Requirements for Insurance; National Credit Union Share Insurance Fund Equity Distributions, 7954-7964 [2018-03622]
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Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Rules and Regulations
OCC and to the Board of Governors of
the Federal Reserve System, on or before
April 5, the results of the stress test in
the manner and form specified by the
OCC.
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NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 741
RIN 3133–AE77
6. Section 46.8 is amended by revising
paragraph (a) to read as follows:
Requirements for Insurance; National
Credit Union Share Insurance Fund
Equity Distributions
§ 46.8
AGENCY:
■
Publication of disclosures.
(a) Publication date. (1) $50 billion or
over covered institution. A $50 billion
or over covered institution must publish
a summary of the results of its annual
stress test in the period starting June 15
and ending July 15 provided:
(i) Unless the OCC determines
otherwise, if the $50 billion or over
covered institution is a consolidated
subsidiary of a bank holding company
or savings and loan holding company
subject to supervisory stress tests
conducted by the Board of Governors of
the Federal Reserve System pursuant to
12 CFR part 252, then within the June
15 to July 15 period such covered
institution may not publish the required
summary of its annual stress test earlier
than the date that the Board of
Governors of the Federal Reserve
System publishes the supervisory stress
test results of the covered bank’s parent
holding company.
(ii) If the Board of Governors of the
Federal Reserve System publishes the
supervisory stress test results of the
covered institution’s parent holding
company prior to June 15, then such
covered institution may publish its
stress test results prior to June 15, but
no later than July 15, through actual
publication by the covered institution or
through publication by the parent
holding company pursuant to paragraph
(b) of this section.
(2) $10 to $50 billion covered
institution. A $10 to $50 billion covered
institution must publish a summary of
the results of its annual stress test in the
period starting October 15 and ending
October 31.
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Dated: February 13, 2018.
Joseph Otting,
Comptroller of the Currency.
The NCUA Board (Board) is
adopting amendments to its share
insurance requirements rule to provide
stakeholders with greater transparency
regarding the calculation of each eligible
financial institution’s pro rata share of
a declared equity distribution from the
National Credit Union Share Insurance
Fund (NCUSIF). The Board is also
adopting a temporary provision to
govern all NCUSIF equity distributions
related to the Corporate System
Resolution Program (CSRP), a special
purpose program established by the
Board to stabilize the corporate credit
union system following the 2007–2009
financial crisis. Furthermore, the Board
is making technical and conforming
amendments to other aspects of the
share insurance requirements rule to
account for these changes.
DATES: This rule is effective March 26,
2018, except for the addition of
§ 741.13, which is effective from March
26, 2018, until December 31, 2022.
FOR FURTHER INFORMATION CONTACT:
Benjamin M. Litchfield, Staff Attorney,
Office of General Counsel, at (703) 518–
6540; or Steve Farrar, Supervisory
Financial Analyst, Office of
Examination and Insurance, at (703)
518–6360. You may also contact them at
the National Credit Union
Administration, 1775 Duke Street,
Alexandria, Virginia 22314–3428.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
II. Summary of the Proposed Rule
III. Summary of Comments to the Proposed
Rule
IV. Section-by-Section Analysis
V. Technical and Conforming Amendments
VI. Regulatory Procedures
I. Background
[FR Doc. 2018–03687 Filed 2–22–18; 8:45 am]
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National Credit Union
Administration (NCUA).
ACTION: Final rule.
BILLING CODE 4810–33–P
The NCUA is the chartering and
supervisory authority for federal credit
unions (FCUs) and the federal
supervisory authority for federally
insured credit unions (FICUs).1 In
1 The NCUA’s authority to charter federal credit
unions is contained in Title I of the FCU Act (12
U.S.C. 1752–1775), and its various authorities as
federal share insurer are contained in Title II of the
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addition to its chartering and
supervisory responsibilities, the Board
also administers the NCUSIF, a
revolving fund within the U.S. Treasury
that provides federal share insurance
coverage to more than 106 million credit
union members for member accounts
held at FICUs and provides assistance in
connection with the liquidation or
threatened liquidation of FICUs in
troubled condition.2
The Federal Credit Union Act (FCU
Act) requires each FICU to pay and
maintain a capitalization deposit with
the NCUSIF equal to one percent of the
FICU’s insured shares to capitalize the
NCUSIF.3 The amount of the FICU’s
required capitalization deposit is
adjusted annually for a FICU with less
than $50 million in assets and
semiannually for a FICU with $50
million in assets or more.4 A FICU that
terminates federal share insurance
coverage is entitled to have its
capitalization deposit returned within a
reasonable time.5
The FCU Act also requires each FICU
to pay a federal share insurance
premium equal to a percentage of the
FICU’s insured shares to ensure that the
NCUSIF has sufficient reserves to pay
potential share insurance claims by
credit union members and to provide
assistance in connection with the
FCU Act (12 U.S.C. 1781–1790e). Title III of the
FCU Act (12 U.S.C. 1795–1795k) governs the
Board’s responsibilities overseeing the NCUA
Central Liquidity Facility, a federal instrumentality
that provides liquidity for member credit unions.
2 12 U.S.C. 1783.
3 Id. at 1782(c)(1)(A)(i).
4 Id. at 1782(c)(1)(A)(iii)(I)–(II) (‘‘The amount of
each insured credit union’s deposit shall be
adjusted as follows, in accordance with procedures
determined by the Board, to reflect changes in the
credit union’s insured shares: (I) Annually, in the
case of an insured credit union with total assets of
not more than $50,000,000; and (II) semi-annually,
in the case of an insured credit union with total
assets of $50,000,000 or more.’’). Because the
statutory text can be read to require the Board to
adjust the capitalization deposit of a FICU with
exactly $50,000,000 in assets both annually and
semi-annually, the Board interprets the phrase ‘‘not
more than’’ to mean ‘‘less than’’ to give full effect
to Congress’ intended meaning of this phrase. See
Griffin v. Oceanic Contractors, Inc., 458 U.S. 564,
571 (1982) (if the meaning of the statutory provision
is clear from its text, the sole responsibility of a
federal agency is to enforce the statute according to
its terms unless literal application of the statute
‘‘will produce a result demonstrably at odds with
the intention of its drafters.’’).
5 Id. at 1782(c)(1)(B)(i). A FICU may terminate
federal share insurance coverage by converting to,
or merging into, a non-federally insured credit
union or a non-credit union financial institution
such as a mutual savings bank. If permitted under
applicable state law, a federally insured, statechartered credit union may also convert to private
share insurance. See 12 CFR 708b (NCUA’s
regulation governing mergers and conversions to
private share insurance). A FICU may also
terminate federal share insurance coverage through
voluntary or involuntary liquidation.
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liquidation or threatened liquidation of
FICUs in troubled condition.6 The
Board may assess a federal share
insurance premium no more than twice
in a calendar year and not in an amount
more than necessary to restore the
NCUSIF’s equity ratio to 1.3 percent.7
Furthermore, the FCU Act requires
the Board to make a pro rata distribution
of NCUSIF equity to FICUs ‘‘after each
calendar year if, as of the end of the
calendar year,’’ there are no outstanding
loans or interest owed to the U.S.
Treasury and the NCUSIF meets certain
financial performance benchmarks.8
When those financial conditions are
present, the FCU Act requires the Board
to make the maximum possible equity
distribution that does not reduce the
NCUSIF’s equity ratio below its normal
operating level or the available assets
ratio below one percent.9
Section 741.4 of the NCUA’s share
insurance requirements rule implements
these requirements.10 The Board
originally adopted it on October 17,
1984 following the passage of the Deficit
Reduction Act of 1984,11 which
amended the FCU Act to require pro
rata distributions of NCUSIF equity
under certain financial conditions.12
The Board subsequently amended
§ 741.4 following the passage of the
Credit Union Membership Access Act of
1998 13 and the Helping Families Save
Their Homes Act of 2009 14 to address
changes made to the FCU Act by each
6 Id.
at 1782(c)(2)(A).
at 1782(c)(2)(B). The ‘‘equity ratio’’ is the
amount of NCUSIF capitalization, including FICU
NCUSIF capitalization deposits and retained
earnings of the NCUSIF (net of direct liabilities of
the NCUSIF and contingent liabilities for which no
provision for losses has been made) divided by the
aggregate amount of insured FICU shares. Id. at
1782(h)(2).
8 Id. at 1782(c)(3)(A). The FCU Act requires the
Board to make a pro rata equity distribution from
the NCUSIF to FICUs for each year where, at the
end of the year, the following circumstances are
present: (1) The NCUSIF has no outstanding loans
from the U.S. Treasury and any outstanding interest
on those loans has been repaid; (2) the NCUSIF’s
equity ratio exceeds the normal operating level set
by the Board; and (3) the NCUSIF’s available assets
ratio exceeds 1 percent. The ‘‘normal operating
level’’ is currently set at 1.39. The ‘‘available assets
ratio’’ is the total of cash plus market value of
unencumbered investments (less direct liabilities
and contingent liabilities for which no provision for
loss has been made) divided by the aggregate
amount of insured FICU shares. Id. at 1782(h)(1).
9 Id. at 1782(c)(3)(B)(i)–(ii).
10 12 CFR 741.4.
11 Public Law 98–369, Div. B., Title VIII, sec.
2804, 98 Stat. 494, 1204 (July 18, 1984).
12 Capitalization of the National Credit Union
Share Insurance Fund, 49 FR 40561 (Oct. 17, 1984).
13 Public Law 105–219, sec. 302(a), 112 Stat. 913,
933 (Aug. 7, 1998).
14 Public Law 111–22, sec. 204(e)–(f), 123 Stat.
1632, 1650–51 (May 20, 2009).
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7 Id.
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of these laws.15 With respect to equity
distributions from the NCUSIF, § 741.4
governs the form of a declared equity
distribution (i.e., a waiver of insurance
premiums, premium rebates, or a
dividend directly from the NCUSIF) and
the scope of financial institutions
(referred to collectively herein as
‘‘eligible financial institutions’’) eligible
to receive the declared equity
distribution.16
II. Summary of the Proposed Rule
On July 20, 2017, the Board issued a
notice of proposed rulemaking soliciting
public comment on proposed
amendments to § 741.4 to provide
stakeholders with greater transparency
regarding the calculation of an eligible
financial institution’s pro rata share of
a declared equity distribution.17 As part
of the proposed rulemaking, the Board
also sought to adopt a temporary
provision for equity distributions
related to the CSRP.18
The proposed rule amended § 741.4 in
several respects. First, the proposed rule
amended § 741.4(e) to adopt a
calculation methodology for
determining each FICU’s pro rata share
of a declared equity distribution based
on either an eligible financial
institution’s quarterly average amount of
insured shares or its year-end insured
shares balance as then reported in the
financial institution’s year-end Call
Report. Second, the proposed rule
amended § 741.4(j)(1)(ii) to eliminate
the ability of a FICU terminating federal
share insurance coverage during the
calendar year from receiving an equity
distribution for that calendar year.
To accommodate these changes, the
proposed rule also made technical and
conforming amendments to the
15 National Credit Union Share Insurance Fund
Premium and One Percent Deposit, 74 FR 63277
(Dec. 3, 2009).
16 Under certain circumstances, a FICU that
terminates federal share insurance coverage
(including through merger with a privately insured
credit union) and a financial institution that
converts to federal share insurance coverage
(including through merger with a FICU) may
receive a prorated share of an equity distribution.
See 12 CFR 741.4(i), (j).
17 Requirements for Insurance; National Credit
Union Share Insurance Fund Equity Distributions,
82 FR 35705 (Aug. 1, 2017).
18 The CSRP was a special purpose initiative to
stabilize the corporate credit union system funded
principally through advances from the Temporary
Corporate Credit Union Stabilization Fund
(TCCUSF). The TCCUSF was a temporary revolving
fund within the U.S. Treasury created to address
problems in the corporate credit union system that
arose as part of the recent financial crisis. On
September 28, 2017, the Board announced the
closure of the TCCUSF and the winding down of
the CSRP. See Closing the Temporary Corporate
Credit Union Stabilization Fund and Setting the
Share Insurance Fund Normal Operating Level, 82
FR 46298 (Oct. 4, 2017).
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definitions in § 741.4(b) and the
provisions governing conversion to
federal share insurance in § 741.4(i).
Appendix A to part 741, which provides
examples of partial year federal share
insurance premium assessments and
equity distributions under § 741.4, was
removed in favor of developing a more
user-friendly and readily updated set of
examples to be posted on the NCUA’s
public website.
The proposed rule also sought to add
a temporary provision, § 741.13, to
govern equity distributions related to
the CSRP. Because the CSRP involved a
series of corporate assessments to
capitalize the TCCUSF, the temporary
provision required any equity
distribution related to the CSRP to take
the form of a rebate of past corporate
assessments paid on either a First-In,
First-Out (FIFO) or Last-In, First-Out
(LIFO) basis to repay those eligible
financial institutions that were required
to pay a corporate assessment.
Finally, the proposed rule requested
comment on ways to improve the
NCUA’s current process for assessing
and collecting federal share insurance
premiums to provide stakeholders with
greater transparency. While not part of
this rulemaking, the Board noted its
intention to address the assessment and
collection of federal share insurance
premiums in a separate rulemaking
based in part on stakeholder comments.
One possible improvement that the
Board was considering was calculating
federal share insurance premiums
similarly to equity distributions.
III. Summary of the Comments to the
Proposed Rule
The Board received 50 comments
from various stakeholders including
FICUs, national credit union trade
associations, state credit union trade
associations, a professional trade
association for state credit union
supervisors, and a natural person.
Commenters overwhelmingly supported
the Board’s initiative to provide FICUs
with greater transparency and offered
general support for the proposed rule.
Commenters almost uniformly
supported the Board’s four-quarter
average method for calculating an
eligible financial institution’s pro rata
share of a declared equity distribution
under § 741.4(e). One commenter wrote
in support of the year-end insured share
balance method, but did not offer any
substantive arguments in support of that
approach. Another commenter wrote in
support of the current average daily
balance method, reasoning that the
current approach more appropriately
treats an equity distribution as a
dividend on the NCUSIF capitalization
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deposit and does not reward FICUs that
aggressively grow insured share
balances which can increase the overall
risk to the NCUSIF.
Commenters were more evenly
divided on the Board’s proposed
changes to § 741.4(j)(1)(ii), which
prohibited the payment of an equity
distribution to a FICU that terminates
federal share insurance coverage during
the calendar year for which an equity
distribution is declared. However,
neither commenters in favor of the
proposed changes nor commenters
opposed to the proposed changes
offered substantive arguments in
support of their respective positions.
Commenters in favor of the proposed
changes echoed the Board’s reasoning
from the proposed rule and commenters
opposed to the proposed changes
generalized about fairness to FICUs that
terminate federal share insurance
coverage.
Commenters were likewise divided on
whether an equity distribution related to
the CSRP should take the form of a
rebate of past corporate assessments
paid on a LIFO or FIFO basis or using
the quarterly average or year-end
method, whichever was adopted in
§ 741.4(e). Of the commenters that
indicated a preference for rebates of past
corporate assessments on a LIFO or
FIFO basis, an overwhelming majority
favored the LIFO approach. Other
commenters indicated a preference for
an aggregate assessments paid
approach, recommended by a national
credit union trade association, which
was neither a logical outgrowth of the
LIFO or FIFO methods nor the quarterly
average or year-end methods. Under the
aggregate assessments paid approach,
each FICU would have received an
equity distribution based on the
percentage of corporate assessments
paid by that FICU over the life of the
CSRP as a percentage of the aggregate
corporate assessments paid by all FICUs
over the life of the CSRP. The Board did
not receive specific comments on any
other aspect of the proposed rule,
including the technical and conforming
amendments proposed to § 741.4(b) and
(i) or the elimination of Appendix A to
part 741.
For the reasons set out in more detail
below, the Board is adopting the fourquarter average method for calculating
an eligible financial institution’s pro
rata share of an equity distribution.
Additionally, the Board is adopting
several new definitions to clarify
provisions of the share insurance
requirements rule. The Board is not
adopting the change to the share
insurance requirements rule that would
have eliminated the ability of a FICU
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that terminated federal share insurance
to receive an equity distribution for that
calendar year. Instead, the Board is
adopting a modified version of that
provision that is more consistent with
the four-quarter average method.
Furthermore, the Board is also adopting
a modified version of the temporary rule
for equity distributions related to the
CSRP that is more consistent with the
four-quarter average method. All other
changes are adopted as proposed.
IV. Section-by-Section Analysis
Section 741.4(e) Distribution of NCUSIF
Equity Not Related to the CSRP
The Board has historically used a
number of different calculation
methodologies to determine an eligible
financial institution’s pro rata share of
a declared equity distribution made in
the normal course of business not
related to the CSRP.19 Rather than
leaving the calculation methodology to
the discretion of the Board, proposed
§ 741.4(e) sought to provide
stakeholders with greater transparency
by establishing a set calculation
methodology for all such declared
equity distributions. After considering a
number of possible approaches, the
Board requested public comment on two
alternative calculation methodologies:
(1) The use of an eligible financial
institution’s quarterly average insured
share balance as then reported over the
calendar year in four quarterly Call
Reports and (2) the use of an eligible
financial institution’s year-end insured
share balance as then reported in its
December 31 Call Report.
Under the four-quarter average
approach, an eligible financial
institution’s pro rata share of a declared
equity distribution would be based on
its quarterly average insured share
balance as then reported over the
calendar year in four quarterly Call
Reports. To account for mergers
between FICUs during the calendar
year, the Board proposed to treat a
continuing FICU’s quarterly average
insured share balance as including
insured shares reported by a merging
FICU during reporting periods before
the completion of the merger. The Board
proposed to apply similar rules to
mergers between a FICU and a nonFICU financial institution (such as a
bank or privately insured credit union),
except that the non-FICU financial
institution would be treated as having
no insured shares during reporting
periods for which it did not carry
federal share insurance coverage.
19 See e.g., 49 FR 40564 (Oct. 17, 1984) (adopting
the year-end insured share balance method).
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Under the year-end approach, an
eligible financial institution’s pro rata
share of a declared equity distribution
would be based on its year-end insured
share balance as then reported in its
December 31 Call Report. This year-end
insured share balance naturally
included any FICU merger activity that
took place during the calendar year. For
any merger between a FICU and a nonFICU financial institution (such as a
bank or privately insured credit union),
the Board proposed to retain the current
rule set out in § 741.4(i)(2)(iii), which
allows a FICU to receive an equity
distribution based on its year-end
insured share balance as then reported
in its December 31 Call Report inclusive
of any shares acquired by merging nonFICU financial institutions throughout
the calendar year.
Of the two approaches, the Board
noted that it favors the four-quarter
average approach because it adjusts for
seasonal fluctuations in insured share
levels.20 Adjusting for seasonable
fluctuations allows the NCUA to make
an equity distribution based on the
actual average size of the eligible
financial institution over the calendar
year rather than at some arbitrary point
in time. This is particularly important to
provide fairness to smaller or
community-based FICUs that may
maintain relatively high insured share
balances during the calendar year but
may experience a larger than normal
decrease in insured share balances at
the end of the year as consumers
liquidate Christmas club and other types
of special savings accounts during the
holiday season. Additionally, this
approach is based on quarterly Call
Report data, eliminating the need for
additional paperwork burden on FICUs.
However, in the proposed rule, the
Board also recognized the benefits of the
year-end approach because it
harmonizes the calculation
methodology for an equity distribution
with the methods for calculating the
NCUSIF’s equity and available assets
ratios, and the dollar amount of a
federal share insurance premium or
distribution. In addition, the use of the
year-end approach eliminates the need
to create special rules for FICU mergers
or terminations of federal share
insurance coverage during the calendar
year. Accordingly, the Board sought
public comment on both approaches
with the understanding that the Board
would consider adopting one of the two
approaches, with or without appropriate
modifications, based, in part, on the
persuasiveness of the comments. The
Board also sought public comment on a
20 See
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number of issues related to each
calculation methodology, including
whether the look-back period under the
four-quarter average approach should be
extended to include insured share
balances from previous years.
Commenters overwhelmingly favored
the four-quarter average approach
because it adjusted for seasonal
fluctuations in insured share growth.
However, many of these commenters
largely echoed the Board’s own
justification for using the four-quarter
average approach without any
additional substantive arguments in
favor of that position. One commenter
wrote in support of the year-end
approach, but did not offer any
substantive arguments in favor of that
position. Another commenter wrote in
support of the Board’s current policy of
applying a daily distribution rate to
each FICU’s average daily capitalization
deposit balance. This commenter raised
concerns that either approach adopted
by the Board would encourage eligible
financial institutions to aggressively
grow insured shares to receive larger
equity distributions. This commenter
also argued that the average daily
balance method is preferable because it
correctly treats an equity distribution as
a dividend on a FICU’s capitalization
deposit.
On balance, the Board believes that
accounting for seasonal fluctuations in
insured share growth is a significant
benefit to eligible financial institutions
that outweighs the administrative
convenience offered by the year-end
approach. Furthermore, the Board
disagrees with the commenter’s
argument that this calculation
methodology encourages eligible
financial institutions to aggressively
grow insured shares to receive larger
equity distributions. Any growth in
insured shares would result in
corresponding decreases to the
NCUSIF’s equity and available assets
ratios which, if the resulting changes are
large enough, could trigger a smaller
equity distribution or the imposition of
a federal share insurance premium. The
Board believes that these potential
negative outcomes sufficiently mitigate
any incentive for an eligible financial
institution to aggressively grow insured
shares. Accordingly, the Board is
adopting the four-quarter average
approach in the final rule with some
minor clarifications.
The four-quarter average approach
relies on the use of quarterly Call Report
data to determine an eligible financial
institution’s pro rata share of an equity
distribution. Implicit in this concept is
the idea that a financial institution that
does not file a quarterly Call Report as
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a FICU for at least one reporting period
in the calendar year for which the Board
declares an equity distribution will not
be entitled to receive a portion of that
distribution nor would that FICU’s
insured shares be used to calculate the
aggregate average amount of insured
shares. For example, a FICU that files a
December 31 Call Report in January
2018, but does not file a March 31 Call
Report for the first quarter of 2018,
would not be eligible to receive an
equity distribution declared for calendar
year 2018. While the Board believes that
this principle is clear from a careful
reading of the preamble and regulatory
text set out in the proposed rule, it is
adopting a provision in the final rule to
ensure the reader understands the
Board’s intent.
The Board is also adopting a
provision in the final rule to explicitly
address mergers between FICUs. In the
preamble and regulatory text set out in
the proposed rule, the Board addressed
mergers between FICUs at some length.
To avoid any confusion, the final rule
clarifies that a FICU that merges with
another FICU that has filed at least one
Call Report for a reporting period in the
calendar year for which the Board
declares an equity distribution shall
receive an amount equivalent to what
the continuing FICU and the merging
FICU would have received but for the
consummation of the merger. For
purposes of calculating the continuing
FICU’s average amount of insured
shares, any insured shares previously
reported during that calendar year by
the merging FICU on its quarterly Call
Reports filed prior to the consummation
of the merger shall be combined with
the insured shares reported on the
continuing FICU’s quarterly Call
Reports for purposes of calculating the
continuing FICU’s equity distribution.
Furthermore, the Board is adopting a
provision in the final rule to explicitly
address purchase and assumption
transactions. In response to the
proposed rule, several commenters
asked about how the four-quarter
average approach would apply to
purchase and assumption transactions
where a FICU acquires all of the insured
shares of another FICU. While the Board
also believes that this principle should
be clear from a careful reading of the
preamble and regulatory text set out in
the proposed rule, it is adopting a
provision in the final rule to make it as
transparent as possible how the Board
will address these transactions. Under
the final rule, a FICU that acquires all
of the insured shares of another FICU
that files at least one Call Report for a
reporting period in the calendar year for
which the Board declares an equity
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7957
distribution, shall receive an amount
equivalent to what the acquiring FICU
and the selling FICU would have
received but for the consummation of
the purchase and assumption
transaction.
In all other respects, the Board is
adopting the four-quarter average
approach as proposed. Because the
Board did not receive substantive
comments on the appropriate look-back
period for the four-quarter average
approach, the Board is adopting a fourquarter look-back period.
Section 741.4(j) Conversion From, or
Termination of, Federal Share
Insurance
For 25 years, the Board did not allow
a FICU that terminated federal share
insurance coverage to receive an equity
distribution as a matter of right. Rather,
§ 741.4 permitted a FICU to leave a
‘‘nominal sum’’ on deposit with the
NCUISIF until the next equity
distribution to be eligible to receive ‘‘a
prorated share of the distribution.’’ 21 In
2009, however, the Board broadened
§ 741.4 to allow a FICU that terminated
federal share insurance coverage to
receive a pro rata equity distribution,
but only for the calendar year in which
the FICU terminated coverage. The
Board made this policy change as a
matter of administrative convenience to
avoid potentially lengthy recordkeeping
requirements imposed under the prior
rule.22 Under this provision, which is
codified in the current share insurance
requirements rule as § 741.4(j)(1)(ii), the
Board makes a prorated distribution to
an insured credit union that terminates
federal share insurance coverage during
the calendar year for which the Board
declares a pro rata distribution based on
the number of full calendar months for
which the insured credit union is
federally insured.23
Proposed § 741.4(j)(1)(ii) sought to
eliminate the ability of a FICU that
terminated federal share insurance
coverage before the declaration date of
an equity distribution to receive any
portion of that distribution. The Board
reasoned that this approach would be
more consistent with general corporate
practice regarding the payment of
shareholder dividends. Furthermore, the
Board believed that this approach
would be more equitable to FICUs that
remain federally insured throughout the
calendar year because they bear the risk
of a federal share insurance premium
21 See e.g., 12 CFR 741.5(i) (1985); 12 CFR 741.4(j)
(1996).
22 See National Credit Union Share Insurance
Fund Premium and One Percent Deposit, 74 FR
63277 (Dec. 3, 2009).
23 12 CFR 741.4(j)(1)(ii).
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and are required to maintain the
required capitalization deposit, while a
FICU that terminates federal share
insurance coverage does not. A FICU
that terminates federal share insurance
coverage before the assessment of a
federal share insurance premium is not
required to pay that premium. Under
current § 741.4(j)(1)(ii), however, that
former FICU may still receive an equity
distribution.
Commenters were evenly split on
whether the Board should adopt the
proposed change to § 741.4(j)(1)(ii) or
retain the current rule. Having
considered the arguments advanced by
the commenters, the Board believes that
it is not appropriate to finalize this
proposed change at this time. Instead,
the Board believes that it would be
beneficial to study this issue further,
and it may revisit amendments to
§ 741.4(j)(1)(ii) in a future rulemaking.
However, the Board is finalizing
technical changes to § 741.4(j)(1)(ii) to
make this provision more consistent
with the four-quarter average method
adopted in § 741.4(e). Section
741.4(j)(1)(ii) will be eliminated and
codified as new § 741.4(e)(4)(i)(C).
Additionally, new § 741.4(e)(4)(i)(C)
will calculate the prorated distribution
of a FICU that terminated federal share
insurance coverage by applying the
general four-quarter average approach
set out in § 741.4(e), including the
requirement that the FICU must file a
Call Report for at least one reporting
period in the calendar year for which
the Board has declared a distribution to
receive a prorated equity distribution,
with one exception. For reporting
periods where the FICU did not
maintain federal share insurance
coverage, it will be treated as having no
insured shares in that period. This has
the same practical effect as the current
process of multiplying the FICU’s last
reported insured share balance by a
modified premium/distribution ratio,
but is computationally simpler.
Section 741.13 NCUSIF Equity
Distributions Related to the CSRP
The Board proposed to adopt a
temporary provision governing any
equity distributions resulting from the
CSRP. Under this temporary provision,
any equity distribution related to the
CSRP was to take the form of a series of
equity distributions repaying any
corporate assessments against FICUs on
either a FIFO or a LIFO basis. The Board
also solicited public comment on
whether it should instead use either the
four-quarter average or year-end
approach with appropriate
modifications to account for the unique
nature of the CSRP.
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Under the proposed FIFO approach,
the Board would have made an equity
distribution to each FICU up to the total
dollar amount of corporate assessments
paid by that FICU during the relevant
assessment period beginning with the
first assessment period in 2009.
Under the proposed LIFO approach,
the Board would have made an equity
distribution to each FICU up to the total
dollar amount of premiums paid by that
FICU during the relevant assessment
period beginning with the last
assessment period in 2013. Of the two
approaches, the Board favored the LIFO
method because it ensured that FICUs
received equity distributions for their
most recent corporate assessments first,
which generally were larger
assessments, with smaller assessments
that took place at the start of the CSRP
being repaid over time as the NCUAguaranteed securities issued as part of
the CSRP matured.
Under either the proposed FIFO or
LIFO approach, any payments owed to
a FICU that had merged into another
FICU would have been paid to the
continuing FICU. Moreover, any
payments owed to a liquidated FICU
with an open liquidation estate or a
closed liquidation estate still within its
applicable look-back period would have
been made to the liquidation estate and
distributed ratably to the FICU’s
creditors in accordance with part 709 of
the NCUA’s rules.24 Given the payment
priority set out in part 709, the Board
anticipated that a majority of these
creditors would be members with
uninsured share balances rather than
general creditors of the liquidation
estate.
Furthermore, because any equity
distribution related to the CSRP would
go first towards repaying FICUs that
paid corporate assessments, a FICU that
had not paid a corporate assessment
would not have been entitled to receive
an equity distribution related to the
CSRP unless all such corporate
assessments are first repaid in full.
Additionally, a FICU that terminated
federal share insurance coverage before
the payment date for an equity
distribution related to the CSRP would
not have been entitled to a distribution
for the reasons stated above in the
discussion of proposed changes to
§ 741.4(j)(1)(ii).
Of the commenters that indicated a
preference for either the proposed FIFO
or LIFO approach, an overwhelming
majority favored the LIFO approach.
Other commenters indicated a
preference for an aggregate assessments
paid approach recommended by a
24 12
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national credit union trade association.
Under the aggregate assessments paid
approach, each FICU would have
received an equity distribution based on
the percentage of corporate assessments
paid by that FICU over the life of the
CSRP as a percentage of the aggregate
corporate assessments paid by all FICUs
over the life of the CSRP. That approach
is neither a logical outgrowth of the
FIFO or LIFO methods nor a logical
outgrowth of the four-quarter average or
year-end methods and, thus, is outside
the scope of this rulemaking.
While FIFO and LIFO would have
been a way to closely link what a FICU
paid in corporate assessments to what it
received in equity distributions related
to the CSRP, the Board acknowledges
that over the past 9 years, several
hundred FICUs have terminated federal
share insurance at various times; there
have been many FICU mergers and
liquidations; and the NCUA has
approved several new charters. Each of
these transactions makes the calculation
of each eligible financial institution’s
pro rata share of an equity distribution
more complex. Additionally, the Board
has acknowledged that FIFO and LIFO
may not be completely compatible with
the FCU Act requirement to make a
distribution on a ‘‘pro rata’’ basis.
Instead, the Board believes that
adopting a modified version of the fourquarter average method is the most
appropriate approach. In the proposed
rule, the Board solicited comment on
whether a four-quarter look-back period,
or some longer look-back period such as
six or eight quarters, was preferable
under the four-quarter average method.
Given the unique nature of the CSRP,
the Board strongly believes that a longer
look-back period, which tracks the
period of time in which corporate
assessments were being made, is
appropriate for CSRP-related equity
distributions because it captures share
insurance activity that took place during
that time.
Accordingly, the Board is adopting a
modified version of the four-quarter
average approach for CSRP-related
equity distributions that includes five
separate look-back periods tied directly
to the beginning of the CSRP that
correspond to each calendar year for
which the Board may declare an equity
distribution related to the CSRP. For
calendar year 2017 equity distributions,
the Board will apply a 36-quarter lookback period. For calendar year 2018
equity distributions, the Board will
apply a 40-quarter look-back period. For
calendar year 2019 equity distributions,
the Board will apply a 44-quarter lookback period. For calendar year 2020
equity distributions, the Board will
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apply a 48-quarter look-back period.
Finally, for calendar year 2021 equity
distributions, the Board will apply a 52quarter look-back period. Applying five
separate look-back periods ensures that
the Board adequately accounts for share
insurance activity that took place during
the CSRP.
Consistent with the four-quarter
average approach, an eligible financial
institution must file at least one
quarterly Call Report as a FICU for a
reporting period in the calendar year for
which the Board declares an equity
distribution to receive a pro rata share
of that distribution. Otherwise, that
financial institution will not receive an
equity distribution for that calendar year
nor will its insured shares be used to
calculate the aggregate average amount
of insured shares used to determine
each eligible financial institution’s pro
rata share of the distribution.
Furthermore, a FICU that terminated
federal share insurance coverage must
file at least one quarterly Call Report as
a FICU for a reporting period in the
applicable calendar year to receive a
prorated equity distribution.
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V. Technical and Conforming
Amendments
In addition to the proposed changes to
the share insurance requirements rule
governing the calculation of an eligible
financial institution’s pro rata share of
an equity distribution and the treatment
of a FICU that terminated federal share
insurance coverage, the Board proposed
to make technical and conforming
amendments to other aspects of § 741.4
and to Appendix A of Part 741.
Commenters did not address these
technical and conforming amendments.
Accordingly, the Board is adopting
these amendments largely as proposed
with one exception. The Board is
making a technical change to the aspect
of the share insurance requirements rule
governing newly chartered FICUs that
was not previously proposed. This
change will relocate regulatory text
governing equity distributions to newly
chartered FICUs from § 741.4(g) to
§ 741.4(e). Because the change is
technical in nature, and does not change
the substance of the rule, the Board
believes that public comment on the
change to this aspect of the share
insurance requirements rule is
unnecessary and therefore has good
cause to waive the notice and comment
requirements of the Administrative
Procedure Act (APA).25
25 5 U.S.C. 553(b)(B) (allowing waiver of public
comment requirement when an agency for good
cause finds such procedures ‘‘unnecessary’’). See
Administrative Procedure Act: Legislative History,
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Section 741.4(b) Definitions
To provide stakeholders with greater
transparency, the Board is amending
§ 741.4(b) to include definitions of
‘‘aggregate amount of insured shares’’,
‘‘aggregate average amount of insured
shares’’, ‘‘average amount of insured
shares’’, ‘‘federally insured credit
union’’, ‘‘financial institution’’,
‘‘insured depository institution’’, and
‘‘NCUSIF equity distribution’’ in the
final rule. Furthermore, the Board is
revising definitions of ‘‘available assets
ratio’’, ‘‘equity ratio’’, ‘‘insured shares’’,
and ‘‘reporting period’’.
Section 741.4(g) New Charters
For greater readability and to improve
ease of use throughout § 741.4, the
Board is removing the language from
§ 741.4(g) addressing equity
distributions for newly chartered FICUs
and codifying it as new
§ 741.4(e)(4)(i)(A). The Board is also
making technical amendments to this
provision to provide for greater
consistency with the four-quarter
average method adopted above. Under
current § 741.4(g), a newly chartered
FICU may not receive a pro rata share
of a declared equity distribution unless
it is has funded its capitalization
deposit.26 Under new § 741.4(e)(4)(i)(A),
a newly chartered FICU may not receive
a pro rata share of a declared equity
distribution unless it has filed a
quarterly Call Report for at least one
reporting period in the calendar year for
which the Board declares the
distribution. In all other respects,
current § 741.4(g) remains unchanged.
Section 741.4(i) Conversion to Federal
Insurance
The Board is also making conforming
amendments to § 741.4(i)(1)(v) and
(i)(2)(iii) to reflect the adoption of the
four-quarter average method for
calculating an eligible financial
institution’s pro rata share of an equity
distribution not related to the CSRP.
First, the Board is removing
§ 741.4(i)(1)(v) and (i)(2)(iii) and
codifying those provisions as new
§ 741.4(e)(4)(i)(B). Section 741.4(i)(1)(v)
currently allows a financial institution
that converts to federal share insurance
coverage during the calendar year to
receive a prorated equity distribution
based on the number of full calendar
months for which the financial
institution was a FICU.27 New
S. Doc. No. 248 79–258 (1946), at 200
(‘‘ ‘Unnecessary’ means unnecessary as far as the
public is concerned, as would be the case if a minor
or merely technical amendment in which the public
is not particularly interested were involved.’’).
26 12 CFR 741.4(g).
27 12 CFR 741.4(i)(1)(v).
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7959
§ 741.4(e)(4)(i)(B) largely retains this
aspect of the current rule. However,
rather than the current process of
multiplying the FICU’s year-end insured
share balance by premium/distribution
ratio, new § 741.4(e)(4)(i)(B) will treat
the FICU as having no insured shares for
the applicable reporting periods for
which the financial institution did not
carry federal share insurance coverage.
This has the same practical effect as the
current process, but is computationally
simpler. Furthermore, a FICU that does
not file at least one quarterly Call Report
for reporting periods of the calendar
year for which the Board declares the
distribution shall not receive an equity
distribution.
Section 741.4(i)(2)(iii) addresses an
equity distribution to a FICU that
merges with a financial institution that
is not federally insured by the NCUA
where the FICU is the surviving entity.28
If the Board declares an equity
distribution for the calendar year in
which such a merger takes place, the
continuing FICU is entitled to receive an
equity distribution based on its year-end
insured share balance. New
§ 741.4(e)(4)(i)(B) differs slightly from
§ 741.4(i)(2)(iii). Under the final rule,
only the insured shares attributable to
the continuing FICU as reported on
quarterly Call Reports at that time shall
be used to determine the average
amount of insured shares for reporting
periods preceding the date of the
merger. This approach harmonizes new
§ 741.4(e)(4)(i)(B) with new
§ 741.4(e)(4)(i)(A) and (C) respectively.
Appendix A to Part 741—Examples of
Partial Year NCUSIF Assessment and
Distribution Calculations Under § 741.4
The Board also proposed to remove
Appendix A to part 741 from the
NCUA’s regulations and replace it with
examples and frequently asked
questions to be published on NCUA’s
public website.29 Appendix A provides
examples of partial year NCUSIF
assessment and distribution calculations
under various factual scenarios. While
the Board recognizes that examples of
how the NCUA makes these calculations
may be useful to stakeholders, including
those examples in an appendix to part
741 makes it difficult for the NCUA to
update, amend, or revise the examples
to provide stakeholders with additional
clarity. Accordingly, the Board is
removing Appendix A and replacing it
with information on the NCUA’s
website which can be updated easily
and as frequently as necessary to
provide stakeholders with more clear,
28 12
29 12
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relevant, and timely examples regarding
the calculation of partial year NCUSIF
assessments and distributions.
VI. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act
requires the NCUA to prepare an
analysis to describe any significant
economic impact a regulation may have
on a substantial number of small entities
(primarily those under $100 million in
assets).30 This rule has no economic
impact on small credit unions because
it only impacts internal NCUA
procedures that are used infrequently.
Accordingly, NCUA certifies the final
rule will not have a significant
economic impact on a substantial
number of small credit unions.
Small Business Regulatory Enforcement
Fairness Act
The Small Business Regulatory
Enforcement Fairness Act of 1996 (Pub.
L. 104–121) (SBREFA) provides
generally for congressional review of
agency rules. A reporting requirement is
triggered in instances where the NCUA
issues a final rule as defined by Section
551 of the Administrative Procedure
Act. The NCUA does not believe this
final rule is a ‘‘major rule’’ within the
meaning of the relevant sections of
SBREFA. As required by SBREFA, the
NCUA has filed the appropriate reports
so that this final rule may be reviewed.
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Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) applies to rulemakings in which
an agency creates a new information
collection requirement or amends an
existing information collection
requirement.31 For the purposes of the
PRA, an information collection
requirement may take the form of a
reporting, recordkeeping, or third-party
disclosure requirement. The final rule
does not contain a new information
collection requirement or amend an
existing information collection
requirement that requires approval by
OMB under the Paperwork Reduction
Act (44 U.S.C. Chap. 35).
Assessment of Federal Regulations and
Policies on Families.
The NCUA has determined that this
final rule will not affect family wellbeing within the meaning of section 654
of the Treasury and General
Government Appropriations Act,
1999.32
30 5
U.S.C. 603(a).
U.S.C. 3507(d); 5 CFR 1320.
32 Public Law 105–277, sec. 654, 112 Stat. 2681,
2681–581 (1998).
31 44
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Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests.33 The 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 final rule will 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. The NCUA has
therefore determined that this final rule
does not constitute a policy that has
federalism implications for purposes of
the executive order.
List of Subjects in 12 CFR Part 741
Bank deposit insurance, Credit
unions, Reporting and recordkeeping
requirements.
By the National Credit Union
Administration Board on February 15, 2018.
Gerard Poliquin,
Secretary of the Board.
For the reasons discussed above, the
Board amends 12 CFR part 741 as
follows:
PART 741—REQUIREMENTS FOR
INSURANCE
1. The authority citation for part 741
continues to read as follows:
■
Authority: 12 U.S.C. 1757, 1766(a), 1781–
1790, and 1790d; 31 U.S.C. 3717.
2. Amend § 741.4:
a. In paragraph (b), by:
i. Adding definitions in alphabetical
order for ‘‘aggregate amount of insured
shares’’ and ‘‘aggregate average amount
of insured shares’’;
■ ii. Revising the definition for
‘‘available assets ratio’’;
■ iii. Adding definitions in alphabetical
order for ‘‘average amount of insured
shares’’ and ‘‘Board’’;
■ iv. Revising the definition of ‘‘equity
ratio’’;
■ v. Adding definitions in alphabetical
order definitions for ‘‘federally insured
credit union’’, ‘‘financial institution’’,
and ‘‘insured depository institution’’;
■ vi. Revising the definition of ‘‘insured
shares’’;
■ vii. Adding definitions in alphabetical
order for ‘‘NCUSIF’’ and ‘‘NCUSIF
equity distribution’’; and
■ viii. Revising the definition of
‘‘reporting period’’.
■ b. Revising paragraphs (e) and (g);
■
■
■
33 64
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c. Removing paragraphs (i)(1)(v) and
(i)(2)(iii);
■ d. Revising paragraph (j)(1)(ii); and
■ e. Removing paragraph (j)(1)(iii).
The revisions and additions to read as
follows:
■
§ 741.4 Insurance premium and one
percent deposit.
*
*
*
*
*
(b) * * *
Aggregate amount of insured shares
means the sum of all insured shares
reported by federally insured credit
unions in calendar year-end Call
Reports from the calendar year for
which the Board declares an NCUSIF
equity distribution pursuant to
paragraph (e) of this section.
Aggregate average amount of insured
shares means the sum of the average
amount of insured shares as then
reported by all financial institutions
eligible to receive an NCUSIF equity
distribution under subparagraph (e)(1)
of this section in quarterly Call Reports
over the calendar year for which the
Board declares an NCUSIF equity
distribution divided by the number of
reporting periods in that calendar year.
Available assets ratio means the ratio
of:
(i) The amount determined by
subtracting—
(A) Direct liabilities of the NCUSIF
and contingent liabilities for which no
provision for losses has been made from
(B) The sum of cash and the market
value of unencumbered investments
authorized under § 203 of the Federal
Credit Union Act (12 U.S.C. 1783), to
(ii) The aggregate amount of insured
shares in all federally insured credit
unions.
Average amount of insured shares
means the sum of insured shares as then
reported by a financial institution
eligible to receive an NCUSIF equity
distribution under subparagraph (e)(1)
of this section over the calendar year for
which the Board declares an NCUSIF
equity distribution divided by the
number of reporting periods in that
calendar year.
Board means the NCUA Board or any
individual or group of individuals with
the delegated authority to act on behalf
of the Board to implement the
requirements of this section.
Federally insured credit union means
a federal or state-chartered credit union
that maintains federal share insurance
coverage from the NCUSIF.
Financial institution means a
federally insured credit union, nonfederally insured credit union, or an
insured depository institution,
including a liquidation or receivership
estate of any such credit union or
depository institution.
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Insured depository institution means
any bank or savings association the
deposits of which are insured by the
Federal Deposit Insurance Corporation
pursuant to the Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.).
Insured shares means the total
amount of a federally insured credit
union’s share, share draft and share
certificate accounts, or their equivalent
under state law (which may include
deposit accounts), authorized to be
issued to members, other credit unions,
public units, or nonmembers (where
permitted under the Act or equivalent
state law), but does not include amounts
in excess of insurance coverage as
provided in part 745 of this chapter.
*
*
*
*
*
National Credit Union Share
Insurance Fund or NCUSIF refers to a
revolving fund established by Congress
within the U.S. Treasury to provide
federal share insurance coverage to
federally insured credit union members
and to offset the NCUA’s administrative
expenses associated with the
conservatorship and liquidation of
federally insured credit unions.
NCUSIF equity distribution means a
distribution of excess equity from the
NCUSIF to financial institutions eligible
to receive a pro rata share of that
distribution pursuant to the
requirements of § 202 of the Federal
Credit Union Act (12 U.S.C. 1782) and
the special rules set out in subparagraph
(e)(5) of this section.
NCUSIF equity ratio means the ratio
of:
(i) The amount determined by
subtracting—
(A) Direct liabilities of the NCUSIF
and contingent liabilities for which no
provision for losses has been made from
(B) The sum of all one percent
deposits made by federally insured
credit unions pursuant to § 741.4 of this
chapter and the retained earnings
balance of the NCUSIF, to
(ii) The aggregate amount of insured
shares in all federally insured credit
unions.
*
*
*
*
*
Reporting period means span of time
covered by a set of financial statements.
For purposes of paragraph (c) of this
section, reporting period refers to a
calendar year for federally insured
credit unions with total assets of less
than $50,000,000 and refers to a
semiannual period for federally insured
credit unions with total assets of
$50,000,000 or more. For all other
provisions of this section, reporting
period refers to the span of time covered
by a quarterly Call Report.
*
*
*
*
*
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(e) NCUSIF equity distribution. Except
as otherwise provided for by federal law
or regulation, the following procedures
shall apply to any NCUSIF equity
distribution declared by the Board:
(1) Eligibility for an NCUSIF equity
distribution. The Board shall make an
NCUSIF equity distribution to any
financial institution that files at least
one quarterly Call Report as a federally
insured credit union for a reporting
period in the calendar year for which
the Board declares the NCUSIF equity
distribution.
(2) Requirement to make an NCUSIF
equity distribution. The Board shall
make an NCUSIF equity distribution on
a pro rata basis to financial institutions
after each calendar year if, as of the end
of the calendar year:
(i) Any loans to the NCUSIF from the
Federal Government, and any interest
on those loans, have been repaid;
(ii) The NCUSIF’s equity ratio exceeds
the normal operating level; and
(iii) The NCUSIF’s available assets
ratio exceeds one percent.
(3) Amount of NCUSIF equity
distribution. The Board shall make the
maximum possible NCUSIF equity
distribution that does not:
(i) Reduce the NCUSIF’s equity ratio
below the normal operating level; and
(ii) Reduce the NCUSIF’s available
assets ratio below one percent.
(4) Form of NCUSIF equity
distribution. The Board shall have the
discretion to determine the form of an
NCUSIF equity distribution including a
waiver of federal share insurance
premiums, a rebate of federal share
insurance premiums, a dividend, or any
combination thereof.
(5) Calculation of pro rata share of
NCUSIF equity distribution. The Board
shall determine a financial institution’s
pro rata share of an NCUSIF equity
distribution by dividing the dollar
amount of the declared NCUSIF equity
distribution by the aggregate average
amount of insured shares for that
calendar year and then multiplying by
a financial institution’s average amount
of insured shares.
(i) Special rules. The following
special rules shall apply to newly
chartered federally insured credit
unions, financial institutions that
convert to federal share insurance
coverage from the NCUSIF, financial
institutions that terminate federal share
insurance coverage from the NCUSIF,
mergers between federally insured
credit unions, and purchase and
assumption transactions:
(A) New charters. A newly chartered
federally insured credit union that
obtains federal share insurance coverage
from the NCUSIF during the calendar
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7961
year shall not receive an NCUSIF equity
distribution for that calendar year
unless the federally insured credit
union has filed at least one quarterly
Call Report as a federally insured credit
union for a reporting period in the
calendar year for which the Board has
declared a distribution. For purposes of
calculating the newly chartered
federally insured credit union’s average
amount of insured shares, the federally
insured credit union shall be treated as
having no insured shares for reporting
periods preceding the first reporting
period in which the federally insured
credit union files its first quarterly Call
Report.
(B) Conversion to federal share
insurance. A financial institution that
converts to federal share insurance
coverage from the NCUSIF during the
calendar year for which the Board
declares an NCUSIF equity distribution
(including through merger into a
federally insured credit union) shall
receive a prorated NCUSIF equity
distribution for that calendar year
provided that the financial institution
has filed at least one quarterly Call
Report as a federally insured credit
union for a reporting period in the
applicable calendar year. For purposes
of calculating the financial institution’s
average amount of insured shares, the
financial institution shall be treated as
having no insured shares for reporting
periods preceding the date of
conversion to federal share insurance
coverage. In cases of conversion through
merger, only the insured shares
attributable to the continuing federally
insured credit union shall be used to
determine the average amount of
insured shares for reporting periods
preceding the date of conversion.
(C) Conversion from, or termination
of, federal share insurance. A financial
institution that terminates federal share
insurance coverage from the NCUSIF
during the calendar year for which the
Board declares an NCUSIF equity
distribution (including through a
conversion to, or merger into, a nonfederally insured credit union or an
insured depository institution) shall
receive a prorated NCUSIF equity
distribution for that calendar year
provided that the financial institution
has filed at least one quarterly Call
Report as a federally insured credit
union for a reporting period in the
applicable calendar year. For purposes
of calculating the financial institution’s
average amount of insured shares, the
financial institution shall be treated as
having no insured shares for reporting
periods following the date of
termination of federal share insurance
coverage. For purposes of this
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subparagraph, a financial institution
that terminates federal share insurance
coverage from the NCUSIF through
liquidation will be treated as
terminating federal share insurance
coverage during the calendar year when
it enters liquidation.
(D) Mergers between federally insured
credit unions. A federally insured credit
union that merges with a federally
insured credit union shall receive an
equity distribution equivalent to what
the continuing federally insured credit
union and the merging federally insured
credit union would have received
separately but for the consummation of
the merger provided that the merging
federally insured credit union has filed
at least one quarterly Call Report as a
federally insured credit union for a
reporting period in the calendar year for
which the Board declares the
distribution. For purposes of calculating
the continuing federally insured credit
union’s average amount of insured
shares, any insured shares previously
reported by the merging federally
insured credit union on its quarterly
Call Reports filed prior to the
consummation of the merger during that
calendar year for which the Board
declares the distribution shall be
combined with the insured shares
reported on the continuing federally
insured credit union’s quarterly Call
Reports.
(E) Purchase and assumption
transactions. A federally insured credit
union that acquires all of the insured
shares of another federally insured
credit union in the calendar year for
which the Board declares an NCUSIF
equity distribution shall receive an
amount equivalent to what the acquiring
federally insured credit union and the
selling federally insured credit union
would have received but for the
consummation of the purchase and
assumption transaction provided that
the selling federally insured credit
union has filed at least one quarterly
Call Report as a federally insured credit
union for a reporting period in the
calendar year for which the Board
declares an NCUSIF equity distribution.
For purposes of calculating the
acquiring federally insured credit
union’s average amount of insured
shares, any insured shares previously
reported during that calendar year for
which the Board declares an NCUSIF
equity distribution by the selling
federally insured credit union on its
quarterly Call Reports filed prior to the
consummation of the purchase and
assumption transaction shall be
combined with the insured shares
reported on the acquiring federally
VerDate Sep<11>2014
16:46 Feb 22, 2018
Jkt 244001
insured credit union’s quarterly Call
Reports.
*
*
*
*
*
(g) New charters. A newly-chartered
credit union that obtains share
insurance coverage from the NCUSIF
during the calendar year in which it has
obtained its charter will not be required
to pay for insurance for that calendar
year. The credit union will fund its one
percent deposit on a date to be
determined by the NCUA Board in the
following calendar year.
*
*
*
*
*
(j) * * *
(1) * * *
(ii) If the NCUSIF assesses a premium
in the calendar year of conversion or
merger on or before the day in which
the conversion or merger is completed,
pay a prorated premium based on the
financial institution’s insured shares as
of the last day of the most recently
ended reporting period preceding the
conversion or merger multiplied by the
ratio of the amount of full calendar
months for which the financial
institution maintained federal share
insurance coverage from the NCUSIF to
the number of full calendar months for
the entire calendar year. If the financial
institution has previously paid a
premium based on this same assessment
that exceeds this amount, the financial
institution will receive a refund of the
difference following the completion of
the conversion or merger.
*
*
*
*
*
■ 3. Effective March 26, 2018, until
December 31, 2022, add § 741.13 to
subpart A to read as follows:
§ 741.13 NCUSIF equity distribution
related to the Corporate System Resolution
Program.
(a) Definitions. For purposes of this
section, the following definitions apply:
(1) Aggregate amount of insured
shares means the sum of all insured
shares reported by federally insured
credit unions in calendar year-end Call
Reports from the calendar year for
which the Board declares an NCUSIF
equity distribution pursuant to
paragraph (b) of this section.
(2) Aggregate average amount of
insured shares means the sum of the
average amount of insured shares as
then reported by all financial
institutions eligible to receive an
NCUSIF equity distribution under
subparagraph (b)(1) of this section in
quarterly Call Reports over a given time
horizon divided by the number of
reporting periods in that time horizon.
(3) Available assets ratio means the
ratio of:
(i) The amount determined by
subtracting—
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(A) Direct liabilities of the NCUSIF
and contingent liabilities for which no
provision for losses has been made from
(B) The sum of cash and the market
value of unencumbered investments
authorized under section 203 of the
Federal Credit Union Act (12 U.S.C.
1783), to
(ii) The aggregate amount of insured
shares in all federally insured credit
unions.
(4) Average amount of insured shares
means the sum of insured shares as then
reported by a financial institution
eligible to receive an NCUSIF equity
distribution under subparagraph (b)(1)
of this section over a given time horizon
divided by the number of reporting
periods in that time horizon.
(5) Board means the NCUA Board or
any individual or group of individuals
with the delegated authority to act on
behalf of the Board to implement the
requirements of this section.
(6) Corporate System Resolution
Program refers to a special program
established by the Board to stabilize the
corporate credit union system.
(7) Federally insured credit union
means a federal or state-chartered credit
union that maintains federal share
insurance coverage from the NCUSIF.
(8) Financial institution means a
federally insured credit union, nonfederally insured credit union, or an
insured depository institution,
including a liquidation or receivership
estate of any such credit union or
depository institution.
(9) Insured depository institution
means any bank or savings association
the deposits of which are insured by the
Federal Deposit Insurance Corporation
pursuant to the Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.).
(10) Insured shares means the total
amount of a federally insured credit
union’s share, share draft and share
certificate accounts, or their equivalent
under state law (which may include
deposit accounts), authorized to be
issued to members, other credit unions,
public units, or nonmembers (where
permitted under the Act or equivalent
state law), but does not include amounts
in excess of insurance coverage as
provided in part 745 of this chapter.
(11) National Credit Union Share
Insurance Fund or NCUSIF refers to a
revolving fund established by Congress
within the U.S. Treasury to provide
federal share insurance coverage to
federally insured credit union members
and to offset the NCUA’s administrative
expenses associated with the
conservatorship and liquidation of
federally insured credit unions.
(12) NCUSIF equity distribution
means a distribution of excess equity
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from the NCUSIF to financial
institutions eligible to receive a pro rata
share of that distribution pursuant to the
requirements of section 202 of the
Federal Credit Union Act (12 U.S.C.
1782) and the special rules set out in
paragraph (b)(5) of this section.
(13) NCUSIF equity ratio means the
ratio of:
(i) The amount determined by
subtracting—
(A) Direct liabilities of the NCUSIF
and contingent liabilities for which no
provision for losses has been made from
(B) The sum of all one percent
deposits made by federally insured
credit unions pursuant to § 741.4 of this
chapter and the retained earnings
balance of the NCUSIF, to
(ii) The aggregate amount of insured
shares in all federally insured credit
unions.
(14) Normal operating level means an
NCUSIF equity ratio not less than 1.2
percent and not more than 1.5 percent,
as established by action of the Board.
(b) NCUSIF equity distributions
related to the Corporate System
Resolution Program. Notwithstanding
§ 741.4 of this chapter, the following
procedures shall apply to any NCUSIF
equity distribution declared for calendar
years 2017 through 2021:
(1) Eligibility for an NCUSIF equity
distribution. The Board shall make an
NCUSIF equity distribution to any
financial institution that files at least
one quarterly Call Report as a federally
insured credit union for a reporting
period in the calendar year for which
the Board declares the NCUSIF equity
distribution.
(2) Requirement to make an NCUSIF
equity distribution. The Board shall
make an NCUSIF equity distribution on
a pro rata basis to financial institutions
after each calendar year if, as of the end
of the calendar year:
(i) Any loans to the NCUSIF from the
federal government, and any interest on
those loans, have been repaid;
(ii) The NCUSIF’s equity ratio exceeds
the normal operating level; and
(iii) The NCUSIF’s available assets
ratio exceeds one percent.
(3) Amount of NCUSIF equity
distribution. The Board shall make the
maximum possible NCUSIF equity
distribution that does not:
(i) Reduce the NCUSIF’s equity ratio
below the normal operating level; and
(ii) Reduce the NCUSIF’s available
assets ratio below one percent.
(4) Form of NCUSIF equity
distribution. The Board shall have the
discretion to determine the form of an
NCUSIF equity distribution including a
waiver of federal share insurance
premiums, a rebate of federal share
VerDate Sep<11>2014
16:46 Feb 22, 2018
Jkt 244001
insurance premiums, a dividend, or any
combination thereof.
(5) Calculation of pro rata share of
NCUSIF equity distribution. The Board
shall determine a financial institution’s
pro rata share of an NCUSIF equity
distribution by dividing the dollar
amount of the declared NCUSIF equity
distribution by the aggregate average
amount of insured shares for that given
time horizon and then multiplying by a
financial institution’s average amount of
insured shares.
(i) Time horizons. When calculating
the average amount of insured shares
and the aggregate average amount of
insured shares for an NCUSIF equity
distribution, the following time
horizons shall apply:
(A) NCUSIF equity distribution for
2017. The average amount of insured
shares and aggregate average amount of
insured shares for an NCUSIF equity
distribution declared for calendar year
2017 shall be based on information from
quarterly Call Reports from the
preceding 36 quarters, including the
calendar year-end Call Report for 2017.
(B) NCUSIF equity distribution for
2018. The average amount of insured
shares and aggregate average amount of
insured shares for an NCUSIF equity
distribution declared for calendar year
2018 shall be based on information from
quarterly Call Reports from the
preceding 40 quarters, including the
calendar year-end Call Report for 2018.
(C) NCUSIF equity distribution for
2019. The average amount of insured
shares and aggregate average amount of
insured shares for an NCUSIF equity
distribution declared for calendar year
2019 shall be based on information from
quarterly Call Reports from the
preceding 44 quarters, including the
calendar year-end Call Report for 2019.
(D) NCUSIF equity distribution for
2020. The average amount of insured
shares and aggregate average amount of
insured shares for an NCUSIF equity
distribution declared for calendar year
2020 shall be based on information from
quarterly Call Reports from the
preceding 48 quarters, including the
calendar year-end Call Report for 2020.
(E) NCUSIF equity distribution for
2021. The average amount of insured
shares and aggregate average amount of
insured shares for an NCUSIF equity
distribution declared for calendar year
2021 shall be based on information from
quarterly Call Reports from the
preceding 52 quarters, including the
calendar year-end Call Report for 2021.
(ii) Special rules. The following
special rules shall apply to newlychartered federally insured credit
unions, financial institutions that
convert to federal share insurance
PO 00000
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7963
coverage from the NCUSIF, financial
institutions that terminate federal share
insurance coverage from the NCUSIF,
mergers between federally insured
credit unions, and purchase and
assumption transactions:
(A) New charters. A newly chartered
federally insured credit union that
obtains federal share insurance coverage
from the NCUSIF during the calendar
year shall not receive an NCUSIF equity
distribution for that calendar year
unless the federally insured credit
union has filed at least one quarterly
Call Report as a federally insured credit
union for a reporting period in the
calendar year. For purposes of
calculating the newly chartered
federally insured credit union’s average
amount of insured shares, the federally
insured credit union shall be treated as
having no insured shares for reporting
periods preceding the first reporting
period in which the federally insured
credit union files its first quarterly Call
Report.
(B) Conversion to federal share
insurance. A financial institution that
converts to federal share insurance
coverage from the NCUSIF during the
calendar year for which the Board
declares an NCUSIF equity distribution
(including through merger into a
federally insured credit union) shall
receive a prorated NCUSIF equity
distribution for that calendar year
provided that the financial institution
has filed at least one quarterly Call
Report as a federally insured credit
union for a reporting period in the
calendar year. For purposes of
calculating the financial institution’s
average amount of insured shares, the
financial institution shall be treated as
having no insured shares for reporting
periods preceding the date of
conversion to federal share insurance
coverage. In cases of conversion through
merger, only the insured shares
attributable to the continuing federally
insured credit union shall be used to
determine the average amount of
insured shares for reporting periods
preceding the date of conversion.
(C) Conversion from, or termination
of, federal share insurance. A financial
institution that terminates federal share
insurance coverage from the NCUSIF
during the calendar year for which the
Board declares an NCUSIF equity
distribution (including through a
conversion to, or merger into, a nonfederally insured credit union or an
insured depository institution) shall
receive a prorated NCUSIF equity
distribution for that calendar year
provided that the financial institution
has filed at least one quarterly Call
Report as a federally insured credit
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union for a reporting period in the
calendar year. For purposes of
calculating the financial institution’s
average amount of insured shares, the
financial institution shall be treated as
having no insured shares for reporting
periods following the date of
termination of federal share insurance
coverage. For purposes of this
subparagraph, a financial institution
that terminates federal share insurance
coverage from the NCUSIF through
liquidation will be treated as
terminating federal share insurance
coverage during the calendar year when
it enters liquidation.
(D) Mergers between federally insured
credit unions. A continuing federally
insured credit union that merges with a
federally insured credit union shall
receive an equity distribution equivalent
to what the continuing federally insured
credit union and the merging federally
insured credit union would have
received separately but for the
consummation of the merger provided
that the merging federally insured credit
union has filed at least one quarterly
Call Report as a federally insured credit
union for a reporting period in the
calendar year for which the Board
declares the distribution. For purposes
of calculating the continuing federally
insured credit union’s average amount
of insured shares, any insured shares
previously reported by the merging
federally insured credit union on its
quarterly Call Reports filed prior to the
consummation of the merger during that
calendar year for which the Board
declares the distribution shall be
combined with the insured shares
reported on the continuing federally
insured credit union’s quarterly Call
Reports.
(E) Purchase and assumption
transactions. A federally insured credit
union that acquires all of the insured
shares of another federally insured
credit union in the calendar year for
which the Board declares an NCUSIF
equity distribution shall receive an
amount equivalent to what the acquiring
federally insured credit union and the
selling federally insured credit union
would have received but for the
consummation of the purchase and
assumption transaction provided that
the selling federally insured credit
union has filed at least one quarterly
Call Report as a federally insured credit
union for a reporting period in the
calendar year for which the Board
declares an NCUSIF equity distribution.
For purposes of calculating the
acquiring federally insured credit
union’s average amount of insured
shares, any insured shares previously
reported during that calendar year for
VerDate Sep<11>2014
16:46 Feb 22, 2018
Jkt 244001
which the Board declares an NCUSIF
equity distribution by the selling
federally insured credit union on its
quarterly Call Reports filed prior to the
consummation of the purchase and
assumption transaction shall be
combined with the insured shares
reported on the acquiring federally
insured credit union’s quarterly Call
Reports.
(c) Expiration. This section shall
expire and no longer be applicable after
December 31, 2022.
Appendix A to Part 71 [Removed]
■
4. Remove Appendix A to part 741.
Appendices B and C to Part 71
[Redesignated as as Appendices A and
B to Part 71]
5. Redesignate appendix B and
appendix C as appendix A and
appendix B, respectively.
■
[FR Doc. 2018–03622 Filed 2–22–18; 8:45 am]
BILLING CODE 7535–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2017–0774; Product
Identifier 2017–NM–036–AD; Amendment
39–19201; AD 2018–04–06]
RIN 2120–AA64
Airworthiness Directives; The Boeing
Company Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
We are superseding
Airworthiness Directive (AD) 2012–12–
05, which applied to all The Boeing
Company Model 737–100, –200, –200C,
–300, –400, and –500 series airplanes.
AD 2012–12–05 required repetitive
inspections for cracking under the stop
fittings and intercostal flanges and for
cracking of the intercostal web,
attachment clips, stringer splice
channels, frame, reinforcement angle,
shear web, frame outer chord and inner
chord; a one-time inspection to detect
missing fasteners; repetitive inspections
of the cargo barrier net fitting for
cracking; repetitive inspections for
cracking of the stringer S–15L aft
intercostal; and repair or corrective
action if necessary. For certain
airplanes, this AD adds new repetitive
inspections of certain areas of the frame
inner chord, and applicable oncondition actions. This AD was
prompted by reports of additional
SUMMARY:
PO 00000
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cracking in locations not covered by the
inspections in AD 2012–12–05. We are
issuing this AD to address the unsafe
condition on these products.
This AD is effective March 30,
2018.
The Director of the Federal Register
approved the incorporation by reference
of a certain publication listed in this AD
as of March 30, 2018.
The Director of the Federal Register
approved the incorporation by reference
of a certain other publication listed in
this AD as of July 23, 2012 (77 FR
36139, June 18, 2012).
The Director of the Federal Register
approved the incorporation by reference
of a certain other publication listed in
this AD as of September 9, 2009 (74 FR
38901, August 5, 2009).
DATES:
For service information
identified in this final rule, contact
Boeing Commercial Airplanes,
Attention: Contractual & Data Services
(C&DS), 2600 Westminster Blvd., MC
110–SK57, Seal Beach, CA 90740;
telephone: 562–797–1717; internet:
https://www.myboeingfleet.com. You
may view this service information at the
FAA, Transport Standards Branch, 2200
South 216th St., Des Moines, WA. For
information on the availability of this
material at the FAA, call 206–231–3195.
It is also available on the internet at
https://www.regulations.gov by searching
for and locating Docket No. FAA–2017–
0774.
ADDRESSES:
Examining the AD Docket
You may examine the AD docket on
the internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2017–
0774; 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 final rule, the regulatory
evaluation, any comments received, and
other information. The address for the
Docket Office (phone: 800–647–5527) is
Docket Management Facility, U.S.
Department of Transportation, Docket
Operations, M–30, West Building
Ground Floor, Room W12–140, 1200
New Jersey Avenue SE, Washington, DC
20590.
FOR FURTHER INFORMATION CONTACT:
Galib Abumeri, Aerospace Engineer,
Airframe Section, FAA, Los Angeles
ACO Branch, 3960 Paramount
Boulevard, Lakewood, CA 90712–4137;
phone: 562–627–5324; fax: 562–627–
5210; email: galib.abumeri@faa.gov.
SUPPLEMENTARY INFORMATION:
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]]>Agencies
[Federal Register Volume 83, Number 37 (Friday, February 23, 2018)]
[Rules and Regulations]
[Pages 7954-7964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03622]
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 741
RIN 3133-AE77
Requirements for Insurance; National Credit Union Share Insurance
Fund Equity Distributions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The NCUA Board (Board) is adopting amendments to its share
insurance requirements rule to provide stakeholders with greater
transparency regarding the calculation of each eligible financial
institution's pro rata share of a declared equity distribution from the
National Credit Union Share Insurance Fund (NCUSIF). The Board is also
adopting a temporary provision to govern all NCUSIF equity
distributions related to the Corporate System Resolution Program
(CSRP), a special purpose program established by the Board to stabilize
the corporate credit union system following the 2007-2009 financial
crisis. Furthermore, the Board is making technical and conforming
amendments to other aspects of the share insurance requirements rule to
account for these changes.
DATES: This rule is effective March 26, 2018, except for the addition
of Sec. 741.13, which is effective from March 26, 2018, until December
31, 2022.
FOR FURTHER INFORMATION CONTACT: Benjamin M. Litchfield, Staff
Attorney, Office of General Counsel, at (703) 518-6540; or Steve
Farrar, Supervisory Financial Analyst, Office of Examination and
Insurance, at (703) 518-6360. You may also contact them at the National
Credit Union Administration, 1775 Duke Street, Alexandria, Virginia
22314-3428.
SUPPLEMENTARY INFORMATION:
I. Background
II. Summary of the Proposed Rule
III. Summary of Comments to the Proposed Rule
IV. Section-by-Section Analysis
V. Technical and Conforming Amendments
VI. Regulatory Procedures
I. Background
The NCUA is the chartering and supervisory authority for federal
credit unions (FCUs) and the federal supervisory authority for
federally insured credit unions (FICUs).\1\ In addition to its
chartering and supervisory responsibilities, the Board also administers
the NCUSIF, a revolving fund within the U.S. Treasury that provides
federal share insurance coverage to more than 106 million credit union
members for member accounts held at FICUs and provides assistance in
connection with the liquidation or threatened liquidation of FICUs in
troubled condition.\2\
---------------------------------------------------------------------------
\1\ The NCUA's authority to charter federal credit unions is
contained in Title I of the FCU Act (12 U.S.C. 1752-1775), and its
various authorities as federal share insurer are contained in Title
II of the FCU Act (12 U.S.C. 1781-1790e). Title III of the FCU Act
(12 U.S.C. 1795-1795k) governs the Board's responsibilities
overseeing the NCUA Central Liquidity Facility, a federal
instrumentality that provides liquidity for member credit unions.
\2\ 12 U.S.C. 1783.
---------------------------------------------------------------------------
The Federal Credit Union Act (FCU Act) requires each FICU to pay
and maintain a capitalization deposit with the NCUSIF equal to one
percent of the FICU's insured shares to capitalize the NCUSIF.\3\ The
amount of the FICU's required capitalization deposit is adjusted
annually for a FICU with less than $50 million in assets and
semiannually for a FICU with $50 million in assets or more.\4\ A FICU
that terminates federal share insurance coverage is entitled to have
its capitalization deposit returned within a reasonable time.\5\
---------------------------------------------------------------------------
\3\ Id. at 1782(c)(1)(A)(i).
\4\ Id. at 1782(c)(1)(A)(iii)(I)-(II) (``The amount of each
insured credit union's deposit shall be adjusted as follows, in
accordance with procedures determined by the Board, to reflect
changes in the credit union's insured shares: (I) Annually, in the
case of an insured credit union with total assets of not more than
$50,000,000; and (II) semi-annually, in the case of an insured
credit union with total assets of $50,000,000 or more.''). Because
the statutory text can be read to require the Board to adjust the
capitalization deposit of a FICU with exactly $50,000,000 in assets
both annually and semi-annually, the Board interprets the phrase
``not more than'' to mean ``less than'' to give full effect to
Congress' intended meaning of this phrase. See Griffin v. Oceanic
Contractors, Inc., 458 U.S. 564, 571 (1982) (if the meaning of the
statutory provision is clear from its text, the sole responsibility
of a federal agency is to enforce the statute according to its terms
unless literal application of the statute ``will produce a result
demonstrably at odds with the intention of its drafters.'').
\5\ Id. at 1782(c)(1)(B)(i). A FICU may terminate federal share
insurance coverage by converting to, or merging into, a non-
federally insured credit union or a non-credit union financial
institution such as a mutual savings bank. If permitted under
applicable state law, a federally insured, state-chartered credit
union may also convert to private share insurance. See 12 CFR 708b
(NCUA's regulation governing mergers and conversions to private
share insurance). A FICU may also terminate federal share insurance
coverage through voluntary or involuntary liquidation.
---------------------------------------------------------------------------
The FCU Act also requires each FICU to pay a federal share
insurance premium equal to a percentage of the FICU's insured shares to
ensure that the NCUSIF has sufficient reserves to pay potential share
insurance claims by credit union members and to provide assistance in
connection with the
[[Page 7955]]
liquidation or threatened liquidation of FICUs in troubled
condition.\6\ The Board may assess a federal share insurance premium no
more than twice in a calendar year and not in an amount more than
necessary to restore the NCUSIF's equity ratio to 1.3 percent.\7\
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\6\ Id. at 1782(c)(2)(A).
\7\ Id. at 1782(c)(2)(B). The ``equity ratio'' is the amount of
NCUSIF capitalization, including FICU NCUSIF capitalization deposits
and retained earnings of the NCUSIF (net of direct liabilities of
the NCUSIF and contingent liabilities for which no provision for
losses has been made) divided by the aggregate amount of insured
FICU shares. Id. at 1782(h)(2).
---------------------------------------------------------------------------
Furthermore, the FCU Act requires the Board to make a pro rata
distribution of NCUSIF equity to FICUs ``after each calendar year if,
as of the end of the calendar year,'' there are no outstanding loans or
interest owed to the U.S. Treasury and the NCUSIF meets certain
financial performance benchmarks.\8\ When those financial conditions
are present, the FCU Act requires the Board to make the maximum
possible equity distribution that does not reduce the NCUSIF's equity
ratio below its normal operating level or the available assets ratio
below one percent.\9\
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\8\ Id. at 1782(c)(3)(A). The FCU Act requires the Board to make
a pro rata equity distribution from the NCUSIF to FICUs for each
year where, at the end of the year, the following circumstances are
present: (1) The NCUSIF has no outstanding loans from the U.S.
Treasury and any outstanding interest on those loans has been
repaid; (2) the NCUSIF's equity ratio exceeds the normal operating
level set by the Board; and (3) the NCUSIF's available assets ratio
exceeds 1 percent. The ``normal operating level'' is currently set
at 1.39. The ``available assets ratio'' is the total of cash plus
market value of unencumbered investments (less direct liabilities
and contingent liabilities for which no provision for loss has been
made) divided by the aggregate amount of insured FICU shares. Id. at
1782(h)(1).
\9\ Id. at 1782(c)(3)(B)(i)-(ii).
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Section 741.4 of the NCUA's share insurance requirements rule
implements these requirements.\10\ The Board originally adopted it on
October 17, 1984 following the passage of the Deficit Reduction Act of
1984,\11\ which amended the FCU Act to require pro rata distributions
of NCUSIF equity under certain financial conditions.\12\ The Board
subsequently amended Sec. 741.4 following the passage of the Credit
Union Membership Access Act of 1998 \13\ and the Helping Families Save
Their Homes Act of 2009 \14\ to address changes made to the FCU Act by
each of these laws.\15\ With respect to equity distributions from the
NCUSIF, Sec. 741.4 governs the form of a declared equity distribution
(i.e., a waiver of insurance premiums, premium rebates, or a dividend
directly from the NCUSIF) and the scope of financial institutions
(referred to collectively herein as ``eligible financial
institutions'') eligible to receive the declared equity
distribution.\16\
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\10\ 12 CFR 741.4.
\11\ Public Law 98-369, Div. B., Title VIII, sec. 2804, 98 Stat.
494, 1204 (July 18, 1984).
\12\ Capitalization of the National Credit Union Share Insurance
Fund, 49 FR 40561 (Oct. 17, 1984).
\13\ Public Law 105-219, sec. 302(a), 112 Stat. 913, 933 (Aug.
7, 1998).
\14\ Public Law 111-22, sec. 204(e)-(f), 123 Stat. 1632, 1650-51
(May 20, 2009).
\15\ National Credit Union Share Insurance Fund Premium and One
Percent Deposit, 74 FR 63277 (Dec. 3, 2009).
\16\ Under certain circumstances, a FICU that terminates federal
share insurance coverage (including through merger with a privately
insured credit union) and a financial institution that converts to
federal share insurance coverage (including through merger with a
FICU) may receive a prorated share of an equity distribution. See 12
CFR 741.4(i), (j).
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II. Summary of the Proposed Rule
On July 20, 2017, the Board issued a notice of proposed rulemaking
soliciting public comment on proposed amendments to Sec. 741.4 to
provide stakeholders with greater transparency regarding the
calculation of an eligible financial institution's pro rata share of a
declared equity distribution.\17\ As part of the proposed rulemaking,
the Board also sought to adopt a temporary provision for equity
distributions related to the CSRP.\18\
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\17\ Requirements for Insurance; National Credit Union Share
Insurance Fund Equity Distributions, 82 FR 35705 (Aug. 1, 2017).
\18\ The CSRP was a special purpose initiative to stabilize the
corporate credit union system funded principally through advances
from the Temporary Corporate Credit Union Stabilization Fund
(TCCUSF). The TCCUSF was a temporary revolving fund within the U.S.
Treasury created to address problems in the corporate credit union
system that arose as part of the recent financial crisis. On
September 28, 2017, the Board announced the closure of the TCCUSF
and the winding down of the CSRP. See Closing the Temporary
Corporate Credit Union Stabilization Fund and Setting the Share
Insurance Fund Normal Operating Level, 82 FR 46298 (Oct. 4, 2017).
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The proposed rule amended Sec. 741.4 in several respects. First,
the proposed rule amended Sec. 741.4(e) to adopt a calculation
methodology for determining each FICU's pro rata share of a declared
equity distribution based on either an eligible financial institution's
quarterly average amount of insured shares or its year-end insured
shares balance as then reported in the financial institution's year-end
Call Report. Second, the proposed rule amended Sec. 741.4(j)(1)(ii) to
eliminate the ability of a FICU terminating federal share insurance
coverage during the calendar year from receiving an equity distribution
for that calendar year.
To accommodate these changes, the proposed rule also made technical
and conforming amendments to the definitions in Sec. 741.4(b) and the
provisions governing conversion to federal share insurance in Sec.
741.4(i). Appendix A to part 741, which provides examples of partial
year federal share insurance premium assessments and equity
distributions under Sec. 741.4, was removed in favor of developing a
more user-friendly and readily updated set of examples to be posted on
the NCUA's public website.
The proposed rule also sought to add a temporary provision, Sec.
741.13, to govern equity distributions related to the CSRP. Because the
CSRP involved a series of corporate assessments to capitalize the
TCCUSF, the temporary provision required any equity distribution
related to the CSRP to take the form of a rebate of past corporate
assessments paid on either a First-In, First-Out (FIFO) or Last-In,
First-Out (LIFO) basis to repay those eligible financial institutions
that were required to pay a corporate assessment.
Finally, the proposed rule requested comment on ways to improve the
NCUA's current process for assessing and collecting federal share
insurance premiums to provide stakeholders with greater transparency.
While not part of this rulemaking, the Board noted its intention to
address the assessment and collection of federal share insurance
premiums in a separate rulemaking based in part on stakeholder
comments. One possible improvement that the Board was considering was
calculating federal share insurance premiums similarly to equity
distributions.
III. Summary of the Comments to the Proposed Rule
The Board received 50 comments from various stakeholders including
FICUs, national credit union trade associations, state credit union
trade associations, a professional trade association for state credit
union supervisors, and a natural person. Commenters overwhelmingly
supported the Board's initiative to provide FICUs with greater
transparency and offered general support for the proposed rule.
Commenters almost uniformly supported the Board's four-quarter
average method for calculating an eligible financial institution's pro
rata share of a declared equity distribution under Sec. 741.4(e). One
commenter wrote in support of the year-end insured share balance
method, but did not offer any substantive arguments in support of that
approach. Another commenter wrote in support of the current average
daily balance method, reasoning that the current approach more
appropriately treats an equity distribution as a dividend on the NCUSIF
capitalization
[[Page 7956]]
deposit and does not reward FICUs that aggressively grow insured share
balances which can increase the overall risk to the NCUSIF.
Commenters were more evenly divided on the Board's proposed changes
to Sec. 741.4(j)(1)(ii), which prohibited the payment of an equity
distribution to a FICU that terminates federal share insurance coverage
during the calendar year for which an equity distribution is declared.
However, neither commenters in favor of the proposed changes nor
commenters opposed to the proposed changes offered substantive
arguments in support of their respective positions. Commenters in favor
of the proposed changes echoed the Board's reasoning from the proposed
rule and commenters opposed to the proposed changes generalized about
fairness to FICUs that terminate federal share insurance coverage.
Commenters were likewise divided on whether an equity distribution
related to the CSRP should take the form of a rebate of past corporate
assessments paid on a LIFO or FIFO basis or using the quarterly average
or year-end method, whichever was adopted in Sec. 741.4(e). Of the
commenters that indicated a preference for rebates of past corporate
assessments on a LIFO or FIFO basis, an overwhelming majority favored
the LIFO approach. Other commenters indicated a preference for an
aggregate assessments paid approach, recommended by a national credit
union trade association, which was neither a logical outgrowth of the
LIFO or FIFO methods nor the quarterly average or year-end methods.
Under the aggregate assessments paid approach, each FICU would have
received an equity distribution based on the percentage of corporate
assessments paid by that FICU over the life of the CSRP as a percentage
of the aggregate corporate assessments paid by all FICUs over the life
of the CSRP. The Board did not receive specific comments on any other
aspect of the proposed rule, including the technical and conforming
amendments proposed to Sec. 741.4(b) and (i) or the elimination of
Appendix A to part 741.
For the reasons set out in more detail below, the Board is adopting
the four-quarter average method for calculating an eligible financial
institution's pro rata share of an equity distribution. Additionally,
the Board is adopting several new definitions to clarify provisions of
the share insurance requirements rule. The Board is not adopting the
change to the share insurance requirements rule that would have
eliminated the ability of a FICU that terminated federal share
insurance to receive an equity distribution for that calendar year.
Instead, the Board is adopting a modified version of that provision
that is more consistent with the four-quarter average method.
Furthermore, the Board is also adopting a modified version of the
temporary rule for equity distributions related to the CSRP that is
more consistent with the four-quarter average method. All other changes
are adopted as proposed.
IV. Section-by-Section Analysis
Section 741.4(e) Distribution of NCUSIF Equity Not Related to the CSRP
The Board has historically used a number of different calculation
methodologies to determine an eligible financial institution's pro rata
share of a declared equity distribution made in the normal course of
business not related to the CSRP.\19\ Rather than leaving the
calculation methodology to the discretion of the Board, proposed Sec.
741.4(e) sought to provide stakeholders with greater transparency by
establishing a set calculation methodology for all such declared equity
distributions. After considering a number of possible approaches, the
Board requested public comment on two alternative calculation
methodologies: (1) The use of an eligible financial institution's
quarterly average insured share balance as then reported over the
calendar year in four quarterly Call Reports and (2) the use of an
eligible financial institution's year-end insured share balance as then
reported in its December 31 Call Report.
---------------------------------------------------------------------------
\19\ See e.g., 49 FR 40564 (Oct. 17, 1984) (adopting the year-
end insured share balance method).
---------------------------------------------------------------------------
Under the four-quarter average approach, an eligible financial
institution's pro rata share of a declared equity distribution would be
based on its quarterly average insured share balance as then reported
over the calendar year in four quarterly Call Reports. To account for
mergers between FICUs during the calendar year, the Board proposed to
treat a continuing FICU's quarterly average insured share balance as
including insured shares reported by a merging FICU during reporting
periods before the completion of the merger. The Board proposed to
apply similar rules to mergers between a FICU and a non-FICU financial
institution (such as a bank or privately insured credit union), except
that the non-FICU financial institution would be treated as having no
insured shares during reporting periods for which it did not carry
federal share insurance coverage.
Under the year-end approach, an eligible financial institution's
pro rata share of a declared equity distribution would be based on its
year-end insured share balance as then reported in its December 31 Call
Report. This year-end insured share balance naturally included any FICU
merger activity that took place during the calendar year. For any
merger between a FICU and a non-FICU financial institution (such as a
bank or privately insured credit union), the Board proposed to retain
the current rule set out in Sec. 741.4(i)(2)(iii), which allows a FICU
to receive an equity distribution based on its year-end insured share
balance as then reported in its December 31 Call Report inclusive of
any shares acquired by merging non-FICU financial institutions
throughout the calendar year.
Of the two approaches, the Board noted that it favors the four-
quarter average approach because it adjusts for seasonal fluctuations
in insured share levels.\20\ Adjusting for seasonable fluctuations
allows the NCUA to make an equity distribution based on the actual
average size of the eligible financial institution over the calendar
year rather than at some arbitrary point in time. This is particularly
important to provide fairness to smaller or community-based FICUs that
may maintain relatively high insured share balances during the calendar
year but may experience a larger than normal decrease in insured share
balances at the end of the year as consumers liquidate Christmas club
and other types of special savings accounts during the holiday season.
Additionally, this approach is based on quarterly Call Report data,
eliminating the need for additional paperwork burden on FICUs.
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\20\ See 82 FR at 35707 (Aug. 1, 2017).
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However, in the proposed rule, the Board also recognized the
benefits of the year-end approach because it harmonizes the calculation
methodology for an equity distribution with the methods for calculating
the NCUSIF's equity and available assets ratios, and the dollar amount
of a federal share insurance premium or distribution. In addition, the
use of the year-end approach eliminates the need to create special
rules for FICU mergers or terminations of federal share insurance
coverage during the calendar year. Accordingly, the Board sought public
comment on both approaches with the understanding that the Board would
consider adopting one of the two approaches, with or without
appropriate modifications, based, in part, on the persuasiveness of the
comments. The Board also sought public comment on a
[[Page 7957]]
number of issues related to each calculation methodology, including
whether the look-back period under the four-quarter average approach
should be extended to include insured share balances from previous
years.
Commenters overwhelmingly favored the four-quarter average approach
because it adjusted for seasonal fluctuations in insured share growth.
However, many of these commenters largely echoed the Board's own
justification for using the four-quarter average approach without any
additional substantive arguments in favor of that position. One
commenter wrote in support of the year-end approach, but did not offer
any substantive arguments in favor of that position. Another commenter
wrote in support of the Board's current policy of applying a daily
distribution rate to each FICU's average daily capitalization deposit
balance. This commenter raised concerns that either approach adopted by
the Board would encourage eligible financial institutions to
aggressively grow insured shares to receive larger equity
distributions. This commenter also argued that the average daily
balance method is preferable because it correctly treats an equity
distribution as a dividend on a FICU's capitalization deposit.
On balance, the Board believes that accounting for seasonal
fluctuations in insured share growth is a significant benefit to
eligible financial institutions that outweighs the administrative
convenience offered by the year-end approach. Furthermore, the Board
disagrees with the commenter's argument that this calculation
methodology encourages eligible financial institutions to aggressively
grow insured shares to receive larger equity distributions. Any growth
in insured shares would result in corresponding decreases to the
NCUSIF's equity and available assets ratios which, if the resulting
changes are large enough, could trigger a smaller equity distribution
or the imposition of a federal share insurance premium. The Board
believes that these potential negative outcomes sufficiently mitigate
any incentive for an eligible financial institution to aggressively
grow insured shares. Accordingly, the Board is adopting the four-
quarter average approach in the final rule with some minor
clarifications.
The four-quarter average approach relies on the use of quarterly
Call Report data to determine an eligible financial institution's pro
rata share of an equity distribution. Implicit in this concept is the
idea that a financial institution that does not file a quarterly Call
Report as a FICU for at least one reporting period in the calendar year
for which the Board declares an equity distribution will not be
entitled to receive a portion of that distribution nor would that
FICU's insured shares be used to calculate the aggregate average amount
of insured shares. For example, a FICU that files a December 31 Call
Report in January 2018, but does not file a March 31 Call Report for
the first quarter of 2018, would not be eligible to receive an equity
distribution declared for calendar year 2018. While the Board believes
that this principle is clear from a careful reading of the preamble and
regulatory text set out in the proposed rule, it is adopting a
provision in the final rule to ensure the reader understands the
Board's intent.
The Board is also adopting a provision in the final rule to
explicitly address mergers between FICUs. In the preamble and
regulatory text set out in the proposed rule, the Board addressed
mergers between FICUs at some length. To avoid any confusion, the final
rule clarifies that a FICU that merges with another FICU that has filed
at least one Call Report for a reporting period in the calendar year
for which the Board declares an equity distribution shall receive an
amount equivalent to what the continuing FICU and the merging FICU
would have received but for the consummation of the merger. For
purposes of calculating the continuing FICU's average amount of insured
shares, any insured shares previously reported during that calendar
year by the merging FICU on its quarterly Call Reports filed prior to
the consummation of the merger shall be combined with the insured
shares reported on the continuing FICU's quarterly Call Reports for
purposes of calculating the continuing FICU's equity distribution.
Furthermore, the Board is adopting a provision in the final rule to
explicitly address purchase and assumption transactions. In response to
the proposed rule, several commenters asked about how the four-quarter
average approach would apply to purchase and assumption transactions
where a FICU acquires all of the insured shares of another FICU. While
the Board also believes that this principle should be clear from a
careful reading of the preamble and regulatory text set out in the
proposed rule, it is adopting a provision in the final rule to make it
as transparent as possible how the Board will address these
transactions. Under the final rule, a FICU that acquires all of the
insured shares of another FICU that files at least one Call Report for
a reporting period in the calendar year for which the Board declares an
equity distribution, shall receive an amount equivalent to what the
acquiring FICU and the selling FICU would have received but for the
consummation of the purchase and assumption transaction.
In all other respects, the Board is adopting the four-quarter
average approach as proposed. Because the Board did not receive
substantive comments on the appropriate look-back period for the four-
quarter average approach, the Board is adopting a four-quarter look-
back period.
Section 741.4(j) Conversion From, or Termination of, Federal Share
Insurance
For 25 years, the Board did not allow a FICU that terminated
federal share insurance coverage to receive an equity distribution as a
matter of right. Rather, Sec. 741.4 permitted a FICU to leave a
``nominal sum'' on deposit with the NCUISIF until the next equity
distribution to be eligible to receive ``a prorated share of the
distribution.'' \21\ In 2009, however, the Board broadened Sec. 741.4
to allow a FICU that terminated federal share insurance coverage to
receive a pro rata equity distribution, but only for the calendar year
in which the FICU terminated coverage. The Board made this policy
change as a matter of administrative convenience to avoid potentially
lengthy recordkeeping requirements imposed under the prior rule.\22\
Under this provision, which is codified in the current share insurance
requirements rule as Sec. 741.4(j)(1)(ii), the Board makes a prorated
distribution to an insured credit union that terminates federal share
insurance coverage during the calendar year for which the Board
declares a pro rata distribution based on the number of full calendar
months for which the insured credit union is federally insured.\23\
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\21\ See e.g., 12 CFR 741.5(i) (1985); 12 CFR 741.4(j) (1996).
\22\ See National Credit Union Share Insurance Fund Premium and
One Percent Deposit, 74 FR 63277 (Dec. 3, 2009).
\23\ 12 CFR 741.4(j)(1)(ii).
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Proposed Sec. 741.4(j)(1)(ii) sought to eliminate the ability of a
FICU that terminated federal share insurance coverage before the
declaration date of an equity distribution to receive any portion of
that distribution. The Board reasoned that this approach would be more
consistent with general corporate practice regarding the payment of
shareholder dividends. Furthermore, the Board believed that this
approach would be more equitable to FICUs that remain federally insured
throughout the calendar year because they bear the risk of a federal
share insurance premium
[[Page 7958]]
and are required to maintain the required capitalization deposit, while
a FICU that terminates federal share insurance coverage does not. A
FICU that terminates federal share insurance coverage before the
assessment of a federal share insurance premium is not required to pay
that premium. Under current Sec. 741.4(j)(1)(ii), however, that former
FICU may still receive an equity distribution.
Commenters were evenly split on whether the Board should adopt the
proposed change to Sec. 741.4(j)(1)(ii) or retain the current rule.
Having considered the arguments advanced by the commenters, the Board
believes that it is not appropriate to finalize this proposed change at
this time. Instead, the Board believes that it would be beneficial to
study this issue further, and it may revisit amendments to Sec.
741.4(j)(1)(ii) in a future rulemaking. However, the Board is
finalizing technical changes to Sec. 741.4(j)(1)(ii) to make this
provision more consistent with the four-quarter average method adopted
in Sec. 741.4(e). Section 741.4(j)(1)(ii) will be eliminated and
codified as new Sec. 741.4(e)(4)(i)(C).
Additionally, new Sec. 741.4(e)(4)(i)(C) will calculate the
prorated distribution of a FICU that terminated federal share insurance
coverage by applying the general four-quarter average approach set out
in Sec. 741.4(e), including the requirement that the FICU must file a
Call Report for at least one reporting period in the calendar year for
which the Board has declared a distribution to receive a prorated
equity distribution, with one exception. For reporting periods where
the FICU did not maintain federal share insurance coverage, it will be
treated as having no insured shares in that period. This has the same
practical effect as the current process of multiplying the FICU's last
reported insured share balance by a modified premium/distribution
ratio, but is computationally simpler.
Section 741.13 NCUSIF Equity Distributions Related to the CSRP
The Board proposed to adopt a temporary provision governing any
equity distributions resulting from the CSRP. Under this temporary
provision, any equity distribution related to the CSRP was to take the
form of a series of equity distributions repaying any corporate
assessments against FICUs on either a FIFO or a LIFO basis. The Board
also solicited public comment on whether it should instead use either
the four-quarter average or year-end approach with appropriate
modifications to account for the unique nature of the CSRP.
Under the proposed FIFO approach, the Board would have made an
equity distribution to each FICU up to the total dollar amount of
corporate assessments paid by that FICU during the relevant assessment
period beginning with the first assessment period in 2009.
Under the proposed LIFO approach, the Board would have made an
equity distribution to each FICU up to the total dollar amount of
premiums paid by that FICU during the relevant assessment period
beginning with the last assessment period in 2013. Of the two
approaches, the Board favored the LIFO method because it ensured that
FICUs received equity distributions for their most recent corporate
assessments first, which generally were larger assessments, with
smaller assessments that took place at the start of the CSRP being
repaid over time as the NCUA-guaranteed securities issued as part of
the CSRP matured.
Under either the proposed FIFO or LIFO approach, any payments owed
to a FICU that had merged into another FICU would have been paid to the
continuing FICU. Moreover, any payments owed to a liquidated FICU with
an open liquidation estate or a closed liquidation estate still within
its applicable look-back period would have been made to the liquidation
estate and distributed ratably to the FICU's creditors in accordance
with part 709 of the NCUA's rules.\24\ Given the payment priority set
out in part 709, the Board anticipated that a majority of these
creditors would be members with uninsured share balances rather than
general creditors of the liquidation estate.
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\24\ 12 CFR part 709.
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Furthermore, because any equity distribution related to the CSRP
would go first towards repaying FICUs that paid corporate assessments,
a FICU that had not paid a corporate assessment would not have been
entitled to receive an equity distribution related to the CSRP unless
all such corporate assessments are first repaid in full. Additionally,
a FICU that terminated federal share insurance coverage before the
payment date for an equity distribution related to the CSRP would not
have been entitled to a distribution for the reasons stated above in
the discussion of proposed changes to Sec. 741.4(j)(1)(ii).
Of the commenters that indicated a preference for either the
proposed FIFO or LIFO approach, an overwhelming majority favored the
LIFO approach. Other commenters indicated a preference for an aggregate
assessments paid approach recommended by a national credit union trade
association. Under the aggregate assessments paid approach, each FICU
would have received an equity distribution based on the percentage of
corporate assessments paid by that FICU over the life of the CSRP as a
percentage of the aggregate corporate assessments paid by all FICUs
over the life of the CSRP. That approach is neither a logical outgrowth
of the FIFO or LIFO methods nor a logical outgrowth of the four-quarter
average or year-end methods and, thus, is outside the scope of this
rulemaking.
While FIFO and LIFO would have been a way to closely link what a
FICU paid in corporate assessments to what it received in equity
distributions related to the CSRP, the Board acknowledges that over the
past 9 years, several hundred FICUs have terminated federal share
insurance at various times; there have been many FICU mergers and
liquidations; and the NCUA has approved several new charters. Each of
these transactions makes the calculation of each eligible financial
institution's pro rata share of an equity distribution more complex.
Additionally, the Board has acknowledged that FIFO and LIFO may not be
completely compatible with the FCU Act requirement to make a
distribution on a ``pro rata'' basis.
Instead, the Board believes that adopting a modified version of the
four-quarter average method is the most appropriate approach. In the
proposed rule, the Board solicited comment on whether a four-quarter
look-back period, or some longer look-back period such as six or eight
quarters, was preferable under the four-quarter average method. Given
the unique nature of the CSRP, the Board strongly believes that a
longer look-back period, which tracks the period of time in which
corporate assessments were being made, is appropriate for CSRP-related
equity distributions because it captures share insurance activity that
took place during that time.
Accordingly, the Board is adopting a modified version of the four-
quarter average approach for CSRP-related equity distributions that
includes five separate look-back periods tied directly to the beginning
of the CSRP that correspond to each calendar year for which the Board
may declare an equity distribution related to the CSRP. For calendar
year 2017 equity distributions, the Board will apply a 36-quarter look-
back period. For calendar year 2018 equity distributions, the Board
will apply a 40-quarter look-back period. For calendar year 2019 equity
distributions, the Board will apply a 44-quarter look-back period. For
calendar year 2020 equity distributions, the Board will
[[Page 7959]]
apply a 48-quarter look-back period. Finally, for calendar year 2021
equity distributions, the Board will apply a 52-quarter look-back
period. Applying five separate look-back periods ensures that the Board
adequately accounts for share insurance activity that took place during
the CSRP.
Consistent with the four-quarter average approach, an eligible
financial institution must file at least one quarterly Call Report as a
FICU for a reporting period in the calendar year for which the Board
declares an equity distribution to receive a pro rata share of that
distribution. Otherwise, that financial institution will not receive an
equity distribution for that calendar year nor will its insured shares
be used to calculate the aggregate average amount of insured shares
used to determine each eligible financial institution's pro rata share
of the distribution. Furthermore, a FICU that terminated federal share
insurance coverage must file at least one quarterly Call Report as a
FICU for a reporting period in the applicable calendar year to receive
a prorated equity distribution.
V. Technical and Conforming Amendments
In addition to the proposed changes to the share insurance
requirements rule governing the calculation of an eligible financial
institution's pro rata share of an equity distribution and the
treatment of a FICU that terminated federal share insurance coverage,
the Board proposed to make technical and conforming amendments to other
aspects of Sec. 741.4 and to Appendix A of Part 741. Commenters did
not address these technical and conforming amendments. Accordingly, the
Board is adopting these amendments largely as proposed with one
exception. The Board is making a technical change to the aspect of the
share insurance requirements rule governing newly chartered FICUs that
was not previously proposed. This change will relocate regulatory text
governing equity distributions to newly chartered FICUs from Sec.
741.4(g) to Sec. 741.4(e). Because the change is technical in nature,
and does not change the substance of the rule, the Board believes that
public comment on the change to this aspect of the share insurance
requirements rule is unnecessary and therefore has good cause to waive
the notice and comment requirements of the Administrative Procedure Act
(APA).\25\
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\25\ 5 U.S.C. 553(b)(B) (allowing waiver of public comment
requirement when an agency for good cause finds such procedures
``unnecessary''). See Administrative Procedure Act: Legislative
History, S. Doc. No. 248 79-258 (1946), at 200 (`` `Unnecessary'
means unnecessary as far as the public is concerned, as would be the
case if a minor or merely technical amendment in which the public is
not particularly interested were involved.'').
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Section 741.4(b) Definitions
To provide stakeholders with greater transparency, the Board is
amending Sec. 741.4(b) to include definitions of ``aggregate amount of
insured shares'', ``aggregate average amount of insured shares'',
``average amount of insured shares'', ``federally insured credit
union'', ``financial institution'', ``insured depository institution'',
and ``NCUSIF equity distribution'' in the final rule. Furthermore, the
Board is revising definitions of ``available assets ratio'', ``equity
ratio'', ``insured shares'', and ``reporting period''.
Section 741.4(g) New Charters
For greater readability and to improve ease of use throughout Sec.
741.4, the Board is removing the language from Sec. 741.4(g)
addressing equity distributions for newly chartered FICUs and codifying
it as new Sec. 741.4(e)(4)(i)(A). The Board is also making technical
amendments to this provision to provide for greater consistency with
the four-quarter average method adopted above. Under current Sec.
741.4(g), a newly chartered FICU may not receive a pro rata share of a
declared equity distribution unless it is has funded its capitalization
deposit.\26\ Under new Sec. 741.4(e)(4)(i)(A), a newly chartered FICU
may not receive a pro rata share of a declared equity distribution
unless it has filed a quarterly Call Report for at least one reporting
period in the calendar year for which the Board declares the
distribution. In all other respects, current Sec. 741.4(g) remains
unchanged.
---------------------------------------------------------------------------
\26\ 12 CFR 741.4(g).
---------------------------------------------------------------------------
Section 741.4(i) Conversion to Federal Insurance
The Board is also making conforming amendments to Sec.
741.4(i)(1)(v) and (i)(2)(iii) to reflect the adoption of the four-
quarter average method for calculating an eligible financial
institution's pro rata share of an equity distribution not related to
the CSRP. First, the Board is removing Sec. 741.4(i)(1)(v) and
(i)(2)(iii) and codifying those provisions as new Sec.
741.4(e)(4)(i)(B). Section 741.4(i)(1)(v) currently allows a financial
institution that converts to federal share insurance coverage during
the calendar year to receive a prorated equity distribution based on
the number of full calendar months for which the financial institution
was a FICU.\27\ New Sec. 741.4(e)(4)(i)(B) largely retains this aspect
of the current rule. However, rather than the current process of
multiplying the FICU's year-end insured share balance by premium/
distribution ratio, new Sec. 741.4(e)(4)(i)(B) will treat the FICU as
having no insured shares for the applicable reporting periods for which
the financial institution did not carry federal share insurance
coverage. This has the same practical effect as the current process,
but is computationally simpler. Furthermore, a FICU that does not file
at least one quarterly Call Report for reporting periods of the
calendar year for which the Board declares the distribution shall not
receive an equity distribution.
---------------------------------------------------------------------------
\27\ 12 CFR 741.4(i)(1)(v).
---------------------------------------------------------------------------
Section 741.4(i)(2)(iii) addresses an equity distribution to a FICU
that merges with a financial institution that is not federally insured
by the NCUA where the FICU is the surviving entity.\28\ If the Board
declares an equity distribution for the calendar year in which such a
merger takes place, the continuing FICU is entitled to receive an
equity distribution based on its year-end insured share balance. New
Sec. 741.4(e)(4)(i)(B) differs slightly from Sec. 741.4(i)(2)(iii).
Under the final rule, only the insured shares attributable to the
continuing FICU as reported on quarterly Call Reports at that time
shall be used to determine the average amount of insured shares for
reporting periods preceding the date of the merger. This approach
harmonizes new Sec. 741.4(e)(4)(i)(B) with new Sec. 741.4(e)(4)(i)(A)
and (C) respectively.
---------------------------------------------------------------------------
\28\ 12 CFR 741.4(i)(2)(iii).
---------------------------------------------------------------------------
Appendix A to Part 741--Examples of Partial Year NCUSIF Assessment and
Distribution Calculations Under Sec. 741.4
The Board also proposed to remove Appendix A to part 741 from the
NCUA's regulations and replace it with examples and frequently asked
questions to be published on NCUA's public website.\29\ Appendix A
provides examples of partial year NCUSIF assessment and distribution
calculations under various factual scenarios. While the Board
recognizes that examples of how the NCUA makes these calculations may
be useful to stakeholders, including those examples in an appendix to
part 741 makes it difficult for the NCUA to update, amend, or revise
the examples to provide stakeholders with additional clarity.
Accordingly, the Board is removing Appendix A and replacing it with
information on the NCUA's website which can be updated easily and as
frequently as necessary to provide stakeholders with more clear,
[[Page 7960]]
relevant, and timely examples regarding the calculation of partial year
NCUSIF assessments and distributions.
---------------------------------------------------------------------------
\29\ 12 CFR 741, App. A.
---------------------------------------------------------------------------
VI. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires the NCUA to prepare an
analysis to describe any significant economic impact a regulation may
have on a substantial number of small entities (primarily those under
$100 million in assets).\30\ This rule has no economic impact on small
credit unions because it only impacts internal NCUA procedures that are
used infrequently. Accordingly, NCUA certifies the final rule will not
have a significant economic impact on a substantial number of small
credit unions.
---------------------------------------------------------------------------
\30\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-121) (SBREFA) provides generally for congressional review
of agency rules. A reporting requirement is triggered in instances
where the NCUA issues a final rule as defined by Section 551 of the
Administrative Procedure Act. The NCUA does not believe this final rule
is a ``major rule'' within the meaning of the relevant sections of
SBREFA. As required by SBREFA, the NCUA has filed the appropriate
reports so that this final rule may be reviewed.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in
which an agency creates a new information collection requirement or
amends an existing information collection requirement.\31\ For the
purposes of the PRA, an information collection requirement may take the
form of a reporting, recordkeeping, or third-party disclosure
requirement. The final rule does not contain a new information
collection requirement or amend an existing information collection
requirement that requires approval by OMB under the Paperwork Reduction
Act (44 U.S.C. Chap. 35).
---------------------------------------------------------------------------
\31\ 44 U.S.C. 3507(d); 5 CFR 1320.
---------------------------------------------------------------------------
Assessment of Federal Regulations and Policies on Families.
The NCUA has determined that this final rule will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999.\32\
---------------------------------------------------------------------------
\32\ Public Law 105-277, sec. 654, 112 Stat. 2681, 2681-581
(1998).
---------------------------------------------------------------------------
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.\33\
The 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 final rule will 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. The NCUA
has therefore determined that this final rule does not constitute a
policy that has federalism implications for purposes of the executive
order.
---------------------------------------------------------------------------
\33\ 64 FR 43255 (Aug. 4, 1999).
---------------------------------------------------------------------------
List of Subjects in 12 CFR Part 741
Bank deposit insurance, Credit unions, Reporting and recordkeeping
requirements.
By the National Credit Union Administration Board on February
15, 2018.
Gerard Poliquin,
Secretary of the Board.
For the reasons discussed above, the Board amends 12 CFR part 741
as follows:
PART 741--REQUIREMENTS FOR INSURANCE
0
1. The authority citation for part 741 continues to read as follows:
Authority: 12 U.S.C. 1757, 1766(a), 1781-1790, and 1790d; 31
U.S.C. 3717.
0
2. Amend Sec. 741.4:
0
a. In paragraph (b), by:
0
i. Adding definitions in alphabetical order for ``aggregate amount of
insured shares'' and ``aggregate average amount of insured shares'';
0
ii. Revising the definition for ``available assets ratio'';
0
iii. Adding definitions in alphabetical order for ``average amount of
insured shares'' and ``Board'';
0
iv. Revising the definition of ``equity ratio'';
0
v. Adding definitions in alphabetical order definitions for ``federally
insured credit union'', ``financial institution'', and ``insured
depository institution'';
0
vi. Revising the definition of ``insured shares'';
0
vii. Adding definitions in alphabetical order for ``NCUSIF'' and
``NCUSIF equity distribution''; and
0
viii. Revising the definition of ``reporting period''.
0
b. Revising paragraphs (e) and (g);
0
c. Removing paragraphs (i)(1)(v) and (i)(2)(iii);
0
d. Revising paragraph (j)(1)(ii); and
0
e. Removing paragraph (j)(1)(iii).
The revisions and additions to read as follows:
Sec. 741.4 Insurance premium and one percent deposit.
* * * * *
(b) * * *
Aggregate amount of insured shares means the sum of all insured
shares reported by federally insured credit unions in calendar year-end
Call Reports from the calendar year for which the Board declares an
NCUSIF equity distribution pursuant to paragraph (e) of this section.
Aggregate average amount of insured shares means the sum of the
average amount of insured shares as then reported by all financial
institutions eligible to receive an NCUSIF equity distribution under
subparagraph (e)(1) of this section in quarterly Call Reports over the
calendar year for which the Board declares an NCUSIF equity
distribution divided by the number of reporting periods in that
calendar year.
Available assets ratio means the ratio of:
(i) The amount determined by subtracting--
(A) Direct liabilities of the NCUSIF and contingent liabilities for
which no provision for losses has been made from
(B) The sum of cash and the market value of unencumbered
investments authorized under Sec. 203 of the Federal Credit Union Act
(12 U.S.C. 1783), to
(ii) The aggregate amount of insured shares in all federally
insured credit unions.
Average amount of insured shares means the sum of insured shares as
then reported by a financial institution eligible to receive an NCUSIF
equity distribution under subparagraph (e)(1) of this section over the
calendar year for which the Board declares an NCUSIF equity
distribution divided by the number of reporting periods in that
calendar year.
Board means the NCUA Board or any individual or group of
individuals with the delegated authority to act on behalf of the Board
to implement the requirements of this section.
Federally insured credit union means a federal or state-chartered
credit union that maintains federal share insurance coverage from the
NCUSIF.
Financial institution means a federally insured credit union, non-
federally insured credit union, or an insured depository institution,
including a liquidation or receivership estate of any such credit union
or depository institution.
[[Page 7961]]
Insured depository institution means any bank or savings
association the deposits of which are insured by the Federal Deposit
Insurance Corporation pursuant to the Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.).
Insured shares means the total amount of a federally insured credit
union's share, share draft and share certificate accounts, or their
equivalent under state law (which may include deposit accounts),
authorized to be issued to members, other credit unions, public units,
or nonmembers (where permitted under the Act or equivalent state law),
but does not include amounts in excess of insurance coverage as
provided in part 745 of this chapter.
* * * * *
National Credit Union Share Insurance Fund or NCUSIF refers to a
revolving fund established by Congress within the U.S. Treasury to
provide federal share insurance coverage to federally insured credit
union members and to offset the NCUA's administrative expenses
associated with the conservatorship and liquidation of federally
insured credit unions.
NCUSIF equity distribution means a distribution of excess equity
from the NCUSIF to financial institutions eligible to receive a pro
rata share of that distribution pursuant to the requirements of Sec.
202 of the Federal Credit Union Act (12 U.S.C. 1782) and the special
rules set out in subparagraph (e)(5) of this section.
NCUSIF equity ratio means the ratio of:
(i) The amount determined by subtracting--
(A) Direct liabilities of the NCUSIF and contingent liabilities for
which no provision for losses has been made from
(B) The sum of all one percent deposits made by federally insured
credit unions pursuant to Sec. 741.4 of this chapter and the retained
earnings balance of the NCUSIF, to
(ii) The aggregate amount of insured shares in all federally
insured credit unions.
* * * * *
Reporting period means span of time covered by a set of financial
statements. For purposes of paragraph (c) of this section, reporting
period refers to a calendar year for federally insured credit unions
with total assets of less than $50,000,000 and refers to a semiannual
period for federally insured credit unions with total assets of
$50,000,000 or more. For all other provisions of this section,
reporting period refers to the span of time covered by a quarterly Call
Report.
* * * * *
(e) NCUSIF equity distribution. Except as otherwise provided for by
federal law or regulation, the following procedures shall apply to any
NCUSIF equity distribution declared by the Board:
(1) Eligibility for an NCUSIF equity distribution. The Board shall
make an NCUSIF equity distribution to any financial institution that
files at least one quarterly Call Report as a federally insured credit
union for a reporting period in the calendar year for which the Board
declares the NCUSIF equity distribution.
(2) Requirement to make an NCUSIF equity distribution. The Board
shall make an NCUSIF equity distribution on a pro rata basis to
financial institutions after each calendar year if, as of the end of
the calendar year:
(i) Any loans to the NCUSIF from the Federal Government, and any
interest on those loans, have been repaid;
(ii) The NCUSIF's equity ratio exceeds the normal operating level;
and
(iii) The NCUSIF's available assets ratio exceeds one percent.
(3) Amount of NCUSIF equity distribution. The Board shall make the
maximum possible NCUSIF equity distribution that does not:
(i) Reduce the NCUSIF's equity ratio below the normal operating
level; and
(ii) Reduce the NCUSIF's available assets ratio below one percent.
(4) Form of NCUSIF equity distribution. The Board shall have the
discretion to determine the form of an NCUSIF equity distribution
including a waiver of federal share insurance premiums, a rebate of
federal share insurance premiums, a dividend, or any combination
thereof.
(5) Calculation of pro rata share of NCUSIF equity distribution.
The Board shall determine a financial institution's pro rata share of
an NCUSIF equity distribution by dividing the dollar amount of the
declared NCUSIF equity distribution by the aggregate average amount of
insured shares for that calendar year and then multiplying by a
financial institution's average amount of insured shares.
(i) Special rules. The following special rules shall apply to newly
chartered federally insured credit unions, financial institutions that
convert to federal share insurance coverage from the NCUSIF, financial
institutions that terminate federal share insurance coverage from the
NCUSIF, mergers between federally insured credit unions, and purchase
and assumption transactions:
(A) New charters. A newly chartered federally insured credit union
that obtains federal share insurance coverage from the NCUSIF during
the calendar year shall not receive an NCUSIF equity distribution for
that calendar year unless the federally insured credit union has filed
at least one quarterly Call Report as a federally insured credit union
for a reporting period in the calendar year for which the Board has
declared a distribution. For purposes of calculating the newly
chartered federally insured credit union's average amount of insured
shares, the federally insured credit union shall be treated as having
no insured shares for reporting periods preceding the first reporting
period in which the federally insured credit union files its first
quarterly Call Report.
(B) Conversion to federal share insurance. A financial institution
that converts to federal share insurance coverage from the NCUSIF
during the calendar year for which the Board declares an NCUSIF equity
distribution (including through merger into a federally insured credit
union) shall receive a prorated NCUSIF equity distribution for that
calendar year provided that the financial institution has filed at
least one quarterly Call Report as a federally insured credit union for
a reporting period in the applicable calendar year. For purposes of
calculating the financial institution's average amount of insured
shares, the financial institution shall be treated as having no insured
shares for reporting periods preceding the date of conversion to
federal share insurance coverage. In cases of conversion through
merger, only the insured shares attributable to the continuing
federally insured credit union shall be used to determine the average
amount of insured shares for reporting periods preceding the date of
conversion.
(C) Conversion from, or termination of, federal share insurance. A
financial institution that terminates federal share insurance coverage
from the NCUSIF during the calendar year for which the Board declares
an NCUSIF equity distribution (including through a conversion to, or
merger into, a non-federally insured credit union or an insured
depository institution) shall receive a prorated NCUSIF equity
distribution for that calendar year provided that the financial
institution has filed at least one quarterly Call Report as a federally
insured credit union for a reporting period in the applicable calendar
year. For purposes of calculating the financial institution's average
amount of insured shares, the financial institution shall be treated as
having no insured shares for reporting periods following the date of
termination of federal share insurance coverage. For purposes of this
[[Page 7962]]
subparagraph, a financial institution that terminates federal share
insurance coverage from the NCUSIF through liquidation will be treated
as terminating federal share insurance coverage during the calendar
year when it enters liquidation.
(D) Mergers between federally insured credit unions. A federally
insured credit union that merges with a federally insured credit union
shall receive an equity distribution equivalent to what the continuing
federally insured credit union and the merging federally insured credit
union would have received separately but for the consummation of the
merger provided that the merging federally insured credit union has
filed at least one quarterly Call Report as a federally insured credit
union for a reporting period in the calendar year for which the Board
declares the distribution. For purposes of calculating the continuing
federally insured credit union's average amount of insured shares, any
insured shares previously reported by the merging federally insured
credit union on its quarterly Call Reports filed prior to the
consummation of the merger during that calendar year for which the
Board declares the distribution shall be combined with the insured
shares reported on the continuing federally insured credit union's
quarterly Call Reports.
(E) Purchase and assumption transactions. A federally insured
credit union that acquires all of the insured shares of another
federally insured credit union in the calendar year for which the Board
declares an NCUSIF equity distribution shall receive an amount
equivalent to what the acquiring federally insured credit union and the
selling federally insured credit union would have received but for the
consummation of the purchase and assumption transaction provided that
the selling federally insured credit union has filed at least one
quarterly Call Report as a federally insured credit union for a
reporting period in the calendar year for which the Board declares an
NCUSIF equity distribution. For purposes of calculating the acquiring
federally insured credit union's average amount of insured shares, any
insured shares previously reported during that calendar year for which
the Board declares an NCUSIF equity distribution by the selling
federally insured credit union on its quarterly Call Reports filed
prior to the consummation of the purchase and assumption transaction
shall be combined with the insured shares reported on the acquiring
federally insured credit union's quarterly Call Reports.
* * * * *
(g) New charters. A newly-chartered credit union that obtains share
insurance coverage from the NCUSIF during the calendar year in which it
has obtained its charter will not be required to pay for insurance for
that calendar year. The credit union will fund its one percent deposit
on a date to be determined by the NCUA Board in the following calendar
year.
* * * * *
(j) * * *
(1) * * *
(ii) If the NCUSIF assesses a premium in the calendar year of
conversion or merger on or before the day in which the conversion or
merger is completed, pay a prorated premium based on the financial
institution's insured shares as of the last day of the most recently
ended reporting period preceding the conversion or merger multiplied by
the ratio of the amount of full calendar months for which the financial
institution maintained federal share insurance coverage from the NCUSIF
to the number of full calendar months for the entire calendar year. If
the financial institution has previously paid a premium based on this
same assessment that exceeds this amount, the financial institution
will receive a refund of the difference following the completion of the
conversion or merger.
* * * * *
0
3. Effective March 26, 2018, until December 31, 2022, add Sec. 741.13
to subpart A to read as follows:
Sec. 741.13 NCUSIF equity distribution related to the Corporate
System Resolution Program.
(a) Definitions. For purposes of this section, the following
definitions apply:
(1) Aggregate amount of insured shares means the sum of all insured
shares reported by federally insured credit unions in calendar year-end
Call Reports from the calendar year for which the Board declares an
NCUSIF equity distribution pursuant to paragraph (b) of this section.
(2) Aggregate average amount of insured shares means the sum of the
average amount of insured shares as then reported by all financial
institutions eligible to receive an NCUSIF equity distribution under
subparagraph (b)(1) of this section in quarterly Call Reports over a
given time horizon divided by the number of reporting periods in that
time horizon.
(3) Available assets ratio means the ratio of:
(i) The amount determined by subtracting--
(A) Direct liabilities of the NCUSIF and contingent liabilities for
which no provision for losses has been made from
(B) The sum of cash and the market value of unencumbered
investments authorized under section 203 of the Federal Credit Union
Act (12 U.S.C. 1783), to
(ii) The aggregate amount of insured shares in all federally
insured credit unions.
(4) Average amount of insured shares means the sum of insured
shares as then reported by a financial institution eligible to receive
an NCUSIF equity distribution under subparagraph (b)(1) of this section
over a given time horizon divided by the number of reporting periods in
that time horizon.
(5) Board means the NCUA Board or any individual or group of
individuals with the delegated authority to act on behalf of the Board
to implement the requirements of this section.
(6) Corporate System Resolution Program refers to a special program
established by the Board to stabilize the corporate credit union
system.
(7) Federally insured credit union means a federal or state-
chartered credit union that maintains federal share insurance coverage
from the NCUSIF.
(8) Financial institution means a federally insured credit union,
non-federally insured credit union, or an insured depository
institution, including a liquidation or receivership estate of any such
credit union or depository institution.
(9) Insured depository institution means any bank or savings
association the deposits of which are insured by the Federal Deposit
Insurance Corporation pursuant to the Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.).
(10) Insured shares means the total amount of a federally insured
credit union's share, share draft and share certificate accounts, or
their equivalent under state law (which may include deposit accounts),
authorized to be issued to members, other credit unions, public units,
or nonmembers (where permitted under the Act or equivalent state law),
but does not include amounts in excess of insurance coverage as
provided in part 745 of this chapter.
(11) National Credit Union Share Insurance Fund or NCUSIF refers to
a revolving fund established by Congress within the U.S. Treasury to
provide federal share insurance coverage to federally insured credit
union members and to offset the NCUA's administrative expenses
associated with the conservatorship and liquidation of federally
insured credit unions.
(12) NCUSIF equity distribution means a distribution of excess
equity
[[Page 7963]]
from the NCUSIF to financial institutions eligible to receive a pro
rata share of that distribution pursuant to the requirements of section
202 of the Federal Credit Union Act (12 U.S.C. 1782) and the special
rules set out in paragraph (b)(5) of this section.
(13) NCUSIF equity ratio means the ratio of:
(i) The amount determined by subtracting--
(A) Direct liabilities of the NCUSIF and contingent liabilities for
which no provision for losses has been made from
(B) The sum of all one percent deposits made by federally insured
credit unions pursuant to Sec. 741.4 of this chapter and the retained
earnings balance of the NCUSIF, to
(ii) The aggregate amount of insured shares in all federally
insured credit unions.
(14) Normal operating level means an NCUSIF equity ratio not less
than 1.2 percent and not more than 1.5 percent, as established by
action of the Board.
(b) NCUSIF equity distributions related to the Corporate System
Resolution Program. Notwithstanding Sec. 741.4 of this chapter, the
following procedures shall apply to any NCUSIF equity distribution
declared for calendar years 2017 through 2021:
(1) Eligibility for an NCUSIF equity distribution. The Board shall
make an NCUSIF equity distribution to any financial institution that
files at least one quarterly Call Report as a federally insured credit
union for a reporting period in the calendar year for which the Board
declares the NCUSIF equity distribution.
(2) Requirement to make an NCUSIF equity distribution. The Board
shall make an NCUSIF equity distribution on a pro rata basis to
financial institutions after each calendar year if, as of the end of
the calendar year:
(i) Any loans to the NCUSIF from the federal government, and any
interest on those loans, have been repaid;
(ii) The NCUSIF's equity ratio exceeds the normal operating level;
and
(iii) The NCUSIF's available assets ratio exceeds one percent.
(3) Amount of NCUSIF equity distribution. The Board shall make the
maximum possible NCUSIF equity distribution that does not:
(i) Reduce the NCUSIF's equity ratio below the normal operating
level; and
(ii) Reduce the NCUSIF's available assets ratio below one percent.
(4) Form of NCUSIF equity distribution. The Board shall have the
discretion to determine the form of an NCUSIF equity distribution
including a waiver of federal share insurance premiums, a rebate of
federal share insurance premiums, a dividend, or any combination
thereof.
(5) Calculation of pro rata share of NCUSIF equity distribution.
The Board shall determine a financial institution's pro rata share of
an NCUSIF equity distribution by dividing the dollar amount of the
declared NCUSIF equity distribution by the aggregate average amount of
insured shares for that given time horizon and then multiplying by a
financial institution's average amount of insured shares.
(i) Time horizons. When calculating the average amount of insured
shares and the aggregate average amount of insured shares for an NCUSIF
equity distribution, the following time horizons shall apply:
(A) NCUSIF equity distribution for 2017. The average amount of
insured shares and aggregate average amount of insured shares for an
NCUSIF equity distribution declared for calendar year 2017 shall be
based on information from quarterly Call Reports from the preceding 36
quarters, including the calendar year-end Call Report for 2017.
(B) NCUSIF equity distribution for 2018. The average amount of
insured shares and aggregate average amount of insured shares for an
NCUSIF equity distribution declared for calendar year 2018 shall be
based on information from quarterly Call Reports from the preceding 40
quarters, including the calendar year-end Call Report for 2018.
(C) NCUSIF equity distribution for 2019. The average amount of
insured shares and aggregate average amount of insured shares for an
NCUSIF equity distribution declared for calendar year 2019 shall be
based on information from quarterly Call Reports from the preceding 44
quarters, including the calendar year-end Call Report for 2019.
(D) NCUSIF equity distribution for 2020. The average amount of
insured shares and aggregate average amount of insured shares for an
NCUSIF equity distribution declared for calendar year 2020 shall be
based on information from quarterly Call Reports from the preceding 48
quarters, including the calendar year-end Call Report for 2020.
(E) NCUSIF equity distribution for 2021. The average amount of
insured shares and aggregate average amount of insured shares for an
NCUSIF equity distribution declared for calendar year 2021 shall be
based on information from quarterly Call Reports from the preceding 52
quarters, including the calendar year-end Call Report for 2021.
(ii) Special rules. The following special rules shall apply to
newly-chartered federally insured credit unions, financial institutions
that convert to federal share insurance coverage from the NCUSIF,
financial institutions that terminate federal share insurance coverage
from the NCUSIF, mergers between federally insured credit unions, and
purchase and assumption transactions:
(A) New charters. A newly chartered federally insured credit union
that obtains federal share insurance coverage from the NCUSIF during
the calendar year shall not receive an NCUSIF equity distribution for
that calendar year unless the federally insured credit union has filed
at least one quarterly Call Report as a federally insured credit union
for a reporting period in the calendar year. For purposes of
calculating the newly chartered federally insured credit union's
average amount of insured shares, the federally insured credit union
shall be treated as having no insured shares for reporting periods
preceding the first reporting period in which the federally insured
credit union files its first quarterly Call Report.
(B) Conversion to federal share insurance. A financial institution
that converts to federal share insurance coverage from the NCUSIF
during the calendar year for which the Board declares an NCUSIF equity
distribution (including through merger into a federally insured credit
union) shall receive a prorated NCUSIF equity distribution for that
calendar year provided that the financial institution has filed at
least one quarterly Call Report as a federally insured credit union for
a reporting period in the calendar year. For purposes of calculating
the financial institution's average amount of insured shares, the
financial institution shall be treated as having no insured shares for
reporting periods preceding the date of conversion to federal share
insurance coverage. In cases of conversion through merger, only the
insured shares attributable to the continuing federally insured credit
union shall be used to determine the average amount of insured shares
for reporting periods preceding the date of conversion.
(C) Conversion from, or termination of, federal share insurance. A
financial institution that terminates federal share insurance coverage
from the NCUSIF during the calendar year for which the Board declares
an NCUSIF equity distribution (including through a conversion to, or
merger into, a non-federally insured credit union or an insured
depository institution) shall receive a prorated NCUSIF equity
distribution for that calendar year provided that the financial
institution has filed at least one quarterly Call Report as a federally
insured credit
[[Page 7964]]
union for a reporting period in the calendar year. For purposes of
calculating the financial institution's average amount of insured
shares, the financial institution shall be treated as having no insured
shares for reporting periods following the date of termination of
federal share insurance coverage. For purposes of this subparagraph, a
financial institution that terminates federal share insurance coverage
from the NCUSIF through liquidation will be treated as terminating
federal share insurance coverage during the calendar year when it
enters liquidation.
(D) Mergers between federally insured credit unions. A continuing
federally insured credit union that merges with a federally insured
credit union shall receive an equity distribution equivalent to what
the continuing federally insured credit union and the merging federally
insured credit union would have received separately but for the
consummation of the merger provided that the merging federally insured
credit union has filed at least one quarterly Call Report as a
federally insured credit union for a reporting period in the calendar
year for which the Board declares the distribution. For purposes of
calculating the continuing federally insured credit union's average
amount of insured shares, any insured shares previously reported by the
merging federally insured credit union on its quarterly Call Reports
filed prior to the consummation of the merger during that calendar year
for which the Board declares the distribution shall be combined with
the insured shares reported on the continuing federally insured credit
union's quarterly Call Reports.
(E) Purchase and assumption transactions. A federally insured
credit union that acquires all of the insured shares of another
federally insured credit union in the calendar year for which the Board
declares an NCUSIF equity distribution shall receive an amount
equivalent to what the acquiring federally insured credit union and the
selling federally insured credit union would have received but for the
consummation of the purchase and assumption transaction provided that
the selling federally insured credit union has filed at least one
quarterly Call Report as a federally insured credit union for a
reporting period in the calendar year for which the Board declares an
NCUSIF equity distribution. For purposes of calculating the acquiring
federally insured credit union's average amount of insured shares, any
insured shares previously reported during that calendar year for which
the Board declares an NCUSIF equity distribution by the selling
federally insured credit union on its quarterly Call Reports filed
prior to the consummation of the purchase and assumption transaction
shall be combined with the insured shares reported on the acquiring
federally insured credit union's quarterly Call Reports.
(c) Expiration. This section shall expire and no longer be
applicable after December 31, 2022.
Appendix A to Part 71 [Removed]
0
4. Remove Appendix A to part 741.
Appendices B and C to Part 71 [Redesignated as as Appendices A and B to
Part 71]
0
5. Redesignate appendix B and appendix C as appendix A and appendix B,
respectively.
[FR Doc. 2018-03622 Filed 2-22-18; 8:45 am]
BILLING CODE 7535-01-P
