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52.17 Reserve fund.

Subdivision 1. Provision for losses. Every credit union shall maintain a reserve fund, which shall be used as a reserve against losses on loans, losses on investments, and other losses, and shall not be used to pay expenses of the credit union or otherwise distributed, except in case of liquidation. At the end of each monthly accounting period the gross income shall be determined. From this amount, there shall be set aside, as a statutory reserve against losses on loans, losses on investments, and against other losses as may be specified in rules prescribed by the commissioner of commerce, sums in accordance with the following schedule:

(a) A credit union in operation for more than four years and having assets of $500,000 or more shall set aside (1) ten percent of gross income until the statutory reserve shall equal four percent of the total of outstanding loans and risk assets, then (2) five percent of gross income until the statutory reserve shall equal six percent of the total of outstanding loans and risk assets;

(b) A credit union in operation less than four years or having assets of less than $500,000 shall set aside (1) ten percent of gross income until the statutory reserve shall equal seven percent of the total of outstanding loans and risk assets, then (2) five percent of gross income until the statutory reserve shall equal ten percent of the total outstanding loans and risk assets.

Whenever the statutory reserve falls below the percent of the total of outstanding loans and risk assets required by clause (a) or (b), it shall be replenished in the manner provided by clause (a) or (b) by regular contributions to maintain the stated reserve goals. The commissioner may waive the requirements in paragraphs (a), clause (2), and (b), clause (2), based on applications by credit unions demonstrating need and considering levels of total reserves and other factors bearing on the credit union's safety and soundness. The commissioner may also require special reserves to protect the interests of members either by rule or by an individual credit union in any special case.

The following shall not be included in computing outstanding loans and risk assets pursuant to clauses (a) and (b): loans to other credit unions; loans to the extent secured by a pledge of savings in the lending credit union; loans which are purchased or acquired from liquidating or merging credit unions and guaranteed by an insurance corporation pursuant to section 52.24; loans insured or guaranteed by the United States or the state of Minnesota, any agency or instrumentality of the United States or the state of Minnesota, to the amount of the insurance or guarantee.

Subd. 2. Required liquidity. Every credit union shall maintain a reserve in the form of liquid assets at a level reasonably necessary to meet anticipated withdrawals, commitments, and loan demand. Reserves must be in cash and balances due from solvent banks or which may be, in whole or in part, in short term obligations guaranteed as to principal and interest by the United States government or in certificates of deposit of a federally insured bank or in a passbook or other account in a federally insured savings association or in balances due from the Minnesota corporate credit union or ICU services corporation or United States central credit union. The commissioner of commerce may prescribe the required amount of reserves for any individual credit union from time to time based upon examination findings or other reports relating to the credit union that are available to the commissioner. Reserves for an individual credit union as prescribed by the commissioner pursuant to this section shall be enforced in accordance with sections 46.24 and 46.30 to 46.33.

HIST: (7774-17) 1925 c 206 s 17; 1933 c 346 s 3; 1937 c 213 s 5; 1971 c 154 s 8; 1973 c 740 s 5; 1975 c 394 s 2; 1978 c 642 s 1; 1980 c 492 s 1; 1981 c 182 s 5; 1982 c 424 s 130; 1983 c 43 s 5; 1983 c 289 s 114 subd 1; 1984 c 512 s 6; 1984 c 655 art 1 s 92; 1989 c 127 s 2; 1995 c 202 art 1 s 25; 1997 c 187 art 3 s 11

Official Publication of the State of Minnesota
Revisor of Statutes