Public Unit and Nonmember Shares, 25018-25022 [2019-11296]
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Federal Register / Vol. 84, No. 104 / Thursday, May 30, 2019 / Proposed Rules
§ 75.4 Interstate movement of equine
infectious anemia reactors.
CANADA [Amended]
(a) * * *
Reactor. Any horse, ass, mule, pony
or zebra which is subjected to an official
test in accordance with the regulations
in § 71.22 of this subchapter and found
positive.
*
*
*
*
*
PART 80—JOHNE’S DISEASE IN
DOMESTIC ANIMALS
8. The authority citation for part 80
continues to read as follows:
■
Done in Washington, DC, this 24th day of
May 2019.
Kevin Shea,
Administrator, Animal and Plant Health
Inspection Service.
[FR Doc. 2019–11278 Filed 5–29–19; 8:45 am]
FOR FURTHER INFORMATION CONTACT:
BILLING CODE 3410–34–P
Benjamin M. Litchfield, Staff Attorney,
Office of General Counsel, 1775 Duke
Street, Alexandria, Virginia 22314, or by
telephone at (703) 518–6540.
SUPPLEMENTARY INFORMATION:
14. The undesignated center heading
‘‘CANADA’’ immediately preceding
§ 93.315 is amended by redesignating
footnote 16 as footnote 14.
■
CENTRAL AMERICA AND THE WEST
INDIES [Amended]
15. The undesignated center heading
‘‘CENTRAL AMERICA AND THE WEST
INDIES’’ immediately preceding
§ 93.319 is amended by redesignating
footnote 17 as footnote 15.
■
MEXICO [Amended]
Authority: 7 U.S.C. 8301–8317; 7 CFR 2.22,
2.80, and 371.4.
9. In § 80.1, the definition of Official
Johne’s disease test is revised to read as
follows:
■
§ 80.1
Comments on Public Unit and
Nonmember Shares Proposed Rule’’ in
the email subject line.
• Fax: (703) 518–6319. Use the
subject line described above for email.
• Mail: Address to Gerard Poliquin,
Secretary of the Board, National Credit
Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314–
3428.
• Hand Delivery/Courier: Same as
mail address.
Public inspection: All public
comments are available on the agency’s
website at https://www.ncua.gov/
RegulationsOpinionsLaws/comments as
submitted, except as may not be
possible for technical reasons. Public
comments will not be edited to remove
any identifying or contact information.
Paper copies of comments may be
inspected in NCUA’s law library, at
1775 Duke Street, Alexandria, Virginia
22314, by appointment weekdays
between 9:00 a.m. and 3:00 p.m. To
make an appointment, call (703) 518–
6540 or send an email to OGCMail@
ncua.gov.
Definitions.
16. The undesignated center heading
‘‘MEXICO’’ immediately preceding
§ 93.321 is amended by redesignating
footnote 18 as footnote 16.
■
§ 93.324
[Amended]
17. Section 93.324 is amended by
redesignating footnote 19 as footnote 17.
■
*
*
*
*
*
Official Johne’s disease test. An
organism detection test approved by the
Administrator and conducted in a
laboratory approved by the
Administrator.1
*
*
*
*
*
PART 93—IMPORTATION OF CERTAIN
ANIMALS, BIRDS, FISH, AND
POULTRY, AND CERTAIN ANIMAL,
BIRD, AND POULTRY PRODUCTS;
REQUIREMENTS FOR MEANS OF
CONVEYANCE AND SHIPPING
CONTAINERS
10. The authority citation for part 93
continues to read as follows:
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Parts 701 and 741
RIN 3313–AF00
■
Public Unit and Nonmember Shares
Authority: 7 U.S.C. 1622 and 8301–8317;
21 U.S.C. 136 and 136a; 31 U.S.C. 9701; 7
CFR 2.22, 2.80, and 371.4.
§ 93.301
[Amended]
11. Section 93.301 is amended as
follows:
■ a. In paragraphs (e)(2)(iii) and (e)(5)(i),
by removing the words ‘‘paragraph (i) of
this section’’ and adding the words
‘‘§ 71.22 of this chapter’’ in their place;
and
■ b. By removing and reserving
paragraph (i).
■
§ 93.303
[Amended]
12. Section 93.303 is amended by
redesignating footnote 12 as footnote 10.
■
§ 93.308
[Amended]
13. Section 93.308 is amended by
redesignating footnotes 13, 14, and 15 as
footnotes 11, 12, and 13, respectively.
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■
1The list of approved laboratories is available on
the internet at https://www.nahln.org or upon
request from the Animal and Plant Health
Inspection Service, Veterinary Services, National
Veterinary Services Laboratories, P.O. Box 844,
Ames, IA 50010–0844.
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National Credit Union
Administration (NCUA).
ACTION: Proposed rule.
AGENCY:
The NCUA Board (Board) is
proposing to amend the NCUA’s public
unit and nonmember share rule to allow
Federal credit unions (FCU) to receive
public unit and nonmember shares up
to 50 percent of the credit union’s paidin and unimpaired capital and surplus
less any public unit and nonmember
shares.
SUMMARY:
Comments must be received by
July 29, 2019.
ADDRESSES: You may submit comments
by any of the following methods (Please
send comments by one method only):
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• NCUA website: https://
www.ncua.gov/
RegulationsOpinionsLaws/proposed_
regs/proposed_regs.html. Follow the
instructions for submitting comments.
• Email: Address to regcomments@
ncua.gov. Include ‘‘[Your name]
DATES:
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I. Background
II. Legal Authority
III. Summary of the Proposed Rule
IV. Section-by-Section Analysis
V. Regulatory Procedures
I. Background
Section 107(6) of the Federal Credit
Union Act (FCU Act) permits an FCU to
receive payment on shares from
nonmembers under certain
circumstances.1 An FCU may receive
payment on shares from nonmember
credit unions.2 An FCU may also
receive payment on shares from
nonmember public units and their
political subdivisions.3 The term
‘‘public unit’’ generally refers to ‘‘the
United States, any state of the United
States, the District of Columbia, the
Commonwealth of Puerto Rico, the
Panama Canal Zone, any territory or
possession of the United States, any
county, municipality, or political
subdivision thereof, or any Indian tribe
as defined in section 3(c) of the Indian
Financing Act of 1974.’’ 4
Moreover, an FCU that predominantly
serves low-income members may
1 12
U.S.C. 1757(6).
2 Id.
3 Id.
4 12
CFR 745.1(c).
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receive payment on shares from any
source regardless of membership.5
Section 701.34 of the NCUA’s
regulations defines a ‘‘low-income
member’’ as, among other things, a
member ‘‘whose family income is 80
[percent] or less than the median family
income for the metropolitan area where
[the member] live[s] or [the] national
metropolitan area, whichever is
greater.’’ 6 Alternatively, a ‘‘low-income
member’’ is a member ‘‘who earn[s] 80
[percent] or less than the total median
earnings for individuals for the
metropolitan area where [the member]
live[s] or [the] national metropolitan
area, whichever is greater.’’ 7
Section 701.32 of the NCUA’s
regulations limits the total amount of
nonmember shares that an FCU may
have to 20 percent of the credit union’s
total shares, or $3 million, whichever is
greater, unless the shares are U.S.
Treasury accounts or matching funds
accounts required by the NCUA’s
Community Development Revolving
Loan Fund Program.8 This limit also
applies to public unit shares regardless
of whether the public unit is a member
of the credit union. The Board imposed
this 20 percent limitation on both
member public unit and nonmember
shares because of the asset/liability
management problems related to public
unit and nonmember shares that arose at
certain FCUs, which resulted in material
losses for the National Credit Union
Share Insurance Fund (NCUSIF).9
Regulatory Reform Agenda
Consistent with the spirit of Executive
Order 13777, entitled ‘‘Enforcing the
Regulatory Reform Agenda,’’ 10 the
Board established a Regulatory Reform
Task Force (Task Force) to identify
NCUA regulations that the agency
should repeal, replace, or modify. The
Task Force performed an exhaustive
review and submitted its first report to
the Board in June 2017. In August 2017,
the Board published the substance of
the Task Force’s first report in the
Federal Register for public comment.11
After the close of the public comment
period, the Board published the Task
Force’s second and final report in the
Federal Register in December 2018.12
5 12
6 12
U.S.C. 1757(6).
CFR 701.34(a)(2).
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7 Id.
8 12
CFR 701.32(b), (c).
Nonmember and Public Unit Accounts, 53
FR 50918 (Dec. 19, 1988).
10 See Enforcing the Regulatory Reform Agenda,
E.O. 13777, 82 FR 12285 (Mar. 1, 2017).
11 See Regulatory Reform Agenda, 82 FR 39702
(Aug. 22, 2017).
12 See Regulatory Reform Agenda, 83 FR 65926
(Dec. 21, 2018).
9 See
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The Task Force’s final report
recommends that the Board increase the
public unit and nonmember share limit
in § 701.32 of the NCUA’s regulations.13
The Task Force stated that public unit
and nonmember shares are the
functional equivalent of borrowings
and, therefore, should be subject to the
borrowing limit for FCUs set out in the
FCU Act. Section 107(9) of the FCU Act
permits an FCU to borrow from any
source up to 50 percent of the credit
union’s paid-in and unimpaired capital
and surplus subject to such rules and
regulations as the Board may
prescribe.14 However, this limitation
does not apply to discounts or sales of
eligible obligations to any Federal
intermediate credit bank or loans from
the Central Liquidity Facility.15 The
proposed rule implements the essence
of the Task Force’s recommendation.
II. Legal Authority
The Board has issued this proposed
rule pursuant to its authority under the
FCU Act. Under the FCU Act, the NCUA
is the chartering and supervisory
authority for FCUs and the Federal
supervisory authority for FICUs.16 The
FCU Act grants the NCUA a broad
mandate to issue regulations governing
both FCUs and all FICUs. Section 120 of
the FCU Act is a general grant of
regulatory authority and authorizes the
Board to prescribe rules and regulations
for the administration of the FCU Act.17
Section 207 of the FCU Act is a specific
grant of authority over share insurance
coverage, conservatorships, and
liquidations.18 Section 209 of the FCU
Act is a plenary grant of regulatory
authority to the Board to issue rules and
regulations necessary or appropriate to
carry out its role as share insurer for all
FICUs.19 Accordingly, the FCU Act
grants the Board broad rulemaking
authority to ensure that the credit union
industry and the NCUSIF remain safe
and sound.
III. Summary of the Proposed Rule
The proposed rule amends § 701.32 of
the NCUA’s regulations to allow an FCU
to receive payment on shares from
public unit and nonmember shares up
to 50 percent of the credit union’s paidin and unimpaired capital and surplus
less any public unit and nonmember
shares from public units and
nonmembers without requesting a
13 12
CFR 701.32.
U.S.C. 1757(9).
15 Id. For rules governing loans from the Central
Liquidity Facility see 12 CFR 725.
16 12 U.S.C. 1752–1775.
17 12 U.S.C. 1766(a).
18 12 U.S.C. 1787(b)(1).
19 12 U.S.C. 1789(a)(11).
14 12
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waiver from the appropriate regional
director. As discussed below, the
proposed rule does not allow a waiver
process for an FCU to exceed this 50
percent limit as a matter of safety and
soundness. The proposed rule also
requires an FCU to develop and
maintain a written plan if its public unit
and nonmember shares, taken together
with borrowings, exceed 70 percent of
paid-in and unimpaired capital and
surplus. Finally, the proposed rule
makes conforming amendments to
§ 741.204, which applies to all FICUs, to
reflect the changes to § 701.32.
IV. Section-by-Section Analysis
Section 701.32(b)—Limitations
Current § 701.32(b) limits the amount
of public unit and nonmember shares
that an FCU may have to 20 percent of
total shares, or $3 million dollars,
whichever is greater, and sets forth
procedures that an FCU must follow if
it wishes to receive from the appropriate
regional director a waiver to accept
additional public unit or nonmember
shares.
Before accepting any public unit or
nonmember shares in excess of 20
percent of total shares, the credit
union’s board of directors ‘‘must adopt
a specific written plan concerning the
intended use of these shares and
forward a copy of the plan to the
[r]egional [d]irector.’’ 20 The plan must
include a ‘‘statement of the credit
union’s needs, sources and intended
uses of public unit and nonmember
shares.’’ 21 The plan must also make
provision for ‘‘matching maturities of
public unit and nonmember shares with
corresponding assets’’ and ‘‘adequate
income spread between public unit and
nonmember shares and corresponding
assets.’’ 22 If there is any mismatch
between maturities of public unit and
nonmember shares with corresponding
assets, the credit union must justify the
mismatch.23
In addition to the written plan
adopted by the FCU’s board of directors,
the FCU also must submit a written
request for a waiver of the 20 percent
limit to the appropriate regional
director.24 The waiver request must
include: (1) The new level of public unit
and nonmember shares requested (either
as a dollar amount or a percentage of
total shares); (2) the current plan
adopted by the FCU’s board of directors
regarding the use of new public unit and
nonmember shares; (3) a copy of the
20 12
CFR 701.32(b)(2).
CFR 701.32(b)(2)(i).
22 12 CFR 701.32(b)(2)(ii) and (iii).
23 12 CFR 701.32(b)(2)(ii).
24 12 CFR 701.32(b)(3).
21 12
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FCU’s latest financial statements; and
(4) a copy of the FCU’s loan and
investment policies.25 If the FCU’s
financial condition and management are
sound, and the credit union’s plan for
the funds is reasonable, § 701.32
establishes a presumption in favor of
granting a waiver.26
The regional director will typically
grant a waiver for a two-year period
unless the regional director believes that
a lesser time is appropriate.27 Upon
expiration of the waiver, the NCUSIF
will continue to insure public unit and
nonmember shares currently held in the
FCU within applicable limits.28
However, an FCU may not accept any
new public unit or nonmember shares
or rollover existing public unit or
nonmember share certificates in excess
of the 20 percent of total shares limit.29
The 20 percent total shares limit and
the procedures set out in § 701.32(b) do
not apply to treasury tax and loan
(TT&L) remittance accounts, TT&L note
accounts, U.S. Treasury general
accounts, and U.S. Treasury time
deposit-open accounts, which are all
subject to the requirements of § 701.37
of the NCUA’s regulations.30 Section
701.32 also does not apply to matching
fund accounts required by the NCUA’s
Community Development Revolving
Loan Program unless the credit union
has already repaid the loan granted
under that program that required
matching funds.31
Aggregate Limit on Public Unit and
Nonmember Shares
The proposed rule simplifies the
current regulatory framework in
§ 701.32(b). In establishing the 20
percent of total shares limit in current
§ 701.32(b), the Board relied heavily on
industry practices in 1988.32 The credit
union industry has undergone
significant changes in the intervening 31
years since this limit was adopted,
including credit unions’ growing need
for additional sources of funding to
serve their members. To respond to
these changes, the proposed rule
increases the current 20 percent of total
shares limit to 50 percent of paid-in and
unimpaired capital and surplus less any
public unit and nonmember shares.
25 12
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26 12
CFR 701.32(b)(3)(i) through (iv).
CFR 701.32(b)(4).
27 Id.
28 12 CFR 701.32(b)(6). See 12 CFR 745 on share
insurance limits.
29 Id.
30 12 CFR 701.32(c). See 12 CFR 701.37.
31 Id. For information on the Community
Development Revolving Loan Program, see 12 CFR
705.
32 53 FR 50918, 50919 (Dec. 19, 1988).
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The change in standard from ‘‘total
shares’’ to ‘‘paid-in and unimpaired
capital and surplus less any public unit
and nonmember shares’’ provides credit
unions with greater ability to accept
public unit and nonmember deposits
because undivided earnings are
included in the measurement of a credit
union’s paid-in and unimpaired capital
and surplus. The proposed rule does not
include public unit and nonmember
shares in the calculation of its
unimpaired capital and surplus for
purposes of this 50 percent limit. This
restriction provides a meaningful limit
on the ability of a credit union to
increase its leverage indefinitely, which
could pose a clear risk to credit unions
and the NCUSIF. The Board believes
that this balanced approach provides an
FCU with greater flexibility to
determine an appropriate funding
structure to support ongoing credit
union operations in a prudent manner.
While the Board recognizes that
public unit and nonmember shares are
unique in some respects, particularly
with respect to their sensitivity to
interest rate fluctuations,33 these shares
are in many other respects the
functional equivalent of other types of
short-term borrowings. Accordingly, the
Board believes that allowing an FCU to
receive public unit and nonmember
shares up to 50 percent of paid-in and
unimpaired capital and surplus, less
any public unit and nonmember shares,
similar to the borrowing limit set out in
Section 107(9) of the FCU Act, is a
preferable approach to the current 20
percent of total shares limit set out in
§ 701.32(b). The Board also believes that
the proposed 50 percent of paid-in and
unimpaired capital and surplus less any
public unit and nonmember shares
regulatory limit is sufficiently high that
an alternative $3 million dollar limit
will be unnecessary.
However, the Board is aware that
some small FCUs, particularly lowincome credit unions that rely on large
volumes of nonmember shares as a
necessary source of funding or newly
chartered credit unions, may be
adversely impacted by the elimination
of the $3 million dollar limit.
Consequently, the Board seeks specific
comments on whether it should retain
the $3 million dollar limit or provide a
special exemption for small low-income
credit unions that demonstrate a need
for large volumes of nonmember shares
above the 50 percent paid-in and
unimpaired capital and surplus limit
and for newly chartered credit unions.
The Board is actively considering these
alternatives and may adopt one of these
33 Id.
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approaches based on the persuasiveness
of the comments.
Because an FCU may currently
borrow up to 50 percent of paid-in and
unimpaired capital and surplus under
Section 107(9) of the FCU Act, the
Board believes that providing credit
unions with the proposed ability to
accept a comparable amount of public
unit and nonmember shares will not
present an undue risk to credit unions
or the NCUSIF. The Board recognizes
that in some instances public unit and
nonmember shares can be a more stable
and cost-effective source of funding
than borrowing. Additionally, public
unit and nonmember shares have other
benefits for credit unions and their
communities, such as developing or
enhancing an FCU’s relationship with
political subdivisions, public units, or
in the case of low-income designated
credit unions, other charitable or
economic development organizations.
However, the Board notes that an FCU
should continue to manage its balance
sheet in a prudent manner. The NCUA
will continue to review an FCU’s
business model and asset-liability
management to ensure the credit union
is operating in a safe and sound manner.
Unsafe or unsound funding sources or
utilization of funds in an unsafe and
unsound manner may affect an FCU’s
CAMEL and risk ratings even if the
credit union is within the aggregate 50
percent limit.
Waiver From the Appropriate Regional
Director
The proposed rule also eliminates the
procedures that an FCU must follow to
obtain a waiver from its appropriate
regional director. Although the Board
seeks to provide FCUs with greater
flexibility, it also believes that the
NCUA should not allow an FCU to have
public unit and nonmember shares in
excess of 50 percent of paid-in and
unimpaired capital and surplus less any
public unit and nonmember shares.
Allowing an FCU to exceed this limit
could lead to safety and soundness
concerns and unnecessary risk for the
NCUSIF. As a result, the proposed rule
does not establish a procedure for an
FCU to request a waiver of the proposed
aggregate 50 percent limit.
Requirement To Maintain a Plan
Regarding Use of Funds
Furthermore, the proposed rule
modifies key safeguards in current
§ 701.32(b) designed to ensure that an
FCU’s board of directors conducts
adequate due diligence before receiving
payment on a significant amount of
public unit and nonmember shares.
Under the proposed rule, an FCU must
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develop and maintain for review by
NCUA examiners a specific plan
regarding the intended use of any
borrowings, public unit, or nonmember
shares that, taken together, exceed 70
percent of the credit union’s paid-in and
unimpaired capital and surplus. The
proposed rule does not require FCUs to
submit the plans to the NCUA for prior
approval.
This approach provides an FCU with
significant flexibility to adopt a prudent
funding structure without the regulatory
burden of developing a plan regarding
the intended use of those funds unless
the credit union borrows a significant
amount of funds or accepts a significant
number of public unit and nonmember
shares. Requiring a plan for material
levels of external funding sources is
prudent due diligence and the Board
expects FCUs that accept elevated levels
of public unit and nonmember shares to
document how the credit union will use
those funds consistent with prudent risk
management principles.
Even though the Board expects that
most FCUs will not need to develop a
specific plan regarding the use of
external funds under the proposed rule,
it still believes that an FCU should
continue to manage its balance sheet in
a prudent manner. As noted above, the
NCUA will continue to review an FCU’s
business model and asset-liability
management to ensure the FCU is
operating in a safe and sound manner.
Unsafe or unsound funding sources or
utilization of funds in an unsafe and
unsound manner may affect a credit
union’s CAMEL and risk ratings and
could result in regulatory action.
V. Regulatory Procedures
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Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA) 34 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).35 This rule will provide a
limited number of FCUs receiving
public unit and nonmember share with
additional flexibility. Accordingly, the
Board believes that the rule will not
have a significant economic impact on
a substantial number of small credit
unions. Therefore, a regulatory
flexibility analysis is not required.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) applies to rulemakings in which
an agency by rule creates a new
paperwork burden on regulated entities
34 5
35 5
U.S.C. 601 et seq.
U.S.C. 603(a).
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or modifies an existing burden. For
purposes of the PRA, a paperwork
burden may take the form of a reporting,
disclosure, or recordkeeping
requirement, each referred to as an
information collection. The NCUA may
not conduct or sponsor, and the
respondent is not required to respond
to, an information collection unless it
displays a currently valid Office of
Management and Budget (OMB) control
number.
This rule will amend § 701.32 to
eliminate the wavier requirements for
those seeking an exemption to the
current 20 percent limit of the total
amount of nonmember shares that an
FCU may issue; due to the proposed
increased limit of 50 percent, with no
exceptions to this limit. This will
eliminate the existing burden to submit
a waiver.
Under the proposed rule, a credit
union must develop a specific plan
regarding the intended use of any
borrowings, public unit, or nonmember
shares that, taken together, exceed 70
percent of the credit union’s paid-in and
unimpaired capital and surplus. The
increased limit of public unit and
nonmember shares could potentially see
an increase in the number of
respondents required to develop a plan
from 20 to 50 FICUs at an estimated
burden of 2 hours to comply annually,
per respondent.
These program changes would revise
the information collection requirement
under currently approved OMB number
3133–0114, as follows:
Title of Information Collection:
Payments on Shares by Public Units and
Nonmembers, 12 CFR 701.32.
OMB Control Number: 3133–0114.
Estimated Number of Respondents:
50.
Estimated Annual Frequency of
Response: 1.
Estimated Total Annual Reponses: 50.
Estimated Hours per Response: 2.
Estimated Total Annual Burden
Hours: 100.
Affected Public: Private Sector: Notfor-profit institutions.
The NCUA invites comments on: (a)
Whether the collections of information
are necessary for the proper
performance of the agency’s functions,
including whether the information has
practical utility; (b) the accuracy of the
estimates of the burden of the
information collections, including the
validity of the methodology and
assumptions used; (c) ways to enhance
the quality, utility, and clarity of the
information to be collected; (d) ways to
minimize the burden of the information
collections on respondents, including
through the use of automated collection
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25021
techniques or other forms of information
technology; and (e) estimates of capital
or start-up costs and costs of operation,
maintenance, and purchase of services
to provide information.
All comments are a matter of public
record. Comments regarding the
information collection requirements of
this rule should be sent to (1) Dawn
Wolfgang, NCUA PRA Clearance
Officer, National Credit Union
Administration, 1775 Duke Street,
Alexandria, Virginia 22314, or Fax No.
703–519–8572, or Email at
PRAcomments@ncua.gov and the (2)
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Attention: Desk Officer for
NCUA, New Executive Office Building,
Room 10235, Washington, DC 20503, or
email at OIRA_Submission,@
OMB.EOP.gov.
Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests.36 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 proposed 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 Board has
therefore determined that this proposed
rule does not constitute a policy that has
federalism implications for purposes of
the executive order.
Assessment of Federal Regulations and
Policies on Families
The NCUA has determined that this
proposed rule will not affect family
well-being within the meaning of
Section 654 of the Treasury and General
Government Appropriations Act, 1999,
Public Law 105–277, 112 Stat. 2681
(1998).
List of Subjects
12 CFR Part 701
Credit unions, Nonmember accounts,
Public units.
12 CFR Part 741
Bank deposit insurance, Credit
unions, Reporting and recordkeeping
requirements.
36 64
E:\FR\FM\30MYP1.SGM
FR 43255 (Aug. 4, 1999).
30MYP1
25022
Federal Register / Vol. 84, No. 104 / Thursday, May 30, 2019 / Proposed Rules
By the National Credit Union
Administration Board on May 23, 2019.
Gerard S. Poliquin,
Secretary of the Board.
provided it has the authority to accept
such accounts.
*
*
*
*
*
[FR Doc. 2019–11296 Filed 5–29–19; 8:45 am]
For the reasons stated above, NCUA
proposes to amend 12 CFR parts 701
and 741 as follows:
BILLING CODE 7535–01–P
DEPARTMENT OF HOMELAND
SECURITY
PART 701—ORGANIZATION AND
OPERATION OF FEDERAL CREDIT
UNIONS
Coast Guard
1. The authority for part 701
continues to read as follows:
33 CFR Part 165
■
Authority: 12 U.S.C. 1752(5), 1755, 1756,
1757, 1758, 1759, 1761a, 1761b, 1766, 1767,
1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C.
3717. Section 701.31 is also authorized by 15
U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601–
3610. Section 701.35 is also authorized by 42
U.S.C. 4311–4312.
2. Revise § 701.32(b) to read as
follows:
■
RIN 1625–AA00
Safety Zone; Fireworks Display,
Delaware River, Philadelphia, PA
Coast Guard, DHS.
Notice of proposed rulemaking.
AGENCY:
ACTION:
The Coast Guard proposes to
establish a temporary safety zone on the
waters of the Delaware River near
Pleasant Hill Park in Philadelphia, PA,
from 9:15 p.m. to 10 p.m. on July 4,
2019, during the One River Alliance
Fireworks Display. The safety zone is
necessary to ensure the safety of
participant vessels, spectators, and the
boating public during the event. This
regulation would prohibit persons and
non-participant vessels from entering,
transiting through, anchoring in, or
remaining within the safety zone unless
authorized by the Captain of the Port
(COTP) Delaware Bay or a designated
representative. We invite your
comments on this proposed rulemaking.
DATES: Comments and related material
must be received by the Coast Guard on
or before June 10, 2019.
ADDRESSES: You may submit comments
identified by docket number USCG–
2019–0338 using the Federal
eRulemaking Portal at https://
www.regulations.gov. See the ‘‘Public
Participation and Request for
Comments’’ portion of the
SUPPLEMENTARY INFORMATION section for
further instructions on submitting
comments.
SUMMARY:
§ 701.32 Payment on shares by public
units and nonmembers.
*
*
*
*
*
(b) Limitations—(1) Aggregate limit on
public unit and nonmember shares.
Except as permitted under paragraph (c)
of this section, a Federal credit union
may not accept public unit and
nonmember shares in excess of 50
percent of the difference of paid-in and
unimpaired capital and surplus and any
public unit and nonmember shares, as
measured at the time of acceptance of
each public unit or nonmember share.
(2) Required due diligence. Before
accepting public unit or nonmember
shares that, taken together with any
borrowings, exceed 70 percent of paidin and unimpaired capital and surplus,
the board of directors must adopt a
specific written plan concerning the
intended use of these funds that is
consistent with prudent risk
management principles.
*
*
*
*
*
PART 741—REQUIREMENTS FOR
INSURANCE
3. The authority for part 741
continues to read as follows:
■
§ 741.204 Maximum public unit and
nonmember accounts, and low-income
designation.
If
you have questions about this proposed
rulemaking, call or email Petty Officer
Thomas Welker, U.S. Coast Guard,
Sector Delaware Bay, Waterways
Management Division, Coast Guard;
telephone (215) 271–4814, email
Thomas.j.welker@uscg.mil.
SUPPLEMENTARY INFORMATION:
*
I. Table of Abbreviations
FOR FURTHER INFORMATION CONTACT:
Authority: 12 U.S.C. 1757, 1766(a), 1781–
1790, and 1790d; 31 U.S.C. 3717.
4. Revise § 741.204(a) to read as
follows:
■
jbell on DSK3GLQ082PROD with PROPOSALS
[Docket Number USCG–2019–0338]
*
*
*
*
(a) Adhere to the requirements of
§ 701.32 of this chapter regarding public
unit and nonmember accounts,
VerDate Sep<11>2014
17:34 May 29, 2019
Jkt 247001
CFR Code of Federal Regulations
COTP Captain of the Port
DHS Department of Homeland Security
PO 00000
Frm 00013
Fmt 4702
Sfmt 4702
FR Federal Register
NPRM Notice of proposed rulemaking
§ Section
U.S.C. United States Code
II. Background, Purpose, and Legal
Basis
On April 19, 2019, Pyrotechnico
Fireworks notified the Coast Guard that
it will be conducting a firework display
near Pleasant Hill Park in Philadelphia,
PA, from 9:15 p.m. to 10 p.m. on July
4, 2019. The display will be launched
from a barge in the Delaware River.
Hazards from firework displays include
accidental discharge of fireworks,
dangerous projectiles, and falling hot
embers or other debris. The Captain of
the Port Delaware Bay (COTP) has
determined that this temporary safety
zone is necessary to provide safety
during the fireworks display, and to
ensure protection of participants,
spectators and other boaters.
The purpose of this rulemaking is to
ensure the safety of vessels and the
navigable waters. The Coast Guard
proposes this rulemaking under
authority in 46 U.S.C 70034 (previously
33 U.S.C. 1231).
III. Discussion of Proposed Rule
The COTP proposes to establish a
temporary safety zone on the waters of
the Delaware River near Pleasant Hill
Park in Philadelphia, PA, during a
fireworks display scheduled to take
place between 9:15 p.m. and 10 p.m. on
July 4, 2019. The fireworks will be set
off from a barge in the river, which will
be anchored at approximate position
latitude 40°02′22.54″ N longitude
074°59′22.03″ W. The safety zone would
extend 200 yards around the barge. No
person or vessel will be permitted to
enter, transit through, anchor in, or
remain within the safety zone without
obtaining permission from the COTP
Delaware Bay or a designated
representative. If the COTP Delaware
Bay or a designated representative
grants authorization to enter, transit
through, anchor in, or remain within the
safety zone, all persons and vessels
receiving such authorization must
comply with the instructions of the
COTP Delaware Bay or a designated
representative. The Coast Guard will
provide public notice of the safety zone
by Local Notice to Mariners and
Broadcast Notice to Mariners. The
regulatory text we are proposing appears
at the end of this document.
IV. Regulatory Analyses
We developed this proposed rule after
considering numerous statutes and
Executive orders related to rulemaking.
Below we summarize our analyses
E:\FR\FM\30MYP1.SGM
30MYP1
]]>Agencies
[Federal Register Volume 84, Number 104 (Thursday, May 30, 2019)]
[Proposed Rules]
[Pages 25018-25022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11296]
=======================================================================
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701 and 741
RIN 3313-AF00
Public Unit and Nonmember Shares
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
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SUMMARY: The NCUA Board (Board) is proposing to amend the NCUA's public
unit and nonmember share rule to allow Federal credit unions (FCU) to
receive public unit and nonmember shares up to 50 percent of the credit
union's paid-in and unimpaired capital and surplus less any public unit
and nonmember shares.
DATES: Comments must be received by July 29, 2019.
ADDRESSES: You may submit comments by any of the following methods
(Please send comments by one method only):
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA website: https://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the instructions for
submitting comments.
Email: Address to [email protected]. Include ``[Your
name] Comments on Public Unit and Nonmember Shares Proposed Rule'' in
the email subject line.
Fax: (703) 518-6319. Use the subject line described above
for email.
Mail: Address to Gerard Poliquin, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
Public inspection: All public comments are available on the
agency's website at https://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical
reasons. Public comments will not be edited to remove any identifying
or contact information. Paper copies of comments may be inspected in
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by
appointment weekdays between 9:00 a.m. and 3:00 p.m. To make an
appointment, call (703) 518-6540 or send an email to [email protected].
FOR FURTHER INFORMATION CONTACT: Benjamin M. Litchfield, Staff
Attorney, Office of General Counsel, 1775 Duke Street, Alexandria,
Virginia 22314, or by telephone at (703) 518-6540.
SUPPLEMENTARY INFORMATION:
I. Background
II. Legal Authority
III. Summary of the Proposed Rule
IV. Section-by-Section Analysis
V. Regulatory Procedures
I. Background
Section 107(6) of the Federal Credit Union Act (FCU Act) permits an
FCU to receive payment on shares from nonmembers under certain
circumstances.\1\ An FCU may receive payment on shares from nonmember
credit unions.\2\ An FCU may also receive payment on shares from
nonmember public units and their political subdivisions.\3\ The term
``public unit'' generally refers to ``the United States, any state of
the United States, the District of Columbia, the Commonwealth of Puerto
Rico, the Panama Canal Zone, any territory or possession of the United
States, any county, municipality, or political subdivision thereof, or
any Indian tribe as defined in section 3(c) of the Indian Financing Act
of 1974.'' \4\
---------------------------------------------------------------------------
\1\ 12 U.S.C. 1757(6).
\2\ Id.
\3\ Id.
\4\ 12 CFR 745.1(c).
---------------------------------------------------------------------------
Moreover, an FCU that predominantly serves low-income members may
[[Page 25019]]
receive payment on shares from any source regardless of membership.\5\
Section 701.34 of the NCUA's regulations defines a ``low-income
member'' as, among other things, a member ``whose family income is 80
[percent] or less than the median family income for the metropolitan
area where [the member] live[s] or [the] national metropolitan area,
whichever is greater.'' \6\ Alternatively, a ``low-income member'' is a
member ``who earn[s] 80 [percent] or less than the total median
earnings for individuals for the metropolitan area where [the member]
live[s] or [the] national metropolitan area, whichever is greater.''
\7\
---------------------------------------------------------------------------
\5\ 12 U.S.C. 1757(6).
\6\ 12 CFR 701.34(a)(2).
\7\ Id.
---------------------------------------------------------------------------
Section 701.32 of the NCUA's regulations limits the total amount of
nonmember shares that an FCU may have to 20 percent of the credit
union's total shares, or $3 million, whichever is greater, unless the
shares are U.S. Treasury accounts or matching funds accounts required
by the NCUA's Community Development Revolving Loan Fund Program.\8\
This limit also applies to public unit shares regardless of whether the
public unit is a member of the credit union. The Board imposed this 20
percent limitation on both member public unit and nonmember shares
because of the asset/liability management problems related to public
unit and nonmember shares that arose at certain FCUs, which resulted in
material losses for the National Credit Union Share Insurance Fund
(NCUSIF).\9\
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\8\ 12 CFR 701.32(b), (c).
\9\ See Nonmember and Public Unit Accounts, 53 FR 50918 (Dec.
19, 1988).
---------------------------------------------------------------------------
Regulatory Reform Agenda
Consistent with the spirit of Executive Order 13777, entitled
``Enforcing the Regulatory Reform Agenda,'' \10\ the Board established
a Regulatory Reform Task Force (Task Force) to identify NCUA
regulations that the agency should repeal, replace, or modify. The Task
Force performed an exhaustive review and submitted its first report to
the Board in June 2017. In August 2017, the Board published the
substance of the Task Force's first report in the Federal Register for
public comment.\11\ After the close of the public comment period, the
Board published the Task Force's second and final report in the Federal
Register in December 2018.\12\
---------------------------------------------------------------------------
\10\ See Enforcing the Regulatory Reform Agenda, E.O. 13777, 82
FR 12285 (Mar. 1, 2017).
\11\ See Regulatory Reform Agenda, 82 FR 39702 (Aug. 22, 2017).
\12\ See Regulatory Reform Agenda, 83 FR 65926 (Dec. 21, 2018).
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The Task Force's final report recommends that the Board increase
the public unit and nonmember share limit in Sec. 701.32 of the NCUA's
regulations.\13\ The Task Force stated that public unit and nonmember
shares are the functional equivalent of borrowings and, therefore,
should be subject to the borrowing limit for FCUs set out in the FCU
Act. Section 107(9) of the FCU Act permits an FCU to borrow from any
source up to 50 percent of the credit union's paid-in and unimpaired
capital and surplus subject to such rules and regulations as the Board
may prescribe.\14\ However, this limitation does not apply to discounts
or sales of eligible obligations to any Federal intermediate credit
bank or loans from the Central Liquidity Facility.\15\ The proposed
rule implements the essence of the Task Force's recommendation.
---------------------------------------------------------------------------
\13\ 12 CFR 701.32.
\14\ 12 U.S.C. 1757(9).
\15\ Id. For rules governing loans from the Central Liquidity
Facility see 12 CFR 725.
---------------------------------------------------------------------------
II. Legal Authority
The Board has issued this proposed rule pursuant to its authority
under the FCU Act. Under the FCU Act, the NCUA is the chartering and
supervisory authority for FCUs and the Federal supervisory authority
for FICUs.\16\ The FCU Act grants the NCUA a broad mandate to issue
regulations governing both FCUs and all FICUs. Section 120 of the FCU
Act is a general grant of regulatory authority and authorizes the Board
to prescribe rules and regulations for the administration of the FCU
Act.\17\ Section 207 of the FCU Act is a specific grant of authority
over share insurance coverage, conservatorships, and liquidations.\18\
Section 209 of the FCU Act is a plenary grant of regulatory authority
to the Board to issue rules and regulations necessary or appropriate to
carry out its role as share insurer for all FICUs.\19\ Accordingly, the
FCU Act grants the Board broad rulemaking authority to ensure that the
credit union industry and the NCUSIF remain safe and sound.
---------------------------------------------------------------------------
\16\ 12 U.S.C. 1752-1775.
\17\ 12 U.S.C. 1766(a).
\18\ 12 U.S.C. 1787(b)(1).
\19\ 12 U.S.C. 1789(a)(11).
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III. Summary of the Proposed Rule
The proposed rule amends Sec. 701.32 of the NCUA's regulations to
allow an FCU to receive payment on shares from public unit and
nonmember shares up to 50 percent of the credit union's paid-in and
unimpaired capital and surplus less any public unit and nonmember
shares from public units and nonmembers without requesting a waiver
from the appropriate regional director. As discussed below, the
proposed rule does not allow a waiver process for an FCU to exceed this
50 percent limit as a matter of safety and soundness. The proposed rule
also requires an FCU to develop and maintain a written plan if its
public unit and nonmember shares, taken together with borrowings,
exceed 70 percent of paid-in and unimpaired capital and surplus.
Finally, the proposed rule makes conforming amendments to Sec.
741.204, which applies to all FICUs, to reflect the changes to Sec.
701.32.
IV. Section-by-Section Analysis
Section 701.32(b)--Limitations
Current Sec. 701.32(b) limits the amount of public unit and
nonmember shares that an FCU may have to 20 percent of total shares, or
$3 million dollars, whichever is greater, and sets forth procedures
that an FCU must follow if it wishes to receive from the appropriate
regional director a waiver to accept additional public unit or
nonmember shares.
Before accepting any public unit or nonmember shares in excess of
20 percent of total shares, the credit union's board of directors
``must adopt a specific written plan concerning the intended use of
these shares and forward a copy of the plan to the [r]egional
[d]irector.'' \20\ The plan must include a ``statement of the credit
union's needs, sources and intended uses of public unit and nonmember
shares.'' \21\ The plan must also make provision for ``matching
maturities of public unit and nonmember shares with corresponding
assets'' and ``adequate income spread between public unit and nonmember
shares and corresponding assets.'' \22\ If there is any mismatch
between maturities of public unit and nonmember shares with
corresponding assets, the credit union must justify the mismatch.\23\
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\20\ 12 CFR 701.32(b)(2).
\21\ 12 CFR 701.32(b)(2)(i).
\22\ 12 CFR 701.32(b)(2)(ii) and (iii).
\23\ 12 CFR 701.32(b)(2)(ii).
---------------------------------------------------------------------------
In addition to the written plan adopted by the FCU's board of
directors, the FCU also must submit a written request for a waiver of
the 20 percent limit to the appropriate regional director.\24\ The
waiver request must include: (1) The new level of public unit and
nonmember shares requested (either as a dollar amount or a percentage
of total shares); (2) the current plan adopted by the FCU's board of
directors regarding the use of new public unit and nonmember shares;
(3) a copy of the
[[Page 25020]]
FCU's latest financial statements; and (4) a copy of the FCU's loan and
investment policies.\25\ If the FCU's financial condition and
management are sound, and the credit union's plan for the funds is
reasonable, Sec. 701.32 establishes a presumption in favor of granting
a waiver.\26\
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\24\ 12 CFR 701.32(b)(3).
\25\ 12 CFR 701.32(b)(3)(i) through (iv).
\26\ 12 CFR 701.32(b)(4).
---------------------------------------------------------------------------
The regional director will typically grant a waiver for a two-year
period unless the regional director believes that a lesser time is
appropriate.\27\ Upon expiration of the waiver, the NCUSIF will
continue to insure public unit and nonmember shares currently held in
the FCU within applicable limits.\28\ However, an FCU may not accept
any new public unit or nonmember shares or rollover existing public
unit or nonmember share certificates in excess of the 20 percent of
total shares limit.\29\
---------------------------------------------------------------------------
\27\ Id.
\28\ 12 CFR 701.32(b)(6). See 12 CFR 745 on share insurance
limits.
\29\ Id.
---------------------------------------------------------------------------
The 20 percent total shares limit and the procedures set out in
Sec. 701.32(b) do not apply to treasury tax and loan (TT&L) remittance
accounts, TT&L note accounts, U.S. Treasury general accounts, and U.S.
Treasury time deposit-open accounts, which are all subject to the
requirements of Sec. 701.37 of the NCUA's regulations.\30\ Section
701.32 also does not apply to matching fund accounts required by the
NCUA's Community Development Revolving Loan Program unless the credit
union has already repaid the loan granted under that program that
required matching funds.\31\
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\30\ 12 CFR 701.32(c). See 12 CFR 701.37.
\31\ Id. For information on the Community Development Revolving
Loan Program, see 12 CFR 705.
---------------------------------------------------------------------------
Aggregate Limit on Public Unit and Nonmember Shares
The proposed rule simplifies the current regulatory framework in
Sec. 701.32(b). In establishing the 20 percent of total shares limit
in current Sec. 701.32(b), the Board relied heavily on industry
practices in 1988.\32\ The credit union industry has undergone
significant changes in the intervening 31 years since this limit was
adopted, including credit unions' growing need for additional sources
of funding to serve their members. To respond to these changes, the
proposed rule increases the current 20 percent of total shares limit to
50 percent of paid-in and unimpaired capital and surplus less any
public unit and nonmember shares.
---------------------------------------------------------------------------
\32\ 53 FR 50918, 50919 (Dec. 19, 1988).
---------------------------------------------------------------------------
The change in standard from ``total shares'' to ``paid-in and
unimpaired capital and surplus less any public unit and nonmember
shares'' provides credit unions with greater ability to accept public
unit and nonmember deposits because undivided earnings are included in
the measurement of a credit union's paid-in and unimpaired capital and
surplus. The proposed rule does not include public unit and nonmember
shares in the calculation of its unimpaired capital and surplus for
purposes of this 50 percent limit. This restriction provides a
meaningful limit on the ability of a credit union to increase its
leverage indefinitely, which could pose a clear risk to credit unions
and the NCUSIF. The Board believes that this balanced approach provides
an FCU with greater flexibility to determine an appropriate funding
structure to support ongoing credit union operations in a prudent
manner.
While the Board recognizes that public unit and nonmember shares
are unique in some respects, particularly with respect to their
sensitivity to interest rate fluctuations,\33\ these shares are in many
other respects the functional equivalent of other types of short-term
borrowings. Accordingly, the Board believes that allowing an FCU to
receive public unit and nonmember shares up to 50 percent of paid-in
and unimpaired capital and surplus, less any public unit and nonmember
shares, similar to the borrowing limit set out in Section 107(9) of the
FCU Act, is a preferable approach to the current 20 percent of total
shares limit set out in Sec. 701.32(b). The Board also believes that
the proposed 50 percent of paid-in and unimpaired capital and surplus
less any public unit and nonmember shares regulatory limit is
sufficiently high that an alternative $3 million dollar limit will be
unnecessary.
---------------------------------------------------------------------------
\33\ Id.
---------------------------------------------------------------------------
However, the Board is aware that some small FCUs, particularly low-
income credit unions that rely on large volumes of nonmember shares as
a necessary source of funding or newly chartered credit unions, may be
adversely impacted by the elimination of the $3 million dollar limit.
Consequently, the Board seeks specific comments on whether it should
retain the $3 million dollar limit or provide a special exemption for
small low-income credit unions that demonstrate a need for large
volumes of nonmember shares above the 50 percent paid-in and unimpaired
capital and surplus limit and for newly chartered credit unions. The
Board is actively considering these alternatives and may adopt one of
these approaches based on the persuasiveness of the comments.
Because an FCU may currently borrow up to 50 percent of paid-in and
unimpaired capital and surplus under Section 107(9) of the FCU Act, the
Board believes that providing credit unions with the proposed ability
to accept a comparable amount of public unit and nonmember shares will
not present an undue risk to credit unions or the NCUSIF. The Board
recognizes that in some instances public unit and nonmember shares can
be a more stable and cost-effective source of funding than borrowing.
Additionally, public unit and nonmember shares have other benefits for
credit unions and their communities, such as developing or enhancing an
FCU's relationship with political subdivisions, public units, or in the
case of low-income designated credit unions, other charitable or
economic development organizations.
However, the Board notes that an FCU should continue to manage its
balance sheet in a prudent manner. The NCUA will continue to review an
FCU's business model and asset-liability management to ensure the
credit union is operating in a safe and sound manner. Unsafe or unsound
funding sources or utilization of funds in an unsafe and unsound manner
may affect an FCU's CAMEL and risk ratings even if the credit union is
within the aggregate 50 percent limit.
Waiver From the Appropriate Regional Director
The proposed rule also eliminates the procedures that an FCU must
follow to obtain a waiver from its appropriate regional director.
Although the Board seeks to provide FCUs with greater flexibility, it
also believes that the NCUA should not allow an FCU to have public unit
and nonmember shares in excess of 50 percent of paid-in and unimpaired
capital and surplus less any public unit and nonmember shares. Allowing
an FCU to exceed this limit could lead to safety and soundness concerns
and unnecessary risk for the NCUSIF. As a result, the proposed rule
does not establish a procedure for an FCU to request a waiver of the
proposed aggregate 50 percent limit.
Requirement To Maintain a Plan Regarding Use of Funds
Furthermore, the proposed rule modifies key safeguards in current
Sec. 701.32(b) designed to ensure that an FCU's board of directors
conducts adequate due diligence before receiving payment on a
significant amount of public unit and nonmember shares. Under the
proposed rule, an FCU must
[[Page 25021]]
develop and maintain for review by NCUA examiners a specific plan
regarding the intended use of any borrowings, public unit, or nonmember
shares that, taken together, exceed 70 percent of the credit union's
paid-in and unimpaired capital and surplus. The proposed rule does not
require FCUs to submit the plans to the NCUA for prior approval.
This approach provides an FCU with significant flexibility to adopt
a prudent funding structure without the regulatory burden of developing
a plan regarding the intended use of those funds unless the credit
union borrows a significant amount of funds or accepts a significant
number of public unit and nonmember shares. Requiring a plan for
material levels of external funding sources is prudent due diligence
and the Board expects FCUs that accept elevated levels of public unit
and nonmember shares to document how the credit union will use those
funds consistent with prudent risk management principles.
Even though the Board expects that most FCUs will not need to
develop a specific plan regarding the use of external funds under the
proposed rule, it still believes that an FCU should continue to manage
its balance sheet in a prudent manner. As noted above, the NCUA will
continue to review an FCU's business model and asset-liability
management to ensure the FCU is operating in a safe and sound manner.
Unsafe or unsound funding sources or utilization of funds in an unsafe
and unsound manner may affect a credit union's CAMEL and risk ratings
and could result in regulatory action.
V. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \34\ 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).\35\ This rule will
provide a limited number of FCUs receiving public unit and nonmember
share with additional flexibility. Accordingly, the Board believes that
the rule will not have a significant economic impact on a substantial
number of small credit unions. Therefore, a regulatory flexibility
analysis is not required.
---------------------------------------------------------------------------
\34\ 5 U.S.C. 601 et seq.
\35\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in
which an agency by rule creates a new paperwork burden on regulated
entities or modifies an existing burden. For purposes of the PRA, a
paperwork burden may take the form of a reporting, disclosure, or
recordkeeping requirement, each referred to as an information
collection. The NCUA may not conduct or sponsor, and the respondent is
not required to respond to, an information collection unless it
displays a currently valid Office of Management and Budget (OMB)
control number.
This rule will amend Sec. 701.32 to eliminate the wavier
requirements for those seeking an exemption to the current 20 percent
limit of the total amount of nonmember shares that an FCU may issue;
due to the proposed increased limit of 50 percent, with no exceptions
to this limit. This will eliminate the existing burden to submit a
waiver.
Under the proposed rule, a credit union must develop a specific
plan regarding the intended use of any borrowings, public unit, or
nonmember shares that, taken together, exceed 70 percent of the credit
union's paid-in and unimpaired capital and surplus. The increased limit
of public unit and nonmember shares could potentially see an increase
in the number of respondents required to develop a plan from 20 to 50
FICUs at an estimated burden of 2 hours to comply annually, per
respondent.
These program changes would revise the information collection
requirement under currently approved OMB number 3133-0114, as follows:
Title of Information Collection: Payments on Shares by Public Units
and Nonmembers, 12 CFR 701.32.
OMB Control Number: 3133-0114.
Estimated Number of Respondents: 50.
Estimated Annual Frequency of Response: 1.
Estimated Total Annual Reponses: 50.
Estimated Hours per Response: 2.
Estimated Total Annual Burden Hours: 100.
Affected Public: Private Sector: Not-for-profit institutions.
The NCUA invites comments on: (a) Whether the collections of
information are necessary for the proper performance of the agency's
functions, including whether the information has practical utility; (b)
the accuracy of the estimates of the burden of the information
collections, including the validity of the methodology and assumptions
used; (c) ways to enhance the quality, utility, and clarity of the
information to be collected; (d) ways to minimize the burden of the
information collections on respondents, including through the use of
automated collection techniques or other forms of information
technology; and (e) estimates of capital or start-up costs and costs of
operation, maintenance, and purchase of services to provide
information.
All comments are a matter of public record. Comments regarding the
information collection requirements of this rule should be sent to (1)
Dawn Wolfgang, NCUA PRA Clearance Officer, National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314, or Fax
No. 703-519-8572, or Email at [email protected] and the (2) Office
of Information and Regulatory Affairs, Office of Management and Budget,
Attention: Desk Officer for NCUA, New Executive Office Building, Room
10235, Washington, DC 20503, or email at OIRA_Submission,@OMB.EOP.gov.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.\36\
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 proposed 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 Board
has therefore determined that this proposed rule does not constitute a
policy that has federalism implications for purposes of the executive
order.
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\36\ 64 FR 43255 (Aug. 4, 1999).
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Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed rule will not affect
family well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects
12 CFR Part 701
Credit unions, Nonmember accounts, Public units.
12 CFR Part 741
Bank deposit insurance, Credit unions, Reporting and recordkeeping
requirements.
[[Page 25022]]
By the National Credit Union Administration Board on May 23,
2019.
Gerard S. Poliquin,
Secretary of the Board.
For the reasons stated above, NCUA proposes to amend 12 CFR parts
701 and 741 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
1. The authority for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
0
2. Revise Sec. 701.32(b) to read as follows:
Sec. 701.32 Payment on shares by public units and nonmembers.
* * * * *
(b) Limitations--(1) Aggregate limit on public unit and nonmember
shares. Except as permitted under paragraph (c) of this section, a
Federal credit union may not accept public unit and nonmember shares in
excess of 50 percent of the difference of paid-in and unimpaired
capital and surplus and any public unit and nonmember shares, as
measured at the time of acceptance of each public unit or nonmember
share.
(2) Required due diligence. Before accepting public unit or
nonmember shares that, taken together with any borrowings, exceed 70
percent of paid-in and unimpaired capital and surplus, the board of
directors must adopt a specific written plan concerning the intended
use of these funds that is consistent with prudent risk management
principles.
* * * * *
PART 741--REQUIREMENTS FOR INSURANCE
0
3. The authority 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
4. Revise Sec. 741.204(a) to read as follows:
Sec. 741.204 Maximum public unit and nonmember accounts, and low-
income designation.
* * * * *
(a) Adhere to the requirements of Sec. 701.32 of this chapter
regarding public unit and nonmember accounts, provided it has the
authority to accept such accounts.
* * * * *
[FR Doc. 2019-11296 Filed 5-29-19; 8:45 am]
BILLING CODE 7535-01-P
