NCUA Proposes Rule to Simplify Fidelity Bond Requirements

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Context and data our newsroom added to the originating report, with the primary source for each item shown below it.

• The docket number for the proposed rule is NCUA–2026–1882.

• The National Credit Union Administration Board has legal authority to issue the proposed rule pursuant to its plenary rulemaking authority under the Federal Credit Union Act and specific rulemaking authority related to statutory requirements mandating the bonding of federally insured credit union employees and officials.

• The National Credit Union Administration Board established the current framework for fidelity bond and insurance coverage in a final rule published on May 27, 1999.

• The 1999 rule created part 713 by redesignating and revising the requirements previously set forth in § 701.20.

• The primary purpose of the 1999 rule was to update and clarify the requirements related to fidelity bond coverage for credit unions to better understand them and to enhance regulatory effectiveness.

• In a final rule published on October 26, 2005, the National Credit Union Administration Board modernized the regulation by increasing the minimum required coverage limits to account for inflation, asset growth, and increased risks from technology and insider fraud.

• The 2005 rule increased the maximum permissible deductible from $200,000 to $1 million for certain credit unions.

• The National Credit Union Administration Board enacted a significant update to part 713 with a final rule published on July 24, 2019.

• The 2019 amendment was prompted by an increase in losses to the National Credit Union Share Insurance Fund resulting from bond issuers rescinding coverage when the signatory on the application was aware of fraudulent activity.

• The 2019 rule amended § 713.2 to require a federally insured credit union’s board of directors to review all applications for bond purchase or renewal.

• The 2019 rule amended § 713.2 to require a federally insured credit union’s board of directors to approve submission of any such application by board resolution.

• The 2019 rule amended § 713.2 to require a federally insured credit union’s board of directors to delegate a non-employee board member to sign the agreement updating bond coverage, with the individual signing the agreement rotating to prevent the same signatory on consecutive renewals.

• The 2019 rule amended § 713.3 to require that additional coverage be offered after a federally insured credit union is liquidated, providing a 12-month window enabling a claim to be filed under the bond for losses discovered after liquidation.

• The 2019 rule amended § 713.4 by introducing a 10-year expiration period for any Board-approved bond form to ensure the form remained current.

• The 10-year expiration period change was instituted after the Board discovered that some fidelity bonds issued on previously approved forms contained outdated provisions, unapproved additions, or were being misinterpreted.

• In 2017, the NCUA Office of General Counsel issued a legal opinion permitting natural person credit unions to include coverage for credit union service organizations (CUSOs) in their fidelity bonds, which was later codified in the 2019 final rule.

  Source: ncua.gov

• The Office of General Counsel issued a 2017 legal opinion permitting natural person credit unions to include coverage for credit union service organizations (CUSOs) in their fidelity bonds, later codified in the 2019 NCUA rule.

  Source: ncua.gov