Prevailing Rate Systems, 29699 [2017-13805]
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29699
Rules and Regulations
Federal Register
Vol. 82, No. 125
Friday, June 30, 2017
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
OFFICE OF PERSONNEL
MANAGEMENT
SUPPLEMENTARY INFORMATION:
5 CFR Part 532
Prevailing Rate Systems
CFR Correction
In Title 5 of the Code of Federal
Regulations, Parts 1 to 699, revised as of
January 1, 2017, on page 464, in Part
532, Subpart B, Appendix C, under
MINNESOTA, Minneapolis-St. Paul,
Area of Application. Survey area plus:,
Minnesota:, the first occurrence of
‘‘Freeborn’’ is replaced with ‘‘Fillmore’’.
[FR Doc. 2017–13805 Filed 6–29–17; 8:45 am]
BILLING CODE 1301–00–D
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 709
RIN 3133–AE41
Safe Harbor
National Credit Union
Administration (NCUA).
ACTION: Final rule.
AGENCY:
The NCUA Board (‘‘Board’’) is
issuing this final rule to amend its
regulations regarding the treatment by
the Board, as liquidating agent or
conservator (‘‘liquidating agent’’ or
‘‘conservator,’’ respectively) of a
federally insured credit union (‘‘FICU’’),
of financial assets transferred by the
credit union in connection with a
securitization or a participation. The
final rule replaces NCUA’s current safe
harbor for financial assets transferred in
connection with securitizations and
participations in which the financial
assets were transferred in compliance
with the existing regulation, and defines
the conditions for safe harbor protection
for securitizations and participations for
which transfers of financial assets
would be made after the effective date
of this rule.
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SUMMARY:
VerDate Sep<11>2014
17:26 Jun 29, 2017
The effective date for this rule is
July 31, 2017.
FOR FURTHER INFORMATION CONTACT: John
Nilles, Senior Capital Markets
Specialist, Office of Examination and
Insurance, at (703) 518–1174; or John H.
Brolin, Senior Staff Attorney, Office of
General Counsel, at (703) 518–6438;
National Credit Union Administration,
1775 Duke Street, Alexandria, VA
22314.
DATES:
Jkt 241001
I. Background
In 2000, when it adopted a regulation
codified at 12 CFR 709.10,1 the Board
clarified the scope of its statutory
authority as conservator or liquidating
agent to disaffirm or repudiate contracts
of an FICU with respect to transfers of
financial assets by a FICU in connection
with a securitization or participation.
Current § 709.10 provides that a
conservator or liquidating agent will not
use its statutory authority to disaffirm or
repudiate contracts to reclaim, recover,
or recharacterize as property of a FICU
or the liquidation estate any financial
assets transferred by the FICU in
connection with a securitization or in
the form of a participation, provided
that such transfer meets all conditions
for sale accounting treatment under
generally accepted accounting
principles (‘‘GAAP’’).2 Current § 709.10
also provides a ‘‘safe harbor’’ by
confirming ‘‘legal isolation’’ if all other
standards for off balance sheet
accounting treatment, along with some
additional conditions focusing on the
enforceability of the transaction, were
met by the transfer in connection with
a securitization or a participation.
Satisfaction of ‘‘legal isolation’’ is vital
to securitization transactions because of
the risk that the pool of financial assets
1 65
FR 55442 (Sept. 14, 2000).
the Proposal, NCUA stated that the agency
had not previously stated that federal credit unions
(‘‘FCUs’’) have the authority to issue asset-backed
securities (‘‘ABS’’) and that its understanding was
that no FCU had done so. NCUA also does not
believe that any federally insured, state-chartered
credit unions (‘‘FISCUs’’) have issued ABS.
Therefore, the securitization aspect of the 2000 Rule
has not been applied. In connection with this final
rule updating the 2000 Rule, the Office of General
Counsel recently published a legal opinion letter on
NCUA’s Web site, which finds that the
securitization of assets is a power incidental to the
operation of FCUs. Accordingly, if an FCU (or a
FISCU if permitted by state law) issues ABS, these
amendments to § 709.10 are necessary to preserve
the safe harbor for investors.
2 In
PO 00000
Frm 00001
Fmt 4700
Sfmt 4700
transferred into the securitization trust
could be recovered in bankruptcy or in
a credit union liquidation. Generally, to
satisfy the legal isolation condition, the
transferred financial assets must have
been presumptively placed beyond the
reach of the transferor, its creditors, a
bankruptcy trustee, or in the case of a
FICU, NCUA as conservator or
liquidating agent. Thus, current § 709.10
addresses only purported sales which
meet the conditions for off balance sheet
accounting treatment under GAAP. The
implementation of accounting rules
since 2000, however, has created
uncertainty for loan participation and
potential securitization participants.
A. Modifications to GAAP Accounting
Standards
In 2009, the Financial Accounting
Standards Board (‘‘FASB’’) finalized
modifications to GAAP through
Statement of Financial Accounting
Standards No. 166, (now codified in
FASB Accounting Standards
Codification (ASC) Topic 860, Transfers
and Servicing) and Statement of
Financial Accounting Standards No. 167
(now codified in FASB ASC Topic 810,
Consolidation) (together, the ‘‘2009
GAAP Modifications’’). The 2009 GAAP
Modifications made changes that affect
whether a special purpose entity
(‘‘SPE’’) must be consolidated for
financial reporting purposes, thereby
subjecting many SPEs to GAAP
consolidation requirements. These
accounting changes could require a
FICU to consolidate an issuing entity to
which financial assets have been
transferred for securitization on to its
balance sheet for financial reporting
purposes primarily because an affiliate
of the FICU retains control over the
financial assets. Given the 2009 GAAP
Modifications, legal and accounting
treatment of a transaction may no longer
be aligned. As a result, the safe harbor
provision of the 2000 Rule may not
apply to a transfer in connection with a
securitization that does not qualify for
off balance sheet accounting treatment.
FASB ASC Topic 860 also affects the
treatment of participation interests
transferred by a FICU, in that it defines
participating interests as pari-passu,
pro-rata interests in financial assets, and
subjects the sale of a participation
interest to the same conditions as the
sale of financial assets. FASB ASC
Topic 860 provides that transfers of
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30JNR1
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[Federal Register Volume 82, Number 125 (Friday, June 30, 2017)]
[Rules and Regulations]
[Page 29699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13805]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules
and Regulations
[[Page 29699]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 532
Prevailing Rate Systems
CFR Correction
In Title 5 of the Code of Federal Regulations, Parts 1 to 699,
revised as of January 1, 2017, on page 464, in Part 532, Subpart B,
Appendix C, under MINNESOTA, Minneapolis-St. Paul, Area of Application.
Survey area plus:, Minnesota:, the first occurrence of ``Freeborn'' is
replaced with ``Fillmore''.
[FR Doc. 2017-13805 Filed 6-29-17; 8:45 am]
BILLING CODE 1301-00-D
