Capital Planning and Stress Testing-Schedule Shift, 3918-3921 [2015-01239]
Download as PDF
<![CDATA[
3918
Proposed Rules
Federal Register
Vol. 80, No. 16
Monday, January 26, 2015
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 702
RIN 3133–AE44
Capital Planning and Stress Testing—
Schedule Shift
National Credit Union
Administration (NCUA).
ACTION: Proposed rule.
AGENCY:
The NCUA Board (Board) is
issuing proposed amendments to the
regulation governing credit union
capital planning and stress testing. The
amendments would adjust the timing of
certain events in the capital planning
and stress testing cycles. If finalized, the
revisions to the regulation would
become effective January 1, 2016.
DATES: Comments must be received on
or before March 27, 2015.
ADDRESSES: You may submit comments
by any of the following methods (Please
send comments by one method only):
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• NCUA Web site: https://
www.ncua.gov/RegulationsOpinions
Laws/proposed_regs/proposed_
regs.html. Follow the instructions for
submitting comments.
• Email: Address to regcomments@
ncua.gov. Include ‘‘[Your name]—
Comments on Proposed Rule—Capital
Planning and Stress Testing—Schedule
Shift’’ in the email subject line.
• Fax: (703) 518–6319. Use the
subject line described above for email.
• Mail: Address to Gerard Poliquin,
Secretary of the Board, National Credit
Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314–
3428.
• Hand Delivery/Courier: Same as
mail address.
FOR FURTHER INFORMATION CONTACT:
Jeremy Taylor or Dale Klein, Senior
Capital Markets Specialists, Office of
National Examinations and Supervision,
at the above address or telephone (703)
518–6640.
tkelley on DSK3SPTVN1PROD with PROPOSALS
SUMMARY:
VerDate Sep<11>2014
18:26 Jan 23, 2015
Jkt 235001
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Proposed Amendments
III. Regulatory Procedures
I. Background
In April 2014, the Board issued a final
rule requiring capital planning and
stress testing for federally insured credit
unions (FICUs) with assets of $10
billion or more.1 Capital planning
requires covered credit unions to assess
their financial condition and risks over
the planning horizon under both
expected and unfavorable conditions.
Annual supervisory stress testing allows
NCUA to obtain an independent test of
these credit unions under stress
scenarios. By setting a regulatory
minimum capital ratio under stress, the
final rule requires covered credit unions
to take corrective action before they
become undercapitalized to an extent
that may cause loss to the National
Credit Union Share Insurance Fund.
The final rule provides several
timeframes for the formulation and
submission of capital plans and for the
stress testing of covered credit unions.
One critical date in the stress testing
process is the date NCUA releases the
baseline, adverse, and severely adverse
economic scenarios that serve as basis
for the testing. As noted in the preamble
to the proposed rule, NCUA plans to
base the scenarios on those developed
by the Federal Reserve, the Federal
Deposit Insurance Corporation, and the
Office of the Comptroller of the
Currency (collectively, the banking
agencies) for their regulated
institutions.2 At the time the Board
issued NCUA’s final rule, the banking
agencies were scheduled to provide
scenarios for their regulated institutions
by November 15 each year.3 The
banking agencies subsequently moved
their scenario release dates to February
15.4
The Board intends to ensure that
scenarios used for credit union stress
testing essentially conform to those used
by the banking agencies, both in
substance and timing. The new
1 12 CFR part 702, subpart E; 79 FR 24311 (Apr.
30, 2014). The rule refers to FICUs with assets of
$10 billion or more as ‘‘covered credit unions.’’
2 78 FR 65583, 65584 (Nov. 1, 2013).
3 12 CFR 46.5, 252.144, 252.154, and 325.204.
4 79 FR 64026 (Oct. 27, 2014); 79 FR 69365 (Nov.
21, 2014); 79 FR 71630 (Dec. 3, 2014).
PO 00000
Frm 00001
Fmt 4702
Sfmt 4702
schedule on which the banking
agencies’ scenarios are published
necessitates NCUA’s modification of its
own stress testing schedule.
Accordingly, this proposed rule
would amend the capital planning and
stress testing rule to change NCUA’s
scenario release date from December 1
to February 28. In addition, the Board
proposes to apply a more uniform fixed
annual timeline for both capital
planning and stress testing required
under the rule. It also proposes to
reword several provisions in the rule to
clarify their meaning. The Board seeks
comment on all aspects of this proposal.
II. Proposed Amendments
The proposed changes to the capital
planning and stress testing rule are
discussed in detail below.
1. Section 702.502—Definitions
Section 702.502 of the current rule
defines certain terms used in the capital
planning and stress testing rule. The
proposed rule amends one current
definition and adds one new definition.
The current rule defines a ‘‘covered
credit union’’ as a FICU whose assets
were at least $10 billion on March 31 of
‘‘the current calendar year,’’ which the
Board believes may be unclear. The
proposal clarifies that a covered credit
union is one whose assets are $10
billion or more and that a FICU that
crosses the asset threshold as of March
31 is subject to the capital planning and
stress testing requirements of the rule in
the following calendar year. In addition,
the proposal adds a new definition for
the term ‘‘capital planning process’’ to
clarify that the process integrates the
development of a capital planning
policy with the formulation of a capital
plan.
2. Section 702.504—Capital Planning
Paragraph (a)(1) of current § 702.504
requires a covered credit union to
submit a capital plan by February 28 of
each year based on the credit union’s
financial data as of September 30 of the
preceding year. The proposal changes
the capital plan submission date to
April 30 and the as-of date to December
31 of the preceding year. The Board
believes that a year-end as-of date will
coincide more closely with annual
strategic planning cycles at the covered
credit unions. With the as-of date
shifted from September 30 to December
31, the proposal correspondingly shifts
E:\FR\FM\26JAP1.SGM
26JAP1
3919
Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules
the capital plan submission date as well.
The Board notes that the proposal
provides a covered credit union four
months from the as-of date to complete
its capital plan, rather than the five
months in the current rule. This reduces
the time a covered credit union will
have to complete its plan, but the Board
believes the modification is necessary to
enable other dates in the capital
planning and stress testing cycles to be
synchronized. The Board also believes it
is sufficient time for covered credit
unions to complete the capital planning
process.
3. Section 702.505—NCUA Action on
Capital Plans
Paragraph (a) of current § 702.505
provides that NCUA will notify a
covered credit union of the acceptance
or rejection of its capital plan within 90
calendar days of the plan’s submission.
The proposal modifies this provision to
establish a fixed date of July 31, which
is 90 days after April 30, the revised
date the covered credit union is
required to submit its capital plan to
NCUA under proposed § 702.504(a)(1).
The Board has determined that agency
resources will be more efficiently
allocated with a fixed date. In addition,
the fixed date will ensure uniform
timing of NCUA acceptance or rejection
of credit union capital plans.
Paragraph (b) of current § 702.505
enumerates the reasons NCUA may
reject a covered credit union’s capital
plan including, in paragraph (b)(5), that
NCUA finds unacceptable weakness in
the plan, the planning analysis, or any
system or process supporting the
analysis. The proposal adds ‘‘or policy’’
to this provision, clarifying the Board’s
intention that a covered credit union’s
capital policy and plan must intersect.
Paragraph (d) of current § 702.505
provides that if NCUA rejects a covered
credit union’s capital plan, the credit
union must update and resubmit a plan
within 90 days of the rejection. For
consistency with the other deadlines
mandated by the rule, the proposal
changes this to a fixed date of October
31. The Board notes that this
modification will not affect the amount
of time a covered credit union will have
to update and resubmit a capital plan.
The proposal still provides a credit
union 90 days to submit a revised plan.
4. Section 702.506—Annual Supervisory
Stress Testing
Paragraph (a) of current § 702.506
provides that NCUA will release the
baseline, adverse, and severely adverse
stress test scenarios by December 1 of
each year. In light of the banking
agencies’ new scenario release date of
February 15, as discussed above, the
proposal likewise shifts NCUA’s release
date to February 28. The proposal also
shifts the as-of date for financial data
from September 30 to December 31, for
consistency with the changes affecting
the capital planning process. In
addition, the proposal deletes a
redundant reference in paragraph (a)
that requires a credit union to include
the stress test results in the following
year’s capital plan, as the requirement is
contained in paragraph (g).
Paragraph (c) of current § 702.506
provides that after NCUA has conducted
three consecutive stress tests, a covered
credit union may, with NCUA approval,
conduct its own stress tests. It states that
a credit union must submit its request
to conduct the tests by July 31 and that
NCUA will approve or disapprove the
request by August 31. Consistent with
the other proposed date shifts described
above, the proposal moves the request
date to October 31 and the response date
to November 30. The proposal also adds
language to paragraph (c) to clarify that
a covered credit union must be subject
to three NCUA-run stress tests before it
seeks self-testing authority. This
clarifying language makes paragraph (d)
redundant, so the proposal deletes it.
The proposal also redesignates
paragraphs (e) through (i) as paragraphs
(d) through (g), respectively.
Paragraph (g) of current § 702.506
states that NCUA will provide each
covered credit union with its stress test
results by May 31. Redesignated
paragraph (f) of the proposal shifts that
date to July 31.
Paragraph (h) of current § 702.506
states that if the NCUA-run stress tests
show a covered credit union cannot
maintain a stress test capital ratio of at
least 5 percent, the credit union must
provide NCUA, within 90 days of
receipt of the stress test results, a stress
test capital enhancement plan showing
how it will meet the target. For
consistency with the other deadlines in
the rule, redesignated paragraph (g) of
the proposal changes this to a fixed date
of October 31, which is still 90 days
from the time NCUA provides stress test
results to the covered credit union.
5. Table Summarizing Proposed Date
Changes
The following table summarizes the
proposed changes to the annual
timelines provided in the capital and
stress testing rule.
TABLE 1—REVISED ANNUAL CAPITAL PLANNING AND STRESS TESTING TIMELINES
Current rule
As-of date for covered credit union’s capital plan and NCUA stress test data .........
NCUA releases stress test scenarios .........................................................................
Covered credit union submits capital plan to NCUA (incorporating credit union–run
stress tests, if authorized).
NCUA provides NCUA-run stress test results to covered credit union .....................
NCUA accepts or rejects covered credit union’s capital plan ....................................
Covered credit union submits stress test capital enhancement plan, if required ......
Covered credit union submits revised capital plan, if required ..................................
Covered credit union requests authority to conduct stress tests ...............................
NCUA approves or declines covered credit union’s request to conduct stress tests
tkelley on DSK3SPTVN1PROD with PROPOSALS
Action required
September 30 ..........................................
December 1 .............................................
February 28 .............................................
December 31.
February 28.
April 30.
May 31 .....................................................
Within 90 days of plan’s submission .......
Within 90 days of receipt of test results
Within 90 days of NCUA rejection ..........
July 31 .....................................................
August 31 ................................................
July 31.
July 31.
October 31.
October 31.
October 31.
November 30.
III. Regulatory Procedures
a. Regulatory Flexibility Act
The Regulatory Flexibility Act
requires NCUA to prepare an analysis of
any significant economic impact any
proposed regulation may have on a
substantial number of small entities
VerDate Sep<11>2014
18:26 Jan 23, 2015
Jkt 235001
(primarily those under $50 million in
assets).5 Because the proposed rule only
applies to FICUs with $10 billion or
more in assets, it will not have any
economic impact on small credit
unions.
55
PO 00000
b. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) applies to rulemakings in which
an agency by rule creates a new
paperwork burden on regulated entities
U.S.C. 603(a).
Frm 00002
Fmt 4702
Sfmt 4702
Proposed rule
E:\FR\FM\26JAP1.SGM
26JAP1
3920
Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules
or increases an existing burden.6 For
purposes of the PRA, a paperwork
burden may take the form of a reporting
or recordkeeping requirement, both
referred to as information collections.
The proposed changes to part 702 do
not impose any new information
collection requirements, and there is no
new burden.
c. 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. The proposed rule does not
have substantial direct effects 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,
therefore, determined that this proposal
does not constitute a policy that has
federalism implications for purposes of
the executive order.
d. Assessment of Federal Regulations
and Policies on Families
NCUA has determined that this
proposed rule will not affect family
well-being within the meaning of
section 654 of the Treasury and General
Government Appropriations Act, 1999,
Public Law 105–277, 112 Stat. 2681
(1998).
List of Subjects in 12 CFR Part 702
Credit unions, Reporting and
recordkeeping requirements.
By the National Credit Union
Administration Board, on January 15, 2015.
Gerard Poliquin,
Secretary of the Board.
For the reasons discussed above, the
National Credit Union Administration
proposes to amend part 702 as follows:
PART 702—CAPITAL ADEQUACY
1. The authority citation for part 702
continues to read as follows:
■
Authority: 12 U.S.C. 1766(a), 1790d.
2. Amend § 702.502 by adding a
definition of ‘‘Capital planning process’’
in alphabetical order and revising the
definition of ‘‘Covered credit union’’ to
read as follows:
tkelley on DSK3SPTVN1PROD with PROPOSALS
■
§ 702.502
Definitions.
*
*
*
*
*
Capital planning process means
development of a capital policy and
6 44
U.S.C. 3507(d); 5 CFR part 1320.
VerDate Sep<11>2014
18:26 Jan 23, 2015
Jkt 235001
formulation of a capital plan that
conforms to this policy.
Covered credit union means a
federally insured credit union whose
assets are $10 billion or more. A credit
union that crosses the asset threshold as
of March 31 is subject to the capital
planning and stress testing requirements
of this subpart in the following calendar
year.
*
*
*
*
*
■ 3. Amend § 702.504 by revising
paragraph (a)(1) to read as follows:
§ 702.504
Capital planning.
(a) * * *
(1) A covered credit union must
develop and maintain a capital plan. It
must submit this plan and its capital
policy to NCUA by April 30 each year,
or such later date as directed by NCUA.
The plan must be based on the credit
union’s financial data as of December 31
of the preceding calendar year, or such
other date as directed by NCUA. NCUA
will assess whether the capital planning
and analysis process is sufficiently
robust in determining whether to accept
a credit union’s capital plan.
*
*
*
*
*
■ 4. Amend § 702.505 by revising
paragraphs (a), (b)(5), and (d) to read as
follows:
§ 702.505
NCUA action on capital plans.
(a) Timing. NCUA will notify the
covered credit union of the acceptance
or rejection of its capital plan by July 31
of the year in which the credit union
submitted its plan.
(b) * * *
(5) NCUA finds unacceptable
weakness in the capital plan or policy,
the capital planning analysis, or any
critical system or process supporting
capital analysis;
*
*
*
*
*
(d) Resubmission of a capital plan. If
NCUA rejects a credit union’s capital
plan, the credit union must update and
resubmit an acceptable capital plan to
NCUA by October 31 of the year in
which the credit union submitted its
plan. The resubmitted capital plan
must, at a minimum, address:
(1) NCUA-noted deficiencies in the
credit union’s original capital plan or
policy; and
(2) Remediation plans for unresolved
supervisory issues contributing to the
rejection of the credit union’s original
capital plan.
*
*
*
*
*
■ 5. Amend § 702.506 by:
■ a. Revising the first two sentences of
paragraph (a);
■ b. Revising paragraph (c);
■ b. Removing paragraph (d);
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
c. Redesignating paragraphs (e)
through (i) as (d) through (h),
respectively; and
■ d. Revising newly redesignated
paragraphs (d) through (g).
The revisions read as follows:
■
§ 702.506
testing.
Annual supervisory stress
(a) General requirements. The
supervisory stress tests consist of
baseline, adverse, and severely adverse
scenarios, which NCUA will provide by
February 28 of each year. The tests will
be based on the credit union’s financial
data as of December 31 of the preceding
calendar year, or such other date as
directed by NCUA. * * *
*
*
*
*
*
(c) Credit union-run tests under
NCUA supervision. After NCUA has
completed three consecutive
supervisory stress tests of a covered
credit union, the covered credit union
may, with NCUA approval, conduct the
tests described in this section. A
covered credit union must submit its
request to NCUA to conduct its own
stress test by October 31 for the
following annual cycle. NCUA will
approve or decline the credit union’s
request by November 30 of the year in
which the credit union submitted its
request. NCUA reserves the right to
conduct the tests described in this
section on any covered credit union at
any time. Where both NCUA and a
covered credit union have conducted
the tests, the results of NCUA’s tests
will determine whether the covered
credit union has met the requirements
of this section.
(d) Potential impact on capital. In
conducting stress tests under this
subpart, NCUA or the covered credit
union will estimate the following for
each scenario during each quarter of the
stress test horizon:
(1) Losses, pre-provision net revenues,
loan and lease loss provisions, and net
income; and
(2) The potential impact on the stress
test capital ratio, incorporating the
effects of any capital action over the 9quarter stress test horizon and
maintenance of an allowance for loan
losses appropriate for credit exposures
throughout the horizon. NCUA or the
covered credit union will conduct the
stress tests without assuming any risk
mitigation actions on the part of the
covered credit union, except those
existing and identified as part of the
covered credit union’s balance sheet, or
off-balance sheet positions, such as asset
sales or derivatives positions, on the
date of the stress test.
(e) Information collection. Upon
request, the covered credit union must
E:\FR\FM\26JAP1.SGM
26JAP1
Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules
[Docket No. FAA–2015–0080; Directorate
Identifier 2012–NM–189–AD]
scheduling inspection intervals of
structurally significant items (SSIs).
This proposed AD would require
repetitive inspections of certain floor
beams and revision of the maintenance
or inspection program to include
inspections of several areas of the
wings. We are proposing this AD to
detect and correct any cracking of the
floor beam at FR 26 and several areas of
the wings, which could lead to reduced
structural integrity of the airplane.
DATES: We must receive comments on
this proposed AD by March 12, 2015.
ADDRESSES: 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
https://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: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE.,
Washington, DC, between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
For service information identified in
this proposed AD, contact ATR—GIE
´
´
Avions de Transport Regional, 1, Allee
Pierre Nadot, 31712 Blagnac Cedex,
France; telephone +33 (0) 5 62 21 62 21;
fax +33 (0) 5 62 21 67 18; email
continued.airworthiness@atr.fr; Internet
https://www.aerochain.com. You may
view this 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.
RIN 2120–AA64
Examining the AD Docket
provide NCUA with any relevant
qualitative or quantitative information
requested by NCUA pertinent to the
stress tests under this section.
(f) Stress test results. NCUA will
provide each covered credit union with
the results of the stress tests by July 31
of the year in which it conducted the
tests. A credit union conducting its own
stress tests must incorporate the test
results in its capital plan.
(g) Supervisory actions. If NCUA-run
stress tests show that a covered credit
union does not have the ability to
maintain a stress test capital ratio of 5
percent or more under expected and
stressed conditions in each quarter of
the 9-quarter horizon, the credit union
must provide NCUA, by October 31 of
the calendar year in which NCUA
conducted the tests, a stress test capital
enhancement plan showing how it will
meet that target. If credit union-run
stress tests show that a covered credit
union does not have the ability to
maintain a stress test capital ratio of 5
percent or more under expected and
stressed conditions in each quarter of
the 9-quarter horizon, the credit union
must incorporate a stress test capital
enhancement plan into its capital plan.
Any affected credit union operating
without a stress test capital
enhancement plan accepted by NCUA
may be subject to supervisory actions on
the part of NCUA.
*
*
*
*
*
[FR Doc. 2015–01239 Filed 1–23–15; 8:45 am]
BILLING CODE 7535–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
Airworthiness Directives; ATR—GIE
´
Avions de Transport Regional
Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
We propose to adopt a new
airworthiness directive (AD) for all
ATR—GIE Avions de Transport
´
Regional Model ATR42 airplanes. This
proposed AD was prompted by several
reports of a cracked floor beam at frame
(FR) 26, and of discrepancies in certain
wing inspection tasks in maintenance
documents that could lead to errors in
tkelley on DSK3SPTVN1PROD with PROPOSALS
SUMMARY:
VerDate Sep<11>2014
18:26 Jan 23, 2015
Jkt 235001
You may examine the AD docket on
the Internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2015–
0080; 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 Operations
office (telephone 800–647–5527) is in
the ADDRESSES section. Comments will
be available in the AD docket shortly
after receipt.
FOR FURTHER INFORMATION CONTACT: Tom
Rodriguez, Aerospace Engineer,
PO 00000
Frm 00004
Fmt 4702
Sfmt 4702
3921
International Branch, ANM–116,
Transport Airplane Directorate, FAA,
1601 Lind Avenue SW., Renton, WA
98057–3356; telephone 425–227–1137;
fax 425–227–1149.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposed AD. Send your comments
to an address listed under the
ADDRESSES section. Include ‘‘Docket No.
FAA–2015–0080; Directorate Identifier
2012–NM–189–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 based on those comments.
We will post all comments we
receive, without change, to https://
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
The European Aviation Safety Agency
(EASA), which is the Technical Agent
for the Member States of the European
Union, has issued EASA Airworthiness
Directive 2012–0193, dated September
25, 2012 (referred to after this as the
Mandatory Continuing Airworthiness
Information, or ‘‘the MCAI’’), to correct
an unsafe condition for all ATR—GIE
´
Avions de Transport Regional Model
ATR42 airplanes. The MCAI states:
Floor beam at Frame 26: During
maintenance checks, the floor beam at frame
(FR) 26 was found cracked on several ATR
42 aeroplanes.
This condition, if not detected and
corrected, could lead to reduce the structural
integrity of the aeroplane. A new Structural
Significant Items (SSI) task will be
introduced in the next revision of the ATR42
Time Limits document in order to address
this issue.
MRBR/MPD discrepancy on Wings item: A
discrepancy has been noticed between the
Maintenance Review Board Report (MRBR)/
Maintenance Planning Document (MPD) and
the Time Limits document. ATR
modifications 02805 and 08039 were
erroneously stated similar in the MRBR/
MPD, inducing misleading applicability of
the SSI tasks depending upon the document
used and leading operators to miss several
inspections, as evidenced during a recent
review.
Following the structural investigation, new
inspection thresholds have been calculated
and will be introduced in the next revisions
of the ATR Time Limits documents (Revision
8 and Revision 9, as applicable to the
aeroplane models) and MRBR/MPD
documents.
E:\FR\FM\26JAP1.SGM
26JAP1
]]>Agencies
[Federal Register Volume 80, Number 16 (Monday, January 26, 2015)]
[Proposed Rules]
[Pages 3918-3921]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01239]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 /
Proposed Rules
[[Page 3918]]
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 702
RIN 3133-AE44
Capital Planning and Stress Testing--Schedule Shift
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The NCUA Board (Board) is issuing proposed amendments to the
regulation governing credit union capital planning and stress testing.
The amendments would adjust the timing of certain events in the capital
planning and stress testing cycles. If finalized, the revisions to the
regulation would become effective January 1, 2016.
DATES: Comments must be received on or before March 27, 2015.
ADDRESSES: You may submit comments by any of the following methods
(Please send comments by one method only):
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web site: https://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the
instructions for submitting comments.
Email: Address to regcomments@ncua.gov. Include ``[Your
name]--Comments on Proposed Rule--Capital Planning and Stress Testing--
Schedule Shift'' in the email subject line.
Fax: (703) 518-6319. Use the subject line described above
for email.
Mail: Address to Gerard Poliquin, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
FOR FURTHER INFORMATION CONTACT: Jeremy Taylor or Dale Klein, Senior
Capital Markets Specialists, Office of National Examinations and
Supervision, at the above address or telephone (703) 518-6640.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Proposed Amendments
III. Regulatory Procedures
I. Background
In April 2014, the Board issued a final rule requiring capital
planning and stress testing for federally insured credit unions (FICUs)
with assets of $10 billion or more.\1\ Capital planning requires
covered credit unions to assess their financial condition and risks
over the planning horizon under both expected and unfavorable
conditions. Annual supervisory stress testing allows NCUA to obtain an
independent test of these credit unions under stress scenarios. By
setting a regulatory minimum capital ratio under stress, the final rule
requires covered credit unions to take corrective action before they
become undercapitalized to an extent that may cause loss to the
National Credit Union Share Insurance Fund.
---------------------------------------------------------------------------
\1\ 12 CFR part 702, subpart E; 79 FR 24311 (Apr. 30, 2014). The
rule refers to FICUs with assets of $10 billion or more as ``covered
credit unions.''
---------------------------------------------------------------------------
The final rule provides several timeframes for the formulation and
submission of capital plans and for the stress testing of covered
credit unions. One critical date in the stress testing process is the
date NCUA releases the baseline, adverse, and severely adverse economic
scenarios that serve as basis for the testing. As noted in the preamble
to the proposed rule, NCUA plans to base the scenarios on those
developed by the Federal Reserve, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency
(collectively, the banking agencies) for their regulated
institutions.\2\ At the time the Board issued NCUA's final rule, the
banking agencies were scheduled to provide scenarios for their
regulated institutions by November 15 each year.\3\ The banking
agencies subsequently moved their scenario release dates to February
15.\4\
---------------------------------------------------------------------------
\2\ 78 FR 65583, 65584 (Nov. 1, 2013).
\3\ 12 CFR 46.5, 252.144, 252.154, and 325.204.
\4\ 79 FR 64026 (Oct. 27, 2014); 79 FR 69365 (Nov. 21, 2014); 79
FR 71630 (Dec. 3, 2014).
---------------------------------------------------------------------------
The Board intends to ensure that scenarios used for credit union
stress testing essentially conform to those used by the banking
agencies, both in substance and timing. The new schedule on which the
banking agencies' scenarios are published necessitates NCUA's
modification of its own stress testing schedule.
Accordingly, this proposed rule would amend the capital planning
and stress testing rule to change NCUA's scenario release date from
December 1 to February 28. In addition, the Board proposes to apply a
more uniform fixed annual timeline for both capital planning and stress
testing required under the rule. It also proposes to reword several
provisions in the rule to clarify their meaning. The Board seeks
comment on all aspects of this proposal.
II. Proposed Amendments
The proposed changes to the capital planning and stress testing
rule are discussed in detail below.
1. Section 702.502--Definitions
Section 702.502 of the current rule defines certain terms used in
the capital planning and stress testing rule. The proposed rule amends
one current definition and adds one new definition. The current rule
defines a ``covered credit union'' as a FICU whose assets were at least
$10 billion on March 31 of ``the current calendar year,'' which the
Board believes may be unclear. The proposal clarifies that a covered
credit union is one whose assets are $10 billion or more and that a
FICU that crosses the asset threshold as of March 31 is subject to the
capital planning and stress testing requirements of the rule in the
following calendar year. In addition, the proposal adds a new
definition for the term ``capital planning process'' to clarify that
the process integrates the development of a capital planning policy
with the formulation of a capital plan.
2. Section 702.504--Capital Planning
Paragraph (a)(1) of current Sec. 702.504 requires a covered credit
union to submit a capital plan by February 28 of each year based on the
credit union's financial data as of September 30 of the preceding year.
The proposal changes the capital plan submission date to April 30 and
the as-of date to December 31 of the preceding year. The Board believes
that a year-end as-of date will coincide more closely with annual
strategic planning cycles at the covered credit unions. With the as-of
date shifted from September 30 to December 31, the proposal
correspondingly shifts
[[Page 3919]]
the capital plan submission date as well. The Board notes that the
proposal provides a covered credit union four months from the as-of
date to complete its capital plan, rather than the five months in the
current rule. This reduces the time a covered credit union will have to
complete its plan, but the Board believes the modification is necessary
to enable other dates in the capital planning and stress testing cycles
to be synchronized. The Board also believes it is sufficient time for
covered credit unions to complete the capital planning process.
3. Section 702.505--NCUA Action on Capital Plans
Paragraph (a) of current Sec. 702.505 provides that NCUA will
notify a covered credit union of the acceptance or rejection of its
capital plan within 90 calendar days of the plan's submission. The
proposal modifies this provision to establish a fixed date of July 31,
which is 90 days after April 30, the revised date the covered credit
union is required to submit its capital plan to NCUA under proposed
Sec. 702.504(a)(1). The Board has determined that agency resources
will be more efficiently allocated with a fixed date. In addition, the
fixed date will ensure uniform timing of NCUA acceptance or rejection
of credit union capital plans.
Paragraph (b) of current Sec. 702.505 enumerates the reasons NCUA
may reject a covered credit union's capital plan including, in
paragraph (b)(5), that NCUA finds unacceptable weakness in the plan,
the planning analysis, or any system or process supporting the
analysis. The proposal adds ``or policy'' to this provision, clarifying
the Board's intention that a covered credit union's capital policy and
plan must intersect.
Paragraph (d) of current Sec. 702.505 provides that if NCUA
rejects a covered credit union's capital plan, the credit union must
update and resubmit a plan within 90 days of the rejection. For
consistency with the other deadlines mandated by the rule, the proposal
changes this to a fixed date of October 31. The Board notes that this
modification will not affect the amount of time a covered credit union
will have to update and resubmit a capital plan. The proposal still
provides a credit union 90 days to submit a revised plan.
4. Section 702.506--Annual Supervisory Stress Testing
Paragraph (a) of current Sec. 702.506 provides that NCUA will
release the baseline, adverse, and severely adverse stress test
scenarios by December 1 of each year. In light of the banking agencies'
new scenario release date of February 15, as discussed above, the
proposal likewise shifts NCUA's release date to February 28. The
proposal also shifts the as-of date for financial data from September
30 to December 31, for consistency with the changes affecting the
capital planning process. In addition, the proposal deletes a redundant
reference in paragraph (a) that requires a credit union to include the
stress test results in the following year's capital plan, as the
requirement is contained in paragraph (g).
Paragraph (c) of current Sec. 702.506 provides that after NCUA has
conducted three consecutive stress tests, a covered credit union may,
with NCUA approval, conduct its own stress tests. It states that a
credit union must submit its request to conduct the tests by July 31
and that NCUA will approve or disapprove the request by August 31.
Consistent with the other proposed date shifts described above, the
proposal moves the request date to October 31 and the response date to
November 30. The proposal also adds language to paragraph (c) to
clarify that a covered credit union must be subject to three NCUA-run
stress tests before it seeks self-testing authority. This clarifying
language makes paragraph (d) redundant, so the proposal deletes it. The
proposal also redesignates paragraphs (e) through (i) as paragraphs (d)
through (g), respectively.
Paragraph (g) of current Sec. 702.506 states that NCUA will
provide each covered credit union with its stress test results by May
31. Redesignated paragraph (f) of the proposal shifts that date to July
31.
Paragraph (h) of current Sec. 702.506 states that if the NCUA-run
stress tests show a covered credit union cannot maintain a stress test
capital ratio of at least 5 percent, the credit union must provide
NCUA, within 90 days of receipt of the stress test results, a stress
test capital enhancement plan showing how it will meet the target. For
consistency with the other deadlines in the rule, redesignated
paragraph (g) of the proposal changes this to a fixed date of October
31, which is still 90 days from the time NCUA provides stress test
results to the covered credit union.
5. Table Summarizing Proposed Date Changes
The following table summarizes the proposed changes to the annual
timelines provided in the capital and stress testing rule.
Table 1--Revised Annual Capital Planning and Stress Testing Timelines
------------------------------------------------------------------------
Action required Current rule Proposed rule
------------------------------------------------------------------------
As-of date for covered credit September 30..... December 31.
union's capital plan and NCUA
stress test data.
NCUA releases stress test December 1....... February 28.
scenarios.
Covered credit union submits February 28...... April 30.
capital plan to NCUA
(incorporating credit union-
run stress tests, if
authorized).
NCUA provides NCUA-run stress May 31........... July 31.
test results to covered
credit union.
NCUA accepts or rejects Within 90 days of July 31.
covered credit union's plan's
capital plan. submission.
Covered credit union submits Within 90 days of October 31.
stress test capital receipt of test
enhancement plan, if required. results.
Covered credit union submits Within 90 days of October 31.
revised capital plan, if NCUA rejection.
required.
Covered credit union requests July 31.......... October 31.
authority to conduct stress
tests.
NCUA approves or declines August 31........ November 30.
covered credit union's
request to conduct stress
tests.
------------------------------------------------------------------------
III. Regulatory Procedures
a. Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
of any significant economic impact any proposed regulation may have on
a substantial number of small entities (primarily those under $50
million in assets).\5\ Because the proposed rule only applies to FICUs
with $10 billion or more in assets, it will not have any economic
impact on small credit unions.
---------------------------------------------------------------------------
\5\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------
b. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in
which an agency by rule creates a new paperwork burden on regulated
entities
[[Page 3920]]
or increases an existing burden.\6\ For purposes of the PRA, a
paperwork burden may take the form of a reporting or recordkeeping
requirement, both referred to as information collections. The proposed
changes to part 702 do not impose any new information collection
requirements, and there is no new burden.
---------------------------------------------------------------------------
\6\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------
c. 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. The proposed rule does not have substantial
direct effects 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,
therefore, determined that this proposal does not constitute a policy
that has federalism implications for purposes of the executive order.
d. Assessment of Federal Regulations and Policies on Families
NCUA has determined that this proposed rule will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects in 12 CFR Part 702
Credit unions, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board, on January
15, 2015.
Gerard Poliquin,
Secretary of the Board.
For the reasons discussed above, the National Credit Union
Administration proposes to amend part 702 as follows:
PART 702--CAPITAL ADEQUACY
0
1. The authority citation for part 702 continues to read as follows:
Authority: 12 U.S.C. 1766(a), 1790d.
0
2. Amend Sec. 702.502 by adding a definition of ``Capital planning
process'' in alphabetical order and revising the definition of
``Covered credit union'' to read as follows:
Sec. 702.502 Definitions.
* * * * *
Capital planning process means development of a capital policy and
formulation of a capital plan that conforms to this policy.
Covered credit union means a federally insured credit union whose
assets are $10 billion or more. A credit union that crosses the asset
threshold as of March 31 is subject to the capital planning and stress
testing requirements of this subpart in the following calendar year.
* * * * *
0
3. Amend Sec. 702.504 by revising paragraph (a)(1) to read as follows:
Sec. 702.504 Capital planning.
(a) * * *
(1) A covered credit union must develop and maintain a capital
plan. It must submit this plan and its capital policy to NCUA by April
30 each year, or such later date as directed by NCUA. The plan must be
based on the credit union's financial data as of December 31 of the
preceding calendar year, or such other date as directed by NCUA. NCUA
will assess whether the capital planning and analysis process is
sufficiently robust in determining whether to accept a credit union's
capital plan.
* * * * *
0
4. Amend Sec. 702.505 by revising paragraphs (a), (b)(5), and (d) to
read as follows:
Sec. 702.505 NCUA action on capital plans.
(a) Timing. NCUA will notify the covered credit union of the
acceptance or rejection of its capital plan by July 31 of the year in
which the credit union submitted its plan.
(b) * * *
(5) NCUA finds unacceptable weakness in the capital plan or policy,
the capital planning analysis, or any critical system or process
supporting capital analysis;
* * * * *
(d) Resubmission of a capital plan. If NCUA rejects a credit
union's capital plan, the credit union must update and resubmit an
acceptable capital plan to NCUA by October 31 of the year in which the
credit union submitted its plan. The resubmitted capital plan must, at
a minimum, address:
(1) NCUA-noted deficiencies in the credit union's original capital
plan or policy; and
(2) Remediation plans for unresolved supervisory issues
contributing to the rejection of the credit union's original capital
plan.
* * * * *
0
5. Amend Sec. 702.506 by:
0
a. Revising the first two sentences of paragraph (a);
0
b. Revising paragraph (c);
0
b. Removing paragraph (d);
0
c. Redesignating paragraphs (e) through (i) as (d) through (h),
respectively; and
0
d. Revising newly redesignated paragraphs (d) through (g).
The revisions read as follows:
Sec. 702.506 Annual supervisory stress testing.
(a) General requirements. The supervisory stress tests consist of
baseline, adverse, and severely adverse scenarios, which NCUA will
provide by February 28 of each year. The tests will be based on the
credit union's financial data as of December 31 of the preceding
calendar year, or such other date as directed by NCUA. * * *
* * * * *
(c) Credit union-run tests under NCUA supervision. After NCUA has
completed three consecutive supervisory stress tests of a covered
credit union, the covered credit union may, with NCUA approval, conduct
the tests described in this section. A covered credit union must submit
its request to NCUA to conduct its own stress test by October 31 for
the following annual cycle. NCUA will approve or decline the credit
union's request by November 30 of the year in which the credit union
submitted its request. NCUA reserves the right to conduct the tests
described in this section on any covered credit union at any time.
Where both NCUA and a covered credit union have conducted the tests,
the results of NCUA's tests will determine whether the covered credit
union has met the requirements of this section.
(d) Potential impact on capital. In conducting stress tests under
this subpart, NCUA or the covered credit union will estimate the
following for each scenario during each quarter of the stress test
horizon:
(1) Losses, pre-provision net revenues, loan and lease loss
provisions, and net income; and
(2) The potential impact on the stress test capital ratio,
incorporating the effects of any capital action over the 9-quarter
stress test horizon and maintenance of an allowance for loan losses
appropriate for credit exposures throughout the horizon. NCUA or the
covered credit union will conduct the stress tests without assuming any
risk mitigation actions on the part of the covered credit union, except
those existing and identified as part of the covered credit union's
balance sheet, or off-balance sheet positions, such as asset sales or
derivatives positions, on the date of the stress test.
(e) Information collection. Upon request, the covered credit union
must
[[Page 3921]]
provide NCUA with any relevant qualitative or quantitative information
requested by NCUA pertinent to the stress tests under this section.
(f) Stress test results. NCUA will provide each covered credit
union with the results of the stress tests by July 31 of the year in
which it conducted the tests. A credit union conducting its own stress
tests must incorporate the test results in its capital plan.
(g) Supervisory actions. If NCUA-run stress tests show that a
covered credit union does not have the ability to maintain a stress
test capital ratio of 5 percent or more under expected and stressed
conditions in each quarter of the 9-quarter horizon, the credit union
must provide NCUA, by October 31 of the calendar year in which NCUA
conducted the tests, a stress test capital enhancement plan showing how
it will meet that target. If credit union-run stress tests show that a
covered credit union does not have the ability to maintain a stress
test capital ratio of 5 percent or more under expected and stressed
conditions in each quarter of the 9-quarter horizon, the credit union
must incorporate a stress test capital enhancement plan into its
capital plan. Any affected credit union operating without a stress test
capital enhancement plan accepted by NCUA may be subject to supervisory
actions on the part of NCUA.
* * * * *
[FR Doc. 2015-01239 Filed 1-23-15; 8:45 am]
BILLING CODE 7535-01-P
