(a) Definition. For the purposes of this section, a related entity is defined as:

(1) a credit union service organization in which a credit union has a material interest by contracting with, lending to or investing in the organization;

(2) a subsidiary or affiliate of a credit union service organization that is wholly owned or controlled by a credit union;

(3) an organization engaged primarily in the business of managing a credit union; and

(4) third-party contractors providing electronic data processing, electronic fund transfers, or other member services to or on behalf of a credit union.

(b) General Supervision. A credit union should perform a thorough analytical assessment to identify, measure, monitor, and establish controls to manage the risks associated with related entities and avoid excessive risk-taking that may threaten the safety and soundness of a credit union. The department may review the risks associated with any related entity and its activities together with other credit union risks using its supervision-by-risk framework. The department shall assess the effectiveness of a credit union's oversight program of related entities, including its strategic planning, third-party selection process, and ongoing monitoring.

(c) Examination. A credit union's use of related entities to achieve its strategic goals does not diminish the responsibility of the department to ensure that the activity is conducted in a safe and sound manner and in compliance with applicable law. Although in most situations, these activities should be conducted in the same manner that would be expected if the credit union were conducting the activities directly, the department shall consider the following factors in determining whether to examine related entities:

(1) the high risk or unusual nature of the activities conducted by the related entity for the credit union;

(2) the significance of the activities conducted by the related entity for the credit union to the credit union's operations and income; and

(3) the extent to which the credit union has sufficient systems, controls, and personnel to adequately monitor, measure, and control risks arising from activities conducted by the related entity. The department may examine a related entity, as the commissioner deems necessary to ensure that a credit union is not assuming excessive risk.

(d) Examination Fee. The related entity shall pay a supplemental examination fee as prescribed in §97.113(e) of this title (relating to Supplemental examination fees). A credit union may elect to pay the fee on behalf of the related entity. The supplemental examination fee for a related entity may be waived or reduced if the commissioner determines it is appropriate.

Source Note: The provisions of this §97.107 adopted to be effective March 14, 2004, 29 TexReg 2639; amended to be effective July 12, 2009, 34 TexReg 4513