Rules of Organization, 55496-55497 [2017-25122]
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55496
Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Rules and Regulations
By order of the Board of Governors of the
Federal Reserve System, October 31, 2017.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2017–24052 Filed 11–21–17; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL RESERVE SYSTEM
12 CFR Part 265
[Docket No. OP–1578]
Rules of Organization
Board of Governors of the
Federal Reserve System (Board).
ACTION: Amendment to Rules of
Organization.
AGENCY:
The Board has amended its
definition of a quorum of the Board in
the Board’s Rules of Organization. The
amendment is designed to facilitate the
Board’s ability to continue to function
efficiently during periods of substantial
vacancies on the Board. The amendment
does not alter the number of Board
members required to constitute a
quorum in normal operating
environments. The amendment also
addresses Board member recusals and
disqualifications. In addition, the Board
has provided a modified definition of a
quorum during exigent circumstances.
In connection with this modification,
the Board is amending its Rules
Regarding Delegation of Authority,
published elsewhere in this Federal
Register, to authorize the Chair (or Vice
Chair, if the Chair is unavailable) to
determine when an emergency situation
exists.
DATES: The amendment to the Board’s
Rules of Organization became effective
on October 25, 2017.
FOR FURTHER INFORMATION CONTACT:
Laurie Schaffer, Associate General
Counsel (202) 452–2272, or Daniel
Hickman, Counsel (202) 973–7432,
Legal Division, Board of Governors of
the Federal Reserve System, 20th Street
and Constitution Avenue NW.,
Washington, DC 20551. For the hearing
impaired only, Telecommunication
Device for Deaf (TDD) users may contact
(202) 263–4869.
SUPPLEMENTARY INFORMATION: The Board
consists of up to seven members
appointed by the President, by and with
the advice and consent of the Senate, as
provided in the Federal Reserve Act
(Act).1 The Act does not define a
quorum of the Board, and authorizes the
Board to make all rules and regulations
necessary to enable the Board effectively
ethrower on DSK3G9T082PROD with RULES
SUMMARY:
1 See
12 U.S.C. 241.
VerDate Sep<11>2014
16:22 Nov 21, 2017
Jkt 244001
to perform its duties and functions.2 For
many years, the Board defined a quorum
to be a majority (four members) of its
authorized strength of seven members.
In 2003, the Board revised its definition
of a quorum of the Board to be a
majority of the Board members currently
in office, unless there are five members
in office, in which case a quorum would
be four members.3 This modification
allowed the Board to function with
fewer than four members in office and
enhanced the Board’s ability to function
during emergencies.
Over the past decade, the Board has
had to operate with fewer than five
members on several occasions.4 Based
on this experience, the Board has
determined that substantial vacancies
present administrative and logistical
challenges that make it difficult to
conduct routine business and efficiently
manage operations, particularly with the
Board’s traditional reliance on a 3member committee structure. In light of
these considerations, the Board has
reconsidered its quorum practice and
decided to amend its definition of a
quorum to provide that a quorum of the
Board is four members, unless there are
three or fewer members in office, in
which case a quorum would be all
members in office. This revised
definition will facilitate the Board’s
ability to continue to function
efficiently during periods of substantial
vacancies on the Board. This revision
does not alter the number of Board
members required to constitute a
quorum or the functioning of the
Board’s committee structure in normal
operating environments (that is, when
five or more members are in office).
Increasing the quorum requirement
for a four-member and three-member
Board may make it more difficult to
convene a quorum if a member of the
Board is recused or disqualified from a
particular matter. To address this
concern, the Board also has amended its
Rules of Organization to clarify that
Board members who are recused or
disqualified from participating in a
particular matter will be excluded from
calculations of the quorum requirement
for that matter.
Since the revisions may make it more
difficult to convene a quorum of the
Board under exigent circumstances, the
Board also has added a modified
definition of quorum providing that, in
2 See
12 U.S.C. 248(i).
FR 37686 (Jul 19, 2001), as amended at 68
FR 24743 (May 8, 2003).
4 Since the current structure of the Board was
established in 1936, the Board has had fewer than
five members on only a few occasions for a short
period of time and the Board has never had fewer
than four members.
3 66
PO 00000
Frm 00004
Fmt 4700
Sfmt 4700
an emergency situation, a quorum of the
Board consists of a majority of the Board
members in office. An emergency
situation is defined as a situation when
action on a matter is necessary to
prevent, correct, or mitigate serious
harm to the economy or the stability of
the financial system, and action is
required before the full Board can
convene. The Board is amending its
Rules Regarding Delegation of Authority
(12 CFR part 265), published elsewhere
in this Federal Register, to authorize the
Chair (or the Vice Chair, if the Chair is
unavailable) to determine when an
emergency situation exists.
The Board has incorporated these
revisions into its Rules of Organization
and Rules Regarding Delegation of
Authority,5 published elsewhere in this
Federal Register. The revisions relate
solely to the internal procedure of the
Board, and, accordingly, the public
notice, public comment and delayed
effective date provisions of the
Administrative Procedure Act do not
apply. See 5 U.S.C. 553(b) and (d).
Because public notice and comment is
not required, the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) also does not
apply to this action.
Board of Governors—Rules of
Organization
Section 2 paragraph (b) is revised to
read as follows:
■
Section 2 Composition, Location, and
Public Information
*
*
*
*
*
(b)(1) Quorum. Four Board members
constitutes a quorum of the Board for
purposes of transacting business except
that, if there are three or fewer Board
members in office, then a quorum
consists of all Board members currently
in office. If a Board member is recused
or disqualified from participating in a
matter, the member shall not be counted
for purposes of calculating the quorum
for that matter.
(b)(2) Exigent Circumstances. In an
emergency situation, a quorum of the
Board consists of a majority of the Board
members in office. An emergency
situation exists when action on a matter
is necessary to prevent, correct, or
mitigate serious harm to the economy or
the stability of the financial system, and
action is required before the full Board
can convene.
5 The Board’s Rules Regarding Delegation of
Authority are codified at 12 CFR part 265.
E:\FR\FM\22NOR1.SGM
22NOR1
Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Rules and Regulations
By order of the Board of Governors of the
Federal Reserve System, November 15, 2017.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2017–25122 Filed 11–21–17; 8:45 am]
BILLING CODE 6210–01–P
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 704
RIN 3133–AE75
Corporate Credit Unions
National Credit Union
Administration (NCUA).
ACTION: Final rule.
AGENCY:
The NCUA Board (Board) is
amending its regulations governing
corporate credit unions (corporates) and
the scope of their activities. Specifically,
the amendments revise provisions on
retained earnings and Tier 1 capital.
DATES: The rule is effective December
22, 2017.
FOR FURTHER INFORMATION CONTACT:
Yvonne Applonie, Director of
Supervision, Office of National
Examinations and Supervision, at 1775
Duke Street, Alexandria, Virginia 22314
or telephone (703) 518–6595; or Marvin
Shaw, Staff Attorney, Office of General
Counsel, at the above address or
telephone (703) 518–6553.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
ethrower on DSK3G9T082PROD with RULES
The Financial Crisis of 2007–2009
The financial crisis of 2007–2009 took
a heavy toll on the corporate credit
union system. The crisis, largely
mortgage related, greatly affected the
investment portfolios of many
corporates, causing widespread
liquidity problems, instability in the
system, and failures. During this period,
the NCUA took extraordinary short and
mid-term measures to stabilize the
corporate system. Among other things,
it: (1) Made capital injections; (2)
approved the Temporary Corporate
Credit Union Share Guarantee Program,
which guaranteed uninsured shares at
participating corporates; (3) retained an
independent third party to analyze
expected non-recoverable credit losses
for distressed securities held by
corporates; (4) conserved five
corporates; and (5) created the NCUA
Guaranteed Note Program.1
1 As part of the corporate system resolution, the
NCUA created the NCUA Guaranteed Note Program
to provide long-term funding for distressed
investment securities (Legacy Assets) from the five
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16:22 Nov 21, 2017
Jkt 244001
The 2010 Amendments
In 2010, the Board comprehensively
revised the regulations governing
corporates and their activities to provide
longer term structural enhancements to
the corporate system.2 The 2010 rule
established a regulatory framework that
provides a foundation for a healthy
corporate system that: (1) Delivers
important services to the corporates’
natural person credit union members,
such as payment systems and liquidity;
and (2) builds and attracts sufficient
capital.3 The 2010 rule also sought to
prevent the recurrence of financial
losses similar to those that led to the
failure of the referenced five corporates
and weakened the financial condition of
others.
The 2010 rule curtailed several
practices that contributed to the
corporate failures. Specifically, it
established investment concentration
limits, limited asset maturities, and
prohibited investments in subordinated
and private label mortgage-backed
securities. The 2010 rule also
implemented a prompt corrective action
(PCA) regime stipulating capital
adequacy for corporates. Largely based
on the Basel I requirements, the capital
requirements of the 2010 rule
emphasized corporates holding tangible
and durable capital.
The Current Environment
The provisions of the 2010 rule have
successfully stabilized the corporate
system and improved the corporates’
ability to function and provide services
to natural person credit unions.
Additionally, since 2010, the overall
economy has improved greatly, thereby
improving the economic landscape in
which corporates operate. Further, the
large concentration of troubled assets
within the corporate system has been
reduced through portfolio repositioning
or the NCUA’s intervention. The
corporate system has significantly
contracted and consolidated, with assets
declining from approximately $81.7
billion prior to the 2010 rule to
approximately $24.9 billion today. In
that same time period, the number of
corporates has decreased from 26 to 11.
Given these developments, the Board
decided to revisit the 2010 rule’s capital
standards.
failed corporates. Legacy Assets consisted of over
2,000 investment securities secured by
approximately 1.6 million residential mortgages, as
well as commercial mortgages and other securitized
assets.
2 12 CFR part 704; 75 FR 64786 (Oct. 20, 2010).
3 75 FR 64787, 64787 (Oct. 20, 2010).
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Fmt 4700
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55497
II. July 2017 Proposal
As a result of its review of the
corporate capital standards, in July
2017, the Board published amendments
to the corporate rule, which primarily
affect the calculation of capital after
corporates consolidate and set a
retained earnings ratio target in meeting
PCA standards.4
Specifically, the Board proposed
incorporating ‘‘GAAP equity acquired in
a merger’’ as a component of retained
earnings. This amendment to the
definition of ‘‘retained earnings’’ in turn
affects the definition of ‘‘Tier 1 capital,’’
which includes retained earnings as one
component of Tier 1 capital. In the
proposal, the Board stated that expressly
including such equity acquired in a
merger as retained earnings and
referencing GAAP clarifies that this
capital is available to cover losses,
enhances transparency, and reduces
ambiguity.5 The Board also proposed
deleting the phrase ‘‘the retained
earnings of any acquired credit union,
or an integrated set of activities and
assets, calculated at the point of
acquisition, if the acquisition is a
mutual combination’’ from the current
definition of ‘‘Tier 1 capital,’’ given that
it would be redundant as a result of the
proposal.
In the 2010 rule, the Board
encouraged corporates to build retained
earnings, which has generally yielded
positive results. Nevertheless, in the
July 2017 proposal, the Board proposed
amending this aspect of the regulation
for three reasons: (1) The 2010 rule’s
language did not expressly reference
‘‘GAAP equity acquired in mergers’’ as
a component of retained earnings; (2)
the 2010 rule’s language limited
perpetual contributed capital (PCC) for
regulatory capital purposes; and (3) the
2010 rule’s language was inconsistent
with other capital regulations.
Specifically, the Board proposed
removing the requirement 6 to limit PCC
counted as Tier 1 capital to the amount
of retained earnings. Further, the Board
proposed permitting a corporate to
include in its Tier 1 capital all PCC that
is sourced from an entity not covered by
federal share insurance.
Further, as discussed in greater detail
below, the Board proposed adding a
definition of ‘‘retained earnings ratio’’ to
the regulation. Under the proposal, that
term would mean ‘‘the corporate credit
union’s retained earnings divided by its
moving daily average net assets.’’ The
Board proposed requiring all corporates
4 82
FR 30774 (July 3, 2017).
5 Id.
6 This requirement would not have gone into
effect until October 2020.
E:\FR\FM\22NOR1.SGM
22NOR1
]]>Agencies
[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)]
[Rules and Regulations]
[Pages 55496-55497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25122]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 265
[Docket No. OP-1578]
Rules of Organization
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Amendment to Rules of Organization.
-----------------------------------------------------------------------
SUMMARY: The Board has amended its definition of a quorum of the Board
in the Board's Rules of Organization. The amendment is designed to
facilitate the Board's ability to continue to function efficiently
during periods of substantial vacancies on the Board. The amendment
does not alter the number of Board members required to constitute a
quorum in normal operating environments. The amendment also addresses
Board member recusals and disqualifications. In addition, the Board has
provided a modified definition of a quorum during exigent
circumstances. In connection with this modification, the Board is
amending its Rules Regarding Delegation of Authority, published
elsewhere in this Federal Register, to authorize the Chair (or Vice
Chair, if the Chair is unavailable) to determine when an emergency
situation exists.
DATES: The amendment to the Board's Rules of Organization became
effective on October 25, 2017.
FOR FURTHER INFORMATION CONTACT: Laurie Schaffer, Associate General
Counsel (202) 452-2272, or Daniel Hickman, Counsel (202) 973-7432,
Legal Division, Board of Governors of the Federal Reserve System, 20th
Street and Constitution Avenue NW., Washington, DC 20551. For the
hearing impaired only, Telecommunication Device for Deaf (TDD) users
may contact (202) 263-4869.
SUPPLEMENTARY INFORMATION: The Board consists of up to seven members
appointed by the President, by and with the advice and consent of the
Senate, as provided in the Federal Reserve Act (Act).\1\ The Act does
not define a quorum of the Board, and authorizes the Board to make all
rules and regulations necessary to enable the Board effectively to
perform its duties and functions.\2\ For many years, the Board defined
a quorum to be a majority (four members) of its authorized strength of
seven members. In 2003, the Board revised its definition of a quorum of
the Board to be a majority of the Board members currently in office,
unless there are five members in office, in which case a quorum would
be four members.\3\ This modification allowed the Board to function
with fewer than four members in office and enhanced the Board's ability
to function during emergencies.
---------------------------------------------------------------------------
\1\ See 12 U.S.C. 241.
\2\ See 12 U.S.C. 248(i).
\3\ 66 FR 37686 (Jul 19, 2001), as amended at 68 FR 24743 (May
8, 2003).
---------------------------------------------------------------------------
Over the past decade, the Board has had to operate with fewer than
five members on several occasions.\4\ Based on this experience, the
Board has determined that substantial vacancies present administrative
and logistical challenges that make it difficult to conduct routine
business and efficiently manage operations, particularly with the
Board's traditional reliance on a 3-member committee structure. In
light of these considerations, the Board has reconsidered its quorum
practice and decided to amend its definition of a quorum to provide
that a quorum of the Board is four members, unless there are three or
fewer members in office, in which case a quorum would be all members in
office. This revised definition will facilitate the Board's ability to
continue to function efficiently during periods of substantial
vacancies on the Board. This revision does not alter the number of
Board members required to constitute a quorum or the functioning of the
Board's committee structure in normal operating environments (that is,
when five or more members are in office).
---------------------------------------------------------------------------
\4\ Since the current structure of the Board was established in
1936, the Board has had fewer than five members on only a few
occasions for a short period of time and the Board has never had
fewer than four members.
---------------------------------------------------------------------------
Increasing the quorum requirement for a four-member and three-
member Board may make it more difficult to convene a quorum if a member
of the Board is recused or disqualified from a particular matter. To
address this concern, the Board also has amended its Rules of
Organization to clarify that Board members who are recused or
disqualified from participating in a particular matter will be excluded
from calculations of the quorum requirement for that matter.
Since the revisions may make it more difficult to convene a quorum
of the Board under exigent circumstances, the Board also has added a
modified definition of quorum providing that, in an emergency
situation, a quorum of the Board consists of a majority of the Board
members in office. An emergency situation is defined as a situation
when action on a matter is necessary to prevent, correct, or mitigate
serious harm to the economy or the stability of the financial system,
and action is required before the full Board can convene. The Board is
amending its Rules Regarding Delegation of Authority (12 CFR part 265),
published elsewhere in this Federal Register, to authorize the Chair
(or the Vice Chair, if the Chair is unavailable) to determine when an
emergency situation exists.
The Board has incorporated these revisions into its Rules of
Organization and Rules Regarding Delegation of Authority,\5\ published
elsewhere in this Federal Register. The revisions relate solely to the
internal procedure of the Board, and, accordingly, the public notice,
public comment and delayed effective date provisions of the
Administrative Procedure Act do not apply. See 5 U.S.C. 553(b) and (d).
Because public notice and comment is not required, the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) also does not apply to this
action.
---------------------------------------------------------------------------
\5\ The Board's Rules Regarding Delegation of Authority are
codified at 12 CFR part 265.
---------------------------------------------------------------------------
Board of Governors--Rules of Organization
0
Section 2 paragraph (b) is revised to read as follows:
Section 2 Composition, Location, and Public Information
* * * * *
(b)(1) Quorum. Four Board members constitutes a quorum of the Board
for purposes of transacting business except that, if there are three or
fewer Board members in office, then a quorum consists of all Board
members currently in office. If a Board member is recused or
disqualified from participating in a matter, the member shall not be
counted for purposes of calculating the quorum for that matter.
(b)(2) Exigent Circumstances. In an emergency situation, a quorum
of the Board consists of a majority of the Board members in office. An
emergency situation exists when action on a matter is necessary to
prevent, correct, or mitigate serious harm to the economy or the
stability of the financial system, and action is required before the
full Board can convene.
[[Page 55497]]
By order of the Board of Governors of the Federal Reserve
System, November 15, 2017.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2017-25122 Filed 11-21-17; 8:45 am]
BILLING CODE 6210-01-P
