Investment and Deposit Activities, 59144-59146 [2012-23644]

Download as PDF 59144 Federal Register / Vol. 77, No. 187 / Wednesday, September 26, 2012 / Proposed Rules 1. The authority citation for part 702 continues to read as follows: Authority: 12 U.S.C. 1766(a), 1790d. 2. Section 702.103 is amended by: a. Removing ‘‘ten’’ in paragraph (a) and replacing it with ‘‘thirty’’. b. Removing ‘‘($10,000,000)’’ in paragraph (a) and replacing it with ‘‘($30,000,000)’’. Comments must be received on or before November 26, 2012. DATES: PART 741—REQUIREMENTS FOR INSURANCE Authority: 12 U.S.C. 1757, 1766(a), 1781– 1790 and 1790d; 31 U.S.C. 3717. [Amended] 4. Section 741.3 is amended by removing the number ‘‘10’’ and replacing it with ‘‘30’’ wherever it appears in paragraph (b)(5)(i). PART 791—RULES OF NCUA BOARD PROCEDURES; PROMULGATION OF NCUA RULES AND REGULATIONS; PUBLIC OBSERVATION OF NCUA BOARD MEETINGS 5. The authority for part 791 continues to read as follows: Authority: 12 U.S.C. 1766, 1789 and 5 U.S.C. 552b. § 791.8 [Amended] 6. Section 791.8 paragraph (a) is revised to read as follows: NCUA’s procedures for developing regulations are governed by the Administrative Procedure Act (5 U.S.C. 551 et seq.), the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and NCUA’s policies for the promulgation of rules and regulations as set forth in its Interpretive Ruling and Policy Statement 87–2 as amended by Interpretive Ruling and Policy Statements 03–2 and 12–2. [FR Doc. 2012–23662 Filed 9–25–12; 8:45 am] BILLING CODE 7535–01–P wreier-aviles on DSK5TPTVN1PROD with PROPOSALS NATIONAL CREDIT UNION ADMINISTRATION FOR FURTHER INFORMATION CONTACT: 12 CFR Part 703 RIN 3133–AE06 Investment and Deposit Activities National Credit Union Administration (NCUA). ACTION: Proposed rule with request for comments. AGENCY: VerDate Mar<15>2010 15:05 Sep 25, 2012 You may submit comments by any of the following methods (Please send comments by one method only): • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • NCUA Web Site: http:// www.ncua.gov/Legal/Regs/Pages/ PropRegs.aspx. Follow the instructions for submitting comments. • Email: Address to regcomments@ncua.gov. Include ‘‘[Your name] Comments on Proposed Rule 703, Investment and Deposit Activities’’ in the email subject line. • Fax: (703) 518–6319. Use the subject line described above for email. • Mail: Address to Mary Rupp, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314– 3428. • Hand Delivery/Courier: Same as mail address. Public Inspection: You may view all public comments on NCUA’s Web site at http://www.ncua.gov/Legal/Regs/ Pages/PropRegs.aspx as submitted, except for those we cannot post for technical reasons. NCUA will not edit or remove any identifying or contact information from the public comments submitted. You may inspect paper copies of comments in NCUA’s law library at 1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays between 9:00 a.m. and 3:00 p.m. To make an appointment, call (703) 518–6546 or send an email to OGCMail@ncua.gov. ADDRESSES: 3. The authority for part 741 continues to read as follows: § 741.3 The NCUA Board (Board) proposes to amend its investment regulation to allow federal credit unions (FCUs) to purchase Treasury Inflation Protected Securities (TIPS). This proposed amendment adds TIPS to the list of permissible investments for FCUs in part 703. The Board believes TIPS will provide FCUs with an additional investment portfolio risk management tool that can be useful in an inflationary economic environment. SUMMARY: PART 702—PROMPT CORRECTIVE ACTION Jkt 226001 Frank Kressman, Associate General Counsel, Office of General Counsel, at the above address or telephone (703) 518–6540, or J. Owen Cole, Jr., Director, Division of Capital Markets, Office of Examination and Insurance, at the above address or telephone (703) 518–6360. SUPPLEMENTARY INFORMATION: I. Background II. Regulatory Procedures PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 I. Background A. Why is the NCUA Board proposing this rule? The Board is proposing this rule because, after extensive research and analysis as discussed more fully below, it believes TIPS can be a valuable risk management tool for FCUs. The Board also believes FCUs have the ability to manage the risks associated with TIPS and can benefit from including them in their overall investment portfolio. In addition to analyzing the nature and performance of TIPS in the marketplace, NCUA has monitored FCU usage of TIPS through a long-term investment pilot program. The results of the pilot program are consistent with the Board’s opinion that TIPS are an appropriate investment for FCUs and can be a valuable portfolio management tool when there are inflationary risks in the economy. Accordingly, for the reasons discussed above, NCUA proposes to make TIPS permissible under part 703. B. What is a TIPS? TIPS 1 is a security issued by the U.S. Department of the Treasury, Bureau of Public Debt, which is readily available to investors. TIPS differ from other securities by providing protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Bureau of Labor Statistic’s Consumer Price Index (CPI).2 When a TIPS matures, the holder is paid the adjusted principal or original principal, whichever is greater. TIPS pay interest twice a year at a fixed rate. The rate is applied to the adjusted principal, so, like the principal, interest payments rise with inflation and fall with deflation. In a deflationary period, it is possible to experience a contractual decline in the principal balance, which is not an event of default. C. Analysis of TIPS and Part 703 Overview TIPS are currently a prohibited investment under part 703 because they reprice their value in response to changes in the CPI, and the CPI is a prohibited index for variable rate 1 To learn more about TIPS, see the U.S. Department of the Treasury, Bureau of Public Debt Web site at: http://www.treasurydirect.gov/indiv/ research/indepth/tips/res_tips.htm. 2 The CPI program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. To learn more about how the CPI is produced, see the Bureau of Labor Statistics ‘‘Frequently Asked Questions’’ on CPI, found at: http://www.bls.gov/ cpi/cpifaq.htm. E:\FR\FM\26SEP1.SGM 26SEP1 Federal Register / Vol. 77, No. 187 / Wednesday, September 26, 2012 / Proposed Rules 59145 certainly some measure of correlation, but an FCU can be exposed to earnings variability if it invests in variable rate assets tied to one rate, LIBOR rates for example, and prices its shares on another, Treasury rates for example. Historically, the Board has prohibited variable rate instruments tied to nondomestic rate indices because of the basis risk for FCUs. While the Board remains concerned about basis risk, it recognizes that FCUs now have greater access to advanced asset-liability management tools that can identify and measure basis risk, and are therefore better equipped to manage such risk associated with adding CPI as a permissible index. instruments. Under § 703.14(a), an FCU is permitted to invest in a variable rate instrument as long as the rate is tied to a domestic interest rate.3 12 CFR 703.14(a). The purpose of this provision is to reduce the basis risk between the interest earned on assets and the dividends paid on shares.4 Generally, deposit/share rates for financial institutions, including credit unions, are responsive to market interest rates. As market rates change, so do the deposit/ share rates. Thus, if an FCU invests in a variable rate instrument with an index tied to market rates, the spread between the asset’s income stream and the share dividends paid should remain relatively constant. This protects the FCU’s earnings in times of rate volatility, especially in periods of rising rates. However, there is not always a perfect correlation between market interest rates and deposit/share rates. This can result in greater volatility for an FCU if it does not take action to manage this basis risk. Allowing FCUs to hold TIPS in their investment portfolios adds no credit risk and allows them the option of minimizing the need for accurate inflation forecasting as a way to maintain the real value of their investment portfolios. TIPS should be based upon sound due diligence and a demonstrated effectiveness in managing risk. This proposal authorizes FCUs to purchase TIPS only. Other similar securities based on inflation indices currently available or available in the future that are not issued by the United States Treasury Department are not authorized by this rule. The current TIPS pilot program will expire in the event this proposal is eventually finalized by the Board. II. Regulatory Procedures of this part, the U.S. dollar-denominated London Interbank Offered Rate (LIBOR) is a domestic interest rate. 4 Basis risk is a common form of risk incurred by financial institutions, including credit unions. Basis risk is the variability between two or more indices (e.g., equity barometers such as the S&P 500, and interest rate indices such as the 1-year Treasury rate) that serve as benchmarks for valuing financial institution assets and liabilities. The Board believes the authority to invest in TIPS for the purpose of protecting against inflation risk can be a valuable part of an effective risk management program for FCUs that understand the risks. TIPS may not be appropriate for all FCUs. As with any investment, the decision to purchase 3 (a) Variable rate investment. A Federal credit union may invest in a variable rate investment, as long as the index is tied to domestic interest rates and not, for example, to foreign currencies, foreign interest rates, or domestic or foreign commodity prices, equity prices, or inflation rates. For purposes VerDate Mar<15>2010 15:05 Sep 25, 2012 Jkt 226001 PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 Regulatory Flexibility Act The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a proposed rule may have on a substantial number of small entities (primarily those under ten million dollars in assets). This proposed rule reduces compliance burden and extends regulatory relief while maintaining existing safety and soundness standards. NCUA has determined this proposed rule will not have a significant economic impact on a substantial number of small credit unions. E:\FR\FM\26SEP1.SGM 26SEP1 EP26SE12.000</GPH> wreier-aviles on DSK5TPTVN1PROD with PROPOSALS D. Caution in Investing in TIPS Why TIPS Should Be Permissible As noted, FCUs are permitted to invest in variable rate instruments where the index is tied to a domestic interest rate. Common domestic interest rates include the Fed Funds rate, Treasury rates, and LIBOR. Despite the common label ‘‘domestic interest rate,’’ each of these rates is not perfectly correlated with the others. There is 59146 Federal Register / Vol. 77, No. 187 / Wednesday, September 26, 2012 / Proposed Rules Paperwork Reduction Act DEPARTMENT OF TRANSPORTATION NCUA has determined that the requirements of this rule do not increase the paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget. Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2012–1001; Directorate Identifier 2012–NM–020–AD] Executive Order 13132 RIN 2120–AA64 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order to adhere to fundamental federalism principles. This proposed rule would not have a substantial direct effect on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this proposed rule does not constitute a policy that has federalism implications for purposes of the executive order. Airworthiness Directives; Cessna Aircraft Company Airplanes List of Subjects 12 CFR Part 703 Credit unions, Investments. By the National Credit Union Administration Board on September 20, 2012. Mary Rupp, Secretary of the Board. For the reasons discussed above, NCUA proposes to amend 12 CFR part 703 as follows: PART 703—INVESTMENT AND DEPOSIT ACTIVITES 1. The authority citation for part 703 continues to read as follows: Authority: 12 U.S.C. 1757(7), 1757(8), 1757(15). 2. Revise § 703.14(a) to read as follows: wreier-aviles on DSK5TPTVN1PROD with PROPOSALS § 703.14 Permissible investments. (a) Variable rate investment. A federal credit union may invest in a variable rate investment, as long as the index is tied to domestic interest rates and not, for example, to foreign currencies, foreign interest rates, or domestic or foreign commodity prices, equity prices, or inflation rates with the exception of Treasury Inflation Protected Securities. For purposes of this part, the U.S. dollar-denominated London Interbank Offered Rate (LIBOR) is a domestic interest rate. [FR Doc. 2012–23644 Filed 9–25–12; 8:45 am] BILLING CODE 7535–01–P VerDate Mar<15>2010 15:05 Sep 25, 2012 Jkt 226001 Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: We propose to adopt a new airworthiness directive (AD) for certain Cessna Aircraft Company Model 500, 501, 550, 551, S550, 560, 560XL, and 650 airplanes. This proposed AD was prompted by multiple reports of smoke and/or fire in the tailcone caused by sparking due to excessive wear of the brushes in the air conditioning (A/C) motor. This proposed AD would require an inspection to determine the accumulated hours on certain A/C drive motor assemblies; repetitive replacement of the brushes in the drive motor assembly, or as an option to the brush replacement, deactivation of the air conditioner; and return of replaced brushes to Cessna. We are proposing this AD to prevent the brushes in the A/C motor from wearing down beyond their limits, which could result in the rivet in the brush contacting the commutator causing sparks and consequent fire and/or smoke in the tailcone with no means to detect or extinguish the fire and/or smoke. DATES: We must receive comments on this proposed AD by November 13, 2012. SUMMARY: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: • Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments. • Fax: 202–493–2251. • Mail: U.S. Department of Transportation, Docket Operations, M– 30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590. • Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this proposed AD, contact Cessna Aircraft Co., P.O. Box 7706, Wichita, KS 67277; telephone 316–517–6215; fax 316–517–5802; email ADDRESSES: PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 citationpubs@cessna.textron.com; Internet https:// www.cessnasupport.com/newlogin.html. You may review copies of the referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425–227– 1221. Examining the AD Docket You may examine the AD docket on the Internet at http:// www.regulations.gov; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (phone: 800–647–5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Christine Abraham, Aerospace Engineer, Electrical Systems and Avionics, ACE– 119W, FAA, Wichita Aircraft Certification Office (ACO), 1801 Airport Road, Room 100, Mid-Continent Airport, Wichita, Kansas 67209; phone: 316–946–4165; fax: 316–946–4107; email: wichita-cos@faa.gov. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include ‘‘Docket No. FAA– 2012–1001; Directorate Identifier 2012– NM–020–AD’’ at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments. We will post all comments we receive, without change, to http:// www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD. Discussion We have received more than 10 reports of smoke/fire (three reports of fire) in the tailcone of Cessna Aircraft Company Model 525, 550, and 560 airplanes, where investigation revealed brushes had worn beyond their limits on the part number (P/N) 1134104–1 A/ E:\FR\FM\26SEP1.SGM 26SEP1

Agencies

[Federal Register Volume 77, Number 187 (Wednesday, September 26, 2012)]
[Proposed Rules]
[Pages 59144-59146]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23644]


-----------------------------------------------------------------------

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 703

RIN 3133-AE06


Investment and Deposit Activities

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The NCUA Board (Board) proposes to amend its investment 
regulation to allow federal credit unions (FCUs) to purchase Treasury 
Inflation Protected Securities (TIPS). This proposed amendment adds 
TIPS to the list of permissible investments for FCUs in part 703. The 
Board believes TIPS will provide FCUs with an additional investment 
portfolio risk management tool that can be useful in an inflationary 
economic environment.

DATES: Comments must be received on or before November 26, 2012.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
     Email: Address to regcomments@ncua.gov. Include ``[Your 
name] Comments on Proposed Rule 703, Investment and Deposit 
Activities'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: You may view all public comments on NCUA's Web 
site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as 
submitted, except for those we cannot post for technical reasons. NCUA 
will not edit or remove any identifying or contact information from the 
public comments submitted. You may inspect paper copies of comments in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9:00 a.m. and 3:00 p.m. To make an 
appointment, call (703) 518-6546 or send an email to OGCMail@ncua.gov.

FOR FURTHER INFORMATION CONTACT: Frank Kressman, Associate General 
Counsel, Office of General Counsel, at the above address or telephone 
(703) 518-6540, or J. Owen Cole, Jr., Director, Division of Capital 
Markets, Office of Examination and Insurance, at the above address or 
telephone (703) 518-6360.

SUPPLEMENTARY INFORMATION:

I. Background
II. Regulatory Procedures

I. Background

A. Why is the NCUA Board proposing this rule?

    The Board is proposing this rule because, after extensive research 
and analysis as discussed more fully below, it believes TIPS can be a 
valuable risk management tool for FCUs. The Board also believes FCUs 
have the ability to manage the risks associated with TIPS and can 
benefit from including them in their overall investment portfolio. In 
addition to analyzing the nature and performance of TIPS in the 
marketplace, NCUA has monitored FCU usage of TIPS through a long-term 
investment pilot program. The results of the pilot program are 
consistent with the Board's opinion that TIPS are an appropriate 
investment for FCUs and can be a valuable portfolio management tool 
when there are inflationary risks in the economy.
    Accordingly, for the reasons discussed above, NCUA proposes to make 
TIPS permissible under part 703.

B. What is a TIPS?

    TIPS \1\ is a security issued by the U.S. Department of the 
Treasury, Bureau of Public Debt, which is readily available to 
investors. TIPS differ from other securities by providing protection 
against inflation. The principal of a TIPS increases with inflation and 
decreases with deflation, as measured by the Bureau of Labor 
Statistic's Consumer Price Index (CPI).\2\ When a TIPS matures, the 
holder is paid the adjusted principal or original principal, whichever 
is greater. TIPS pay interest twice a year at a fixed rate. The rate is 
applied to the adjusted principal, so, like the principal, interest 
payments rise with inflation and fall with deflation. In a deflationary 
period, it is possible to experience a contractual decline in the 
principal balance, which is not an event of default.
---------------------------------------------------------------------------

    \1\ To learn more about TIPS, see the U.S. Department of the 
Treasury, Bureau of Public Debt Web site at: http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips.htm.
    \2\ The CPI program produces monthly data on changes in the 
prices paid by urban consumers for a representative basket of goods 
and services. To learn more about how the CPI is produced, see the 
Bureau of Labor Statistics ``Frequently Asked Questions'' on CPI, 
found at: http://www.bls.gov/cpi/cpifaq.htm.
---------------------------------------------------------------------------

C. Analysis of TIPS and Part 703

Overview
    TIPS are currently a prohibited investment under part 703 because 
they reprice their value in response to changes in the CPI, and the CPI 
is a prohibited index for variable rate

[[Page 59145]]

instruments. Under Sec.  703.14(a), an FCU is permitted to invest in a 
variable rate instrument as long as the rate is tied to a domestic 
interest rate.\3\ 12 CFR 703.14(a).
---------------------------------------------------------------------------

    \3\ (a) Variable rate investment. A Federal credit union may 
invest in a variable rate investment, as long as the index is tied 
to domestic interest rates and not, for example, to foreign 
currencies, foreign interest rates, or domestic or foreign commodity 
prices, equity prices, or inflation rates. For purposes of this 
part, the U.S. dollar-denominated London Interbank Offered Rate 
(LIBOR) is a domestic interest rate.
---------------------------------------------------------------------------

    The purpose of this provision is to reduce the basis risk between 
the interest earned on assets and the dividends paid on shares.\4\ 
Generally, deposit/share rates for financial institutions, including 
credit unions, are responsive to market interest rates. As market rates 
change, so do the deposit/share rates. Thus, if an FCU invests in a 
variable rate instrument with an index tied to market rates, the spread 
between the asset's income stream and the share dividends paid should 
remain relatively constant. This protects the FCU's earnings in times 
of rate volatility, especially in periods of rising rates.
---------------------------------------------------------------------------

    \4\ Basis risk is a common form of risk incurred by financial 
institutions, including credit unions. Basis risk is the variability 
between two or more indices (e.g., equity barometers such as the S&P 
500, and interest rate indices such as the 1-year Treasury rate) 
that serve as benchmarks for valuing financial institution assets 
and liabilities.
---------------------------------------------------------------------------

    However, there is not always a perfect correlation between market 
interest rates and deposit/share rates. This can result in greater 
volatility for an FCU if it does not take action to manage this basis 
risk.
Why TIPS Should Be Permissible
    As noted, FCUs are permitted to invest in variable rate instruments 
where the index is tied to a domestic interest rate. Common domestic 
interest rates include the Fed Funds rate, Treasury rates, and LIBOR. 
Despite the common label ``domestic interest rate,'' each of these 
rates is not perfectly correlated with the others. There is certainly 
some measure of correlation, but an FCU can be exposed to earnings 
variability if it invests in variable rate assets tied to one rate, 
LIBOR rates for example, and prices its shares on another, Treasury 
rates for example.
    Historically, the Board has prohibited variable rate instruments 
tied to non-domestic rate indices because of the basis risk for FCUs. 
While the Board remains concerned about basis risk, it recognizes that 
FCUs now have greater access to advanced asset-liability management 
tools that can identify and measure basis risk, and are therefore 
better equipped to manage such risk associated with adding CPI as a 
permissible index.
[GRAPHIC] [TIFF OMITTED] TP26SE12.000

    Allowing FCUs to hold TIPS in their investment portfolios adds no 
credit risk and allows them the option of minimizing the need for 
accurate inflation forecasting as a way to maintain the real value of 
their investment portfolios.

D. Caution in Investing in TIPS

    The Board believes the authority to invest in TIPS for the purpose 
of protecting against inflation risk can be a valuable part of an 
effective risk management program for FCUs that understand the risks. 
TIPS may not be appropriate for all FCUs. As with any investment, the 
decision to purchase TIPS should be based upon sound due diligence and 
a demonstrated effectiveness in managing risk. This proposal authorizes 
FCUs to purchase TIPS only. Other similar securities based on inflation 
indices currently available or available in the future that are not 
issued by the United States Treasury Department are not authorized by 
this rule. The current TIPS pilot program will expire in the event this 
proposal is eventually finalized by the Board.

II. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a proposed rule may have on 
a substantial number of small entities (primarily those under ten 
million dollars in assets). This proposed rule reduces compliance 
burden and extends regulatory relief while maintaining existing safety 
and soundness standards. NCUA has determined this proposed rule will 
not have a significant economic impact on a substantial number of small 
credit unions.

[[Page 59146]]

Paperwork Reduction Act

    NCUA has determined that the requirements of this rule do not 
increase the paperwork requirements under the Paperwork Reduction Act 
of 1995 and regulations of the Office of Management and Budget.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order to adhere to fundamental 
federalism principles. This proposed rule would not have a substantial 
direct effect on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
determined that this proposed rule does not constitute a policy that 
has federalism implications for purposes of the executive order.

List of Subjects

12 CFR Part 703

    Credit unions, Investments.

    By the National Credit Union Administration Board on September 
20, 2012.
Mary Rupp,
Secretary of the Board.

    For the reasons discussed above, NCUA proposes to amend 12 CFR part 
703 as follows:

PART 703--INVESTMENT AND DEPOSIT ACTIVITES

    1. The authority citation for part 703 continues to read as 
follows:

    Authority:  12 U.S.C. 1757(7), 1757(8), 1757(15).

    2. Revise Sec.  703.14(a) to read as follows:


Sec.  703.14  Permissible investments.

    (a) Variable rate investment. A federal credit union may invest in 
a variable rate investment, as long as the index is tied to domestic 
interest rates and not, for example, to foreign currencies, foreign 
interest rates, or domestic or foreign commodity prices, equity prices, 
or inflation rates with the exception of Treasury Inflation Protected 
Securities. For purposes of this part, the U.S. dollar-denominated 
London Interbank Offered Rate (LIBOR) is a domestic interest rate.

[FR Doc. 2012-23644 Filed 9-25-12; 8:45 am]
BILLING CODE 7535-01-P