimum coverage; approved forms.
Every corporate credit union will maintain bond coverage with a company holding a certificate of authority from the Secretary of the Treasury. All bond forms, and any riders and endorsements which limit the coverage provided by approved bond forms, must receive the prior written approval of NCUA. Fidelity bonds must provide coverage for the fraud and dishonesty of all employees, directors, officers, and supervisory and credit committee members. Notwithstanding the foregoing, all bonds must include a provision, in a form approved by NCUA, requiring written notification by surety to NCUA:
(2)
When bond coverage is terminated, by issuance of a written notice, on an employee, director, officer, supervisory or credit committee member; or
(3)
When a deductible is increased above permissible limits. Said notification shall be sent to NCUA and shall include a brief statement of cause for termination or increase.
(d) Minimum coverage amounts.
(1)
The minimum amount of bond coverage will be computed based on the corporate credit union's daily average net assets for the preceding calendar year. The following table lists the minimum requirements:
| Daily average net assets | Minimumbond(million) |
|---|---|
| Less than $50 million | $1.0 |
| $50-$99 million | 2.0 |
| $100-$499 million | 4.0 |
| $500-$999 million | 6.0 |
| $1.0-$1.999 billion | 8.0 |
| $2.0-$4.999 billion | 10.0 |
| $5.0-$9.999 billion | 15.0 |
| $10.0-$24.999 billion | 20.0 |
| $25.0 billion plus | 25.0 |
(2)
It is the duty of the board of directors of each corporate credit union to provide adequate protection to meet its unique circumstances by obtaining, when necessary, bond coverage in excess of the minimums in the table in paragraph (d)(1) of this section.
(e) Deductibles.
(1)
The maximum amount of deductibles allowed are based on the corporate credit union's core capital ratio. The following table sets out the maximum deductibles, except that in each category the maximum deductible shall be $5 million:
| Core capital ratio | Maximum deductible |
|---|---|
| Less than 1.0 percent | 7.5 percent of the sum of retained earnings and paid-in capital. |
| 1.0-1.74 percent | 10.0 percent of the sum of retained earnings and paid-in capital |
| 1.75-2.24 percent | 12.0 percent of the sum of retained earnings and paid-in capital. |
| Greater than 2.25 percent | 15.0 percent of the sum of retained earnings and paid-in capital. |
(2)
A deductible may be applied separately to one or more insuring clauses in a blanket bond. Deductibles in excess of those showing in this section must have the written approval of NCUA at least 30 calendar days prior to the effective date of the deductibles.
(f) Additional coverage.
NCUA may require additional coverage for any corporate credit union when, in the opinion of NCUA, current coverage is insufficient. The board of directors of the corporate credit union must obtain additional coverage within 30 calendar days after the date of written notice from NCUA.