At the July meeting of the NCUA Board, the Board voted to finalize the fidelity bond rule proposed in November 2018. It was published in the Federal Register on July 24, 2019 at 84 Fed. Reg. 35517.
A fidelity bond is a form of insurance that covers against losses that might be incurred due to fraud or acts of dishonesty caused by specific individuals, like credit union staff or volunteers. Section 120 of the Federal Credit Union Act requires credit unions to obtain fidelity bonds regarding “every person appointed or elected” by an FCU “to any position requiring the receipt, payment or custody of money or other personal property” of the FCU. The NCUA Board is tasked by the FCU Act to establish bond forms and regulatory requirements. The requirements for fidelity bonds can be found in Part 713 of NCUA’s rules and regulations. Federally-insured state-chartered credit unions are also subject to NCUA’s fidelity bond requirements through a cross-reference at section 741.201.
The regulatory review of the fidelity bond provisions found several inconsistencies between Part 713 and approved bond forms and outdated provisions, leading to the 2018 proposal.
Board and Supervisory Committee Responsibilities
The current rule requires that the credit union’s board of directors annually review its fidelity bond and other insurance coverage to ensure it is adequate. NCUA proposed that the rule further require the board to review applications for purchase or renewal of a fidelity bond. NCUA stated “almost every commenter objected” to this requirement on the basis that it was unnecessary and too time intensive. NCUA disagreed and finalized it anyway.
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