Risk-Based Net Worth-COVID-19 Regulatory Relief, 10872-10875 [2021-01400]

Download as PDF 10872 Proposed Rules Federal Register Vol. 86, No. 34 Tuesday, February 23, 2021 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 702 RIN 3133–AF21 Risk-Based Net Worth—COVID–19 Regulatory Relief National Credit Union Administration (NCUA). ACTION: Proposed rule. AGENCY: The NCUA Board (Board) is issuing this proposal to raise the asset threshold for defining a credit union as ‘‘complex’’ for purposes of being subject to any risk-based net worth requirement in the NCUA’s regulations. The proposed rule would amend the NCUA’s regulations to provide that any risk-based net worth requirement will be applicable only to a federally insured natural-person credit union (credit union) with quarter-end assets that exceed $500 million and a risk-based net worth requirement that exceeds six percent. The COVID–19 pandemic has created a vital need for financial institutions, including credit unions, to provide access to responsible credit and other member services to support consumers. Implementing this regulatory change in advance of January 1, 2022, the effective date of the 2015 final risk based capital (RBC) rule issued by the NCUA, would provide necessary capital relief to a significant number of credit unions without substantially decreasing the safety and soundness of credit unions or the National Credit Union Share Insurance Fund (NCUSIF). DATES: Comments must be received on or before March 25, 2021. ADDRESSES: You may submit written comments, identified by RIN 3133– AF21, by any of the following methods (Please send comments by one method only): • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Fax: (703) 518–6319. Include ‘‘[Your Name]—Comments on RiskSUMMARY: VerDate Sep<11>2014 17:21 Feb 22, 2021 Jkt 253001 Based Net Worth—COVID–19 Regulatory Relief’’ in the transmittal. • Mail: Address to Melane ConyersAusbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314–3428. Public Inspection: You may view all public comments on the Federal eRulemaking Portal at http:// www.regulations.gov as submitted, except for those we cannot post for technical reasons. The NCUA will not edit or remove any identifying or contact information from the public comments submitted. Due to social distancing measures in effect, the usual opportunity to inspect paper copies of comments in the NCUA’s law library is not currently available. After social distancing measures are relaxed, visitors may make an appointment to review paper copies by calling (703) 518–6540 or emailing OGCMail@ncua.gov. FOR FURTHER INFORMATION CONTACT: Policy and Analysis: Kathryn Metzker, Risk Management Division, Office of Examination and Insurance, at (571) 438–0073; Legal: Thomas Zells, Staff Attorney, Office of General Counsel, at (703) 518–6540; Rachel Ackmann, Senior Staff Attorney, Office of General Counsel, at (703) 548–2601; or by mail at: National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314. SUPPLEMENTARY INFORMATION: I. Introduction II. Legal Authority III. The Proposed Rule IV. Impact of the Proposed Rule V. Regulatory Procedures I. Introduction In 1998, Congress enacted the Credit Union Membership Access Act (CUMAA).1 Section 301 of CUMAA added section 216 to the Federal Credit Union Act (FCU Act),2 which required the Board to adopt by regulation a system of prompt corrective action (PCA) to restore the net worth of credit unions that become inadequately capitalized. The purpose of section 216 of the FCU Act is to ‘‘resolve the problems of [federally] insured credit unions at the least possible long-term loss to the [NCUSIF].’’ 3 To carry out that purpose, Congress set forth a basic 1 Public Law 105–219, 112 Stat. 913 (1998). U.S.C. 1790d. 3 12 U.S.C. 1790d(a)(1). 2 12 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 structure for PCA in section 216 that consists of three principal components: (1) A framework combining mandatory actions prescribed by statute with discretionary actions developed by the NCUA; (2) an alternative system of PCA to be developed by the NCUA for credit unions defined as ‘‘new;’’ and (3) a riskbased net worth requirement to apply to credit unions the NCUA defines as ‘‘complex.’’ The Board initially implemented the required system of PCA in 2000,4 primarily in part 702 of the NCUA’s regulations, and most recently made substantial updates to the regulation in October 2015 5 and October 2018.6 The risk-based net worth requirement for credit unions meeting the definition of ‘‘complex’’ was first applied on the basis of data in the Call Report reflecting activity in the first quarter of 2001.7 The NCUA’s risk-based net worth requirement has been largely unchanged since its implementation, with limited exceptions.8 Currently, the NCUA defines a credit union as complex and thus subject to the requirement only if the credit union has quarter-end assets that exceed $50 million and its riskbased net worth requirement exceeds six percent.9 As described more fully below, while the risk-based net worth requirement remains in place, the NCUA has issued multiple final rules to implement a requirement that utilizes an RBC ratio to replace the current requirement. The 4 12 CFR part 702; see also 65 FR 8584 (Feb. 18, 2000) and 65 FR 44950 (July 20, 2000). 5 80 FR 66626 (Oct. 29, 2015). 6 83 FR 55467 (Nov. 6, 2018). 7 65 FR 44950 (July 20, 2000). 8 The NCUA’s risk-based net worth requirement has been largely unchanged since its implementation, with limited exceptions: Revisions were made to the rule in 2003 to amend the riskbased net worth requirement for member business loans, 68 FR 56537 (Oct. 1, 2003); revisions were made to the rule in 2008 to incorporate a change in the statutory definition of ‘‘net worth,’’ 73 FR 72688 (Dec. 1, 2008); revisions were made to the rule in 2011 to expand the definition of ‘‘low-risk assets’’ to include debt instruments on which the payment of principal and interest is unconditionally guaranteed by the NCUA, 76 FR 16234 (Mar. 23, 2011); revisions were made in 2013 to exclude credit unions with total assets of $50 million or less from the definition of ‘‘complex’’ credit union, 78 FR 4033 (Jan. 18, 2013); and amendments were made in April 2020 to define loans made by credit unions under the Small Business Administration’s Paycheck Protection Program as ‘‘low-risk assets,’’ 85 FR 23212 (Apr. 27, 2020). 9 12 CFR 702.103. E:\FR\FM\23FEP1.SGM 23FEP1 Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Proposed Rules RBC requirement is based on the same provisions in the FCU Act, but uses different terminology and standards to distinguish it from the current riskbased net worth requirement. However, the effective date of the RBC amendments has been delayed until January 1, 2022, and the rule is currently undergoing a holistic review as part of that delay. Further, and of particular relevance to this proposed rule, the prospective RBC requirement applies only if a credit union’s quarterend total assets exceed $500 million, whereas the current risk-based net worth requirement applies if a credit union has quarter-end assets that exceed $50 million and its risk-based net worth requirement, as calculated under current part 702, exceeds six percent. As noted, at its October 2015 meeting, the Board issued a final rule (2015 Final Rule) to amend part 702 of the NCUA’s current PCA regulations to require that credit unions taking certain risks hold capital commensurate with those risks.10 The RBC provisions of the 2015 Final Rule applied only to credit unions with quarter-end total assets exceeding $100 million. The overarching intent of the 2015 Final Rule was to reduce the likelihood that a relatively small number of high-risk outlier credit unions would exhaust their capital and cause large losses to the NCUSIF. Under the FCU Act, federally insured credit unions are collectively responsible for replenishing losses to the NCUSIF.11 The 2015 Final Rule restructures the NCUA’s current PCA regulations and makes various revisions, including amending the agency’s risk-based net worth requirement by replacing it with a new RBC ratio. The Board originally set the effective date of the 2015 Final Rule for January 1, 2019 to provide credit unions and the NCUA with sufficient time to make the necessary adjustments—such as systems, processes, and procedures—and to reduce the burden on affected credit unions. At its October 2018 meeting, the Board issued a final rule (2018 Supplemental Rule) to delay the effective date of the 2015 Final Rule for an additional year, moving the effective date from January 1, 2019 to January 1, 10 80 FR 66626 (Oct. 29, 2015). 12 U.S.C. 1782(c)(2)(A) (The FCU Act requires that each federally insured credit union pay a Federal share insurance premium equal to a percentage of the credit union’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 liquidation or threatened liquidation of federally insured credit unions in troubled condition.). 11 See VerDate Sep<11>2014 17:21 Feb 22, 2021 Jkt 253001 2020.12 Importantly, the 2018 Supplemental Rule also amended the definition of ‘‘complex’’ credit union, adopted in the 2015 Final Rule for RBC purposes, by increasing the threshold level for coverage from $100 million to $500 million. Therefore, only credit unions with over $500 million in assets will be subject to the 2015 Final Rule.13 These changes provided these covered credit unions and the NCUA with additional time to prepare for the rule’s implementation, and exempted an additional 1,026 credit unions from the RBC requirements of the 2015 Final Rule without subjecting the NCUSIF to undue risk. In December 2019, the Board issued a final rule (2019 Supplemental Rule) to further delay the effective date of the 2015 Final Rule an additional two years, until January 1, 2022.14 The Board issued the 2019 Supplemental Rule to allow the Board more time to holistically and comprehensively evaluate capital standards for credit unions 15 and provide covered credit unions and the NCUA with additional time to prepare for the 2015 Final Rule’s implementation. Under the 2019 Supplemental Rule, the NCUA’s current PCA regulation remains in effect until the 2015 Final Rule’s amended effective date, January 1, 2022. The NCUA has enforced, and will continue to enforce, the capital standards currently in place and address any supervisory concerns through existing regulatory and supervisory mechanisms. Until that amended effective date, a credit union that would be exempted from any future RBC requirement because it does not have over $500 million in total assets remains subject to the current risk-based net worth requirement if it has over $50 million in total assets and a risk-based net worth requirement that exceeds six percent. The Board now believes that this is an unnecessary restriction and is proposing to increase the threshold for defining a complex credit union for purposes of the current risk-based net worth requirement to $500 million to match the prospective RBC requirement while retaining the requirement that a credit union’s risk-based net worth requirement also exceeds six percent. 12 83 FR 55467 (Nov. 6, 2018). risk-based net worth requirement currently in effect applies to a credit union only if it has quarter-end assets that exceed $50 million and its risk-based net worth requirement exceeds six percent. 14 84 FR 68781 (Dec. 17, 2019). 15 The final rule provided several examples of issues the Board would consider during the delay, including asset securitization, subordinated debt, and a community bank leverage ratio analog. 13 The PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 10873 This capital relief would enable credit unions to provide better service and more loans to their members. II. Legal Authority As discussed above, in 1998, Congress enacted CUMAA.16 Section 301 of CUMAA added section 216 to the FCU Act,17 which required the Board to adopt by regulation a system of PCA to restore the net worth of credit unions that become inadequately capitalized.18 Section 216(b)(1)(A) requires the Board to adopt by regulation a system of PCA for credit unions ‘‘consistent with’’ section 216 of the FCU Act and ‘‘comparable to’’ section 38 of the Federal Deposit Insurance Act (FDI Act).19 Section 216(b)(1)(B) requires that the Board, in designing the PCA system, also take into account the ‘‘cooperative character of credit unions’’ (i.e., credit unions are not-for-profit cooperatives that do not issue capital stock, must rely on retained earnings to build net worth, and have boards of directors that consist primarily of volunteers).20 Among other things, section 216(c) of the FCU Act requires the NCUA to use a credit union’s net worth ratio to determine its classification among five ‘‘net worth categories’’ set forth in the FCU Act.21 Section 216(o) generally defines a credit union’s ‘‘net worth’’ as its retained earnings balance,22 and a credit union’s ‘‘net worth ratio,’’ as the ratio of its net worth to its total assets.23 As a credit union’s net worth ratio declines, so does its classification among the five net worth categories, thus subjecting it to an expanding range of mandatory and discretionary supervisory actions under PCA.24 Section 216(d)(1) of the FCU Act requires that the NCUA’s system of PCA include, in addition to the statutorily defined net worth ratio requirement applicable to credit unions, ‘‘a riskbased net worth 25 requirement for 16 Public Law 105–219, 112 Stat. 913 (1998). U.S.C. 1790d. 18 The risk-based net worth requirement for credit unions meeting the definition of ‘‘complex’’ was first applied on the basis of data in the Call Report reflecting activity in the first quarter of 2001. 65 FR 44950 (July 20, 2000). 19 12 U.S.C. 1790d(b)(1)(A); see also 12 U.S.C. 1831o (Section 38 of the FDI Act setting forth the PCA requirements for banks). 20 12 U.S.C. 1790d(b)(1)(B). 21 12 U.S.C. 1790d(c). 22 12 U.S.C. 1790d(o)(2). 23 12 U.S.C. 1790d(o)(3). 24 12 U.S.C. 1790d(c)–(g); 12 CFR 702.204(a)–(b). 25 For purposes of this rulemaking, the term ‘‘riskbased net worth requirement’’ is used in reference to the statutory requirement for the Board to design a capital standard that accounts for variations in the risk profile of complex credit unions. The term RBC is used to refer to the specific standards established 17 12 E:\FR\FM\23FEP1.SGM Continued 23FEP1 10874 Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Proposed Rules insured credit unions that are complex, as defined by the Board.’’ 26 The FCU Act directs the NCUA to base its definition of ‘‘complex’’ credit unions ‘‘on the portfolios of assets and liabilities of credit unions.’’ 27 It also requires the NCUA to design a riskbased net worth requirement to apply to such ‘‘complex’’ credit unions.28 In addition to the specific regulatory authority provided to the NCUA by the above-referenced statutory provisions of the FCU Act, the FCU Act also grants the NCUA broad plenary rulemaking authority. III. The Proposed Rule The COVID–19 pandemic has created a vital need for financial institutions, including credit unions, to provide access to responsible credit and other member services to support consumers. The Board is working with Federal and state regulatory agencies, in addition to credit unions, to assist credit unions in managing their operations and to facilitate continued assistance to credit union members and communities impacted by the coronavirus. As part of these ongoing efforts, the Board is proposing to raise the asset threshold for defining a credit union as ‘‘complex’’ for purposes of the current risk-based net worth requirement. Under the proposal, any risk-based net worth requirement would be applicable to only a credit union with quarter-end assets that exceed $500 million whose risk-based net worth requirement also exceeds six percent. This would remain in place until the effective date of the abovereferenced RBC rule. The Board believes that this increase would provide necessary relief to a significant number of credit unions and their members without substantially increasing the risk to credit unions or the NCUSIF, consistent with the NCUA’s responsibility to maintain the safety and soundness of the credit union system. The NCUA seeks to strike the appropriate balance between providing for the safety and soundness of the credit union industry, while not restricting credit union activities by requiring a credit union to hold excessive levels of capital. Requiring a in the 2015 Final Rule to function as criteria for the statutory risk-based net worth requirement. The term ‘‘risk-based capital ratio’’ is also used by the other Federal banking agencies and the international banking community when referring to the types of risk-based requirements that are addressed in the 2015 Final Rule. This change in terminology has no substantive effect on the requirements of the FCU Act, and is intended only to reduce confusion for the reader. 26 12 U.S.C. 1790d(d)(1). 27 12 U.S.C. 1790d(d). 28 Id. VerDate Sep<11>2014 17:21 Feb 22, 2021 Jkt 253001 credit union to hold excess capital above what is necessary to account for risk limits its ability to increase lending or provide necessary services to members. Specifically, potential consequences of the higher capital requirements include: Reduced or higher-cost lending, limited products, higher compliance cost, and increased merger activity. In 2018, the NCUA determined that increasing the applicability threshold for RBC to $500 million did not pose undue risk to the NCUSIF because credit unions with assets greater than $500 million account for the majority of industry assets (both total assets and complex assets, as explained below). Based on September 30, 2020 data, credit unions with assets between $50 million and $500 million account for 15.9 percent of industry assets and 33.8 percent of credit unions. The average asset size of a credit union in this cohort is $164 million. Conversely, credit unions with assets greater than $500 million account for 81.6 percent of industry assets and only 12.4 percent of total credit unions. Therefore, raising the risk-based net worth requirement threshold to $500 million would still cover the majority of assets in the credit union system and not pose undue risk to the NCUSIF for the same reasons that the Board found in the 2018 Supplemental Rule. In the 2015 Final Rule and 2018 Supplemental Rule, the NCUA determined a credit union was complex by evaluating whether its portfolios of assets and liabilities were complex based on the products and services in which such credit unions engaged. An asset size threshold was developed as a proxy measure based on a detailed analysis performed by the NCUA.29 The threshold set forth a clear demarcation line, above which the NCUA determined all credit unions engaged in complex activities, and where almost all such credit unions were involved in multiple complex activities. The asset threshold adopted in the 2015 Final Rule and revised in the 2018 Supplemental Rule for determining whether a credit union is complex was based on a complexity index.30 The 29 See the 2015 Final Rule and 2018 Supplemental Rule for reasons the NCUA believes a single asset-size threshold is appropriate for determining whether a credit union is complex for purposes of prompt corrective action. See 80 FR 66626 (Oct. 29, 2015) and 83 FR 55467 (Nov. 6, 2018). 30 The 2015 Final Rule and 2018 Supplemental Rule both used a complexity index, however the original complexity index used in the 2015 Final Rule was amended in the 2018 Supplemental Rule. The 2018 Supplemental Rule used a revised complexity index that amended six of the indicators PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 2018 Supplemental Rule also used a complexity ratio, a ratio of complex assets and liabilities to total assets, to evaluate the extent to which credit unions are involved in complex activities. The 2018 Supplemental Rule noted that of the $497 billion in complex assets and liabilities in the credit union system, $423 billion (85 percent)—the majority of complex assets and liabilities in the credit union system—are held among credit unions with more than $500 million in assets.31 In general, two-thirds of credit unions with more than $500 million in total assets had complex assets and liabilities ratios above 30 percent. Only 11 percent of credit unions with less than $500 million had complexity ratios above 30 percent. Using both the revised complexity index and the complexity ratio, the 2018 Supplemental Rule noted the $500 million threshold for defining complex credit unions would not represent undue risk to the NCUSIF as approximately 76 percent of the assets held by federally insured credit unions would still be covered. As noted above, credit unions with assets above $500 million represent 81.6 percent of industry assets as of September 30, 2020. The Board believes this change would provide relief to many credit unions and help to maintain confidence in the system of cooperative credit, consistent with the NCUA’s mission. IV. Impact of the Proposed Rule Increasing the complexity threshold to $500 million would provide potential relief to 1,737 credit unions. While all complex credit unions meet their riskbased net worth requirement as of September 30, 2020, because their net worth ratio exceeds their risk-based net worth requirement, immediate capital relief can be provided to some of these credit unions. As shown in Table 1, there are 94 complex credit unions with assets totaling $66 billion which are required to hold capital above 7 percent to be well capitalized based on their risk-based net worth requirement. Of the 94 credit unions, 67 have assets less than $500 million and would no longer be required to hold more capital to remain well capitalized. Additionally, increasing the complexity threshold now rather than when the 2015 Final Rule goes into effect will not pose in the original complexity index so the index more accurately reflected ‘‘complexity’’ in credit unions and took into account certain regulatory changes that were made after the 2015 Final Rule was approved. 31 This was based on available data at the time of the 2018 Supplemental Rule. E:\FR\FM\23FEP1.SGM 23FEP1 10875 Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Proposed Rules undue risk to the NCUSIF as the 67 credit unions provided relief represent less than 1 percent of industry assets. TABLE 1—COMPLEX CREDIT UNIONS WITH A RISK BASED NET WORTH REQUIREMENT GREATER THAN 7 PERCENT Number of credit unions Asset category Assets >$50M 32 .......................................................................................................................... Assets >$500M 33 ........................................................................................................................ $50M< Assets <$500M ................................................................................................................ Therefore, this proposed rule would provide immediate relief for the 67 credit unions that must currently manage their capital levels to a riskbased net worth requirement above seven percent.34 Additionally, it would also provide relief to all credit unions with assets between $50 million and $500 million, which would be able to expand their portfolios and simply manage their capital levels to meet the seven percent leverage requirement to be well capitalized. The NCUA invites comments on all aspects of the proposal.35 V. Regulatory Procedures A. Regulatory Flexibility Act (RFA) The Regulatory Flexibility Act (RFA) generally requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of a proposed rule on small entities. A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include federally insured credit unions with assets less than $100 million) and publishes its certification and a short, explanatory statement in the Federal Register together with the rule. The proposed rule would only exempt additional credit unions from any riskbased net worth requirement in part 702 of the NCUA’s regulations applicable to complex credit unions. As a result, it 32 This reflects the current threshold for complex credit unions. 33 This reflects the proposed threshold for complex credit unions. 34 This would reduce the amount of capital they are required to hold to be well capitalized by $82 million in aggregate, based on September 30, 2020 data. 35 Because of the straightforward nature of the proposed change and the extensive comment period offered on the various RBC rulemakings, the Board is not providing the usual 60-day comment period. See NCUA Interpretive Ruling and Policy Statement (IRPS) 87–2, as amended by IRPS 03–2 and IRPS 15–1. 80 FR 57512 (Sept. 24, 2015), available at https://www.ncua.gov/files/publications/irps/ IRPS1987-2.pdf. VerDate Sep<11>2014 17:21 Feb 22, 2021 Jkt 253001 will not cause any increased burden on credit unions and will not have an impact on small credit unions. Accordingly, the NCUA certifies that the proposed rule will not have a significant economic impact on a substantial number of small credit unions. B. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency by rule creates a new paperwork burden on regulated entities or modifies an existing burden (44 U.S.C. 3507(d)). For purposes of the PRA, a paperwork burden may take the form of a reporting, recordkeeping, or a third-party disclosure requirement, 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 valid Office of Management and Budget (OMB) control number. This proposed rule contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. et seq.). C. Executive Order 13132 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. 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. This proposed rule would 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 proposed rule does not constitute a policy that has federalism implications for purposes of the Executive order. D. 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 PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 Total assets (million) 94 27 67 Percent of industry assets $66.0 54.6 11.4 3.7 3.1 0.6 section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105–277, 112 Stat. 2681 (1998). List of Subjects in 12 CFR Part 702 Credit, Credit unions, Reporting and recordkeeping requirements. By the NCUA Board on January 14, 2021. Melane Conyers-Ausbrooks, Secretary of the Board. For the reasons discussed in the preamble, the Board proposes to amend part 702 of chapter VII of title 12 of the Code of Federal Regulations as follows: PART 702—CAPITAL ADEQUACY 1. The authority citation for part 702 continues to read as follows: ■ Authority: 12 U.S.C. 1766(a), 1790d. § 702.103 [Amended] 2. Amend § 702.103(a) by removing the words ‘‘fifty million dollars ($50,000,000)’’ and add in their place ‘‘five hundred million dollars ($500,000,000).’’ ■ [FR Doc. 2021–01400 Filed 2–22–21; 8:45 am] BILLING CODE 7535–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2020–0994; Project Identifier AD–2020–00687–T] RIN 2120–AA64 Airworthiness Directives; Gulfstream Aerospace Corporation Airplanes Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: The FAA proposes to adopt a new airworthiness directive (AD) for certain Gulfstream Aerospace Corporation (Gulfstream) Model GVII– G600 airplanes. This proposed AD was prompted by a report that a failure mode SUMMARY: E:\FR\FM\23FEP1.SGM 23FEP1

Agencies

[Federal Register Volume 86, Number 34 (Tuesday, February 23, 2021)]
[Proposed Rules]
[Pages 10872-10875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01400]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / 
Proposed Rules

[[Page 10872]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 702

RIN 3133-AF21


Risk-Based Net Worth--COVID-19 Regulatory Relief

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: The NCUA Board (Board) is issuing this proposal to raise the 
asset threshold for defining a credit union as ``complex'' for purposes 
of being subject to any risk-based net worth requirement in the NCUA's 
regulations. The proposed rule would amend the NCUA's regulations to 
provide that any risk-based net worth requirement will be applicable 
only to a federally insured natural-person credit union (credit union) 
with quarter-end assets that exceed $500 million and a risk-based net 
worth requirement that exceeds six percent. The COVID-19 pandemic has 
created a vital need for financial institutions, including credit 
unions, to provide access to responsible credit and other member 
services to support consumers. Implementing this regulatory change in 
advance of January 1, 2022, the effective date of the 2015 final risk 
based capital (RBC) rule issued by the NCUA, would provide necessary 
capital relief to a significant number of credit unions without 
substantially decreasing the safety and soundness of credit unions or 
the National Credit Union Share Insurance Fund (NCUSIF).

DATES: Comments must be received on or before March 25, 2021.

ADDRESSES: You may submit written comments, identified by RIN 3133-
AF21, by any of the following methods (Please send comments by one 
method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Fax: (703) 518-6319. Include ``[Your Name]--Comments on 
Risk-Based Net Worth--COVID-19 Regulatory Relief'' in the transmittal.
     Mail: Address to Melane Conyers-Ausbrooks, Secretary of 
the Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
    Public Inspection: You may view all public comments on the Federal 
eRulemaking Portal at http://www.regulations.gov as submitted, except 
for those we cannot post for technical reasons. The NCUA will not edit 
or remove any identifying or contact information from the public 
comments submitted. Due to social distancing measures in effect, the 
usual opportunity to inspect paper copies of comments in the NCUA's law 
library is not currently available. After social distancing measures 
are relaxed, visitors may make an appointment to review paper copies by 
calling (703) 518-6540 or emailing [email protected].

FOR FURTHER INFORMATION CONTACT: Policy and Analysis: Kathryn Metzker, 
Risk Management Division, Office of Examination and Insurance, at (571) 
438-0073; Legal: Thomas Zells, Staff Attorney, Office of General 
Counsel, at (703) 518-6540; Rachel Ackmann, Senior Staff Attorney, 
Office of General Counsel, at (703) 548-2601; or by mail at: National 
Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 
22314.

SUPPLEMENTARY INFORMATION: 

I. Introduction
II. Legal Authority
III. The Proposed Rule
IV. Impact of the Proposed Rule
V. Regulatory Procedures

I. Introduction

    In 1998, Congress enacted the Credit Union Membership Access Act 
(CUMAA).\1\ Section 301 of CUMAA added section 216 to the Federal 
Credit Union Act (FCU Act),\2\ which required the Board to adopt by 
regulation a system of prompt corrective action (PCA) to restore the 
net worth of credit unions that become inadequately capitalized. The 
purpose of section 216 of the FCU Act is to ``resolve the problems of 
[federally] insured credit unions at the least possible long-term loss 
to the [NCUSIF].'' \3\ To carry out that purpose, Congress set forth a 
basic structure for PCA in section 216 that consists of three principal 
components: (1) A framework combining mandatory actions prescribed by 
statute with discretionary actions developed by the NCUA; (2) an 
alternative system of PCA to be developed by the NCUA for credit unions 
defined as ``new;'' and (3) a risk-based net worth requirement to apply 
to credit unions the NCUA defines as ``complex.''
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    \1\ Public Law 105-219, 112 Stat. 913 (1998).
    \2\ 12 U.S.C. 1790d.
    \3\ 12 U.S.C. 1790d(a)(1).
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    The Board initially implemented the required system of PCA in 
2000,\4\ primarily in part 702 of the NCUA's regulations, and most 
recently made substantial updates to the regulation in October 2015 \5\ 
and October 2018.\6\ The risk-based net worth requirement for credit 
unions meeting the definition of ``complex'' was first applied on the 
basis of data in the Call Report reflecting activity in the first 
quarter of 2001.\7\ The NCUA's risk-based net worth requirement has 
been largely unchanged since its implementation, with limited 
exceptions.\8\ Currently, the NCUA defines a credit union as complex 
and thus subject to the requirement only if the credit union has 
quarter-end assets that exceed $50 million and its risk-based net worth 
requirement exceeds six percent.\9\
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    \4\ 12 CFR part 702; see also 65 FR 8584 (Feb. 18, 2000) and 65 
FR 44950 (July 20, 2000).
    \5\ 80 FR 66626 (Oct. 29, 2015).
    \6\ 83 FR 55467 (Nov. 6, 2018).
    \7\ 65 FR 44950 (July 20, 2000).
    \8\ The NCUA's risk-based net worth requirement has been largely 
unchanged since its implementation, with limited exceptions: 
Revisions were made to the rule in 2003 to amend the risk-based net 
worth requirement for member business loans, 68 FR 56537 (Oct. 1, 
2003); revisions were made to the rule in 2008 to incorporate a 
change in the statutory definition of ``net worth,'' 73 FR 72688 
(Dec. 1, 2008); revisions were made to the rule in 2011 to expand 
the definition of ``low-risk assets'' to include debt instruments on 
which the payment of principal and interest is unconditionally 
guaranteed by the NCUA, 76 FR 16234 (Mar. 23, 2011); revisions were 
made in 2013 to exclude credit unions with total assets of $50 
million or less from the definition of ``complex'' credit union, 78 
FR 4033 (Jan. 18, 2013); and amendments were made in April 2020 to 
define loans made by credit unions under the Small Business 
Administration's Paycheck Protection Program as ``low-risk assets,'' 
85 FR 23212 (Apr. 27, 2020).
    \9\ 12 CFR 702.103.
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    As described more fully below, while the risk-based net worth 
requirement remains in place, the NCUA has issued multiple final rules 
to implement a requirement that utilizes an RBC ratio to replace the 
current requirement. The

[[Page 10873]]

RBC requirement is based on the same provisions in the FCU Act, but 
uses different terminology and standards to distinguish it from the 
current risk-based net worth requirement. However, the effective date 
of the RBC amendments has been delayed until January 1, 2022, and the 
rule is currently undergoing a holistic review as part of that delay. 
Further, and of particular relevance to this proposed rule, the 
prospective RBC requirement applies only if a credit union's quarter-
end total assets exceed $500 million, whereas the current risk-based 
net worth requirement applies if a credit union has quarter-end assets 
that exceed $50 million and its risk-based net worth requirement, as 
calculated under current part 702, exceeds six percent.
    As noted, at its October 2015 meeting, the Board issued a final 
rule (2015 Final Rule) to amend part 702 of the NCUA's current PCA 
regulations to require that credit unions taking certain risks hold 
capital commensurate with those risks.\10\ The RBC provisions of the 
2015 Final Rule applied only to credit unions with quarter-end total 
assets exceeding $100 million. The overarching intent of the 2015 Final 
Rule was to reduce the likelihood that a relatively small number of 
high-risk outlier credit unions would exhaust their capital and cause 
large losses to the NCUSIF. Under the FCU Act, federally insured credit 
unions are collectively responsible for replenishing losses to the 
NCUSIF.\11\
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    \10\ 80 FR 66626 (Oct. 29, 2015).
    \11\ See 12 U.S.C. 1782(c)(2)(A) (The FCU Act requires that each 
federally insured credit union pay a Federal share insurance premium 
equal to a percentage of the credit union'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 liquidation or threatened liquidation of 
federally insured credit unions in troubled condition.).
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    The 2015 Final Rule restructures the NCUA's current PCA regulations 
and makes various revisions, including amending the agency's risk-based 
net worth requirement by replacing it with a new RBC ratio. The Board 
originally set the effective date of the 2015 Final Rule for January 1, 
2019 to provide credit unions and the NCUA with sufficient time to make 
the necessary adjustments--such as systems, processes, and procedures--
and to reduce the burden on affected credit unions.
    At its October 2018 meeting, the Board issued a final rule (2018 
Supplemental Rule) to delay the effective date of the 2015 Final Rule 
for an additional year, moving the effective date from January 1, 2019 
to January 1, 2020.\12\ Importantly, the 2018 Supplemental Rule also 
amended the definition of ``complex'' credit union, adopted in the 2015 
Final Rule for RBC purposes, by increasing the threshold level for 
coverage from $100 million to $500 million. Therefore, only credit 
unions with over $500 million in assets will be subject to the 2015 
Final Rule.\13\ These changes provided these covered credit unions and 
the NCUA with additional time to prepare for the rule's implementation, 
and exempted an additional 1,026 credit unions from the RBC 
requirements of the 2015 Final Rule without subjecting the NCUSIF to 
undue risk.
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    \12\ 83 FR 55467 (Nov. 6, 2018).
    \13\ The risk-based net worth requirement currently in effect 
applies to a credit union only if it has quarter-end assets that 
exceed $50 million and its risk-based net worth requirement exceeds 
six percent.
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    In December 2019, the Board issued a final rule (2019 Supplemental 
Rule) to further delay the effective date of the 2015 Final Rule an 
additional two years, until January 1, 2022.\14\ The Board issued the 
2019 Supplemental Rule to allow the Board more time to holistically and 
comprehensively evaluate capital standards for credit unions \15\ and 
provide covered credit unions and the NCUA with additional time to 
prepare for the 2015 Final Rule's implementation.
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    \14\ 84 FR 68781 (Dec. 17, 2019).
    \15\ The final rule provided several examples of issues the 
Board would consider during the delay, including asset 
securitization, subordinated debt, and a community bank leverage 
ratio analog.
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    Under the 2019 Supplemental Rule, the NCUA's current PCA regulation 
remains in effect until the 2015 Final Rule's amended effective date, 
January 1, 2022. The NCUA has enforced, and will continue to enforce, 
the capital standards currently in place and address any supervisory 
concerns through existing regulatory and supervisory mechanisms. Until 
that amended effective date, a credit union that would be exempted from 
any future RBC requirement because it does not have over $500 million 
in total assets remains subject to the current risk-based net worth 
requirement if it has over $50 million in total assets and a risk-based 
net worth requirement that exceeds six percent. The Board now believes 
that this is an unnecessary restriction and is proposing to increase 
the threshold for defining a complex credit union for purposes of the 
current risk-based net worth requirement to $500 million to match the 
prospective RBC requirement while retaining the requirement that a 
credit union's risk-based net worth requirement also exceeds six 
percent. This capital relief would enable credit unions to provide 
better service and more loans to their members.

II. Legal Authority

    As discussed above, in 1998, Congress enacted CUMAA.\16\ Section 
301 of CUMAA added section 216 to the FCU Act,\17\ which required the 
Board to adopt by regulation a system of PCA to restore the net worth 
of credit unions that become inadequately capitalized.\18\ Section 
216(b)(1)(A) requires the Board to adopt by regulation a system of PCA 
for credit unions ``consistent with'' section 216 of the FCU Act and 
``comparable to'' section 38 of the Federal Deposit Insurance Act (FDI 
Act).\19\ Section 216(b)(1)(B) requires that the Board, in designing 
the PCA system, also take into account the ``cooperative character of 
credit unions'' (i.e., credit unions are not-for-profit cooperatives 
that do not issue capital stock, must rely on retained earnings to 
build net worth, and have boards of directors that consist primarily of 
volunteers).\20\ Among other things, section 216(c) of the FCU Act 
requires the NCUA to use a credit union's net worth ratio to determine 
its classification among five ``net worth categories'' set forth in the 
FCU Act.\21\ Section 216(o) generally defines a credit union's ``net 
worth'' as its retained earnings balance,\22\ and a credit union's 
``net worth ratio,'' as the ratio of its net worth to its total 
assets.\23\ As a credit union's net worth ratio declines, so does its 
classification among the five net worth categories, thus subjecting it 
to an expanding range of mandatory and discretionary supervisory 
actions under PCA.\24\
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    \16\ Public Law 105-219, 112 Stat. 913 (1998).
    \17\ 12 U.S.C. 1790d.
    \18\ The risk-based net worth requirement for credit unions 
meeting the definition of ``complex'' was first applied on the basis 
of data in the Call Report reflecting activity in the first quarter 
of 2001. 65 FR 44950 (July 20, 2000).
    \19\ 12 U.S.C. 1790d(b)(1)(A); see also 12 U.S.C. 1831o (Section 
38 of the FDI Act setting forth the PCA requirements for banks).
    \20\ 12 U.S.C. 1790d(b)(1)(B).
    \21\ 12 U.S.C. 1790d(c).
    \22\ 12 U.S.C. 1790d(o)(2).
    \23\ 12 U.S.C. 1790d(o)(3).
    \24\ 12 U.S.C. 1790d(c)-(g); 12 CFR 702.204(a)-(b).
---------------------------------------------------------------------------

    Section 216(d)(1) of the FCU Act requires that the NCUA's system of 
PCA include, in addition to the statutorily defined net worth ratio 
requirement applicable to credit unions, ``a risk-based net worth \25\ 
requirement for

[[Page 10874]]

insured credit unions that are complex, as defined by the Board.'' \26\ 
The FCU Act directs the NCUA to base its definition of ``complex'' 
credit unions ``on the portfolios of assets and liabilities of credit 
unions.'' \27\ It also requires the NCUA to design a risk-based net 
worth requirement to apply to such ``complex'' credit unions.\28\
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    \25\ For purposes of this rulemaking, the term ``risk-based net 
worth requirement'' is used in reference to the statutory 
requirement for the Board to design a capital standard that accounts 
for variations in the risk profile of complex credit unions. The 
term RBC is used to refer to the specific standards established in 
the 2015 Final Rule to function as criteria for the statutory risk-
based net worth requirement. The term ``risk-based capital ratio'' 
is also used by the other Federal banking agencies and the 
international banking community when referring to the types of risk-
based requirements that are addressed in the 2015 Final Rule. This 
change in terminology has no substantive effect on the requirements 
of the FCU Act, and is intended only to reduce confusion for the 
reader.
    \26\ 12 U.S.C. 1790d(d)(1).
    \27\ 12 U.S.C. 1790d(d).
    \28\ Id.
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    In addition to the specific regulatory authority provided to the 
NCUA by the above-referenced statutory provisions of the FCU Act, the 
FCU Act also grants the NCUA broad plenary rulemaking authority.

III. The Proposed Rule

    The COVID-19 pandemic has created a vital need for financial 
institutions, including credit unions, to provide access to responsible 
credit and other member services to support consumers. The Board is 
working with Federal and state regulatory agencies, in addition to 
credit unions, to assist credit unions in managing their operations and 
to facilitate continued assistance to credit union members and 
communities impacted by the coronavirus. As part of these ongoing 
efforts, the Board is proposing to raise the asset threshold for 
defining a credit union as ``complex'' for purposes of the current 
risk-based net worth requirement. Under the proposal, any risk-based 
net worth requirement would be applicable to only a credit union with 
quarter-end assets that exceed $500 million whose risk-based net worth 
requirement also exceeds six percent. This would remain in place until 
the effective date of the above-referenced RBC rule. The Board believes 
that this increase would provide necessary relief to a significant 
number of credit unions and their members without substantially 
increasing the risk to credit unions or the NCUSIF, consistent with the 
NCUA's responsibility to maintain the safety and soundness of the 
credit union system.
    The NCUA seeks to strike the appropriate balance between providing 
for the safety and soundness of the credit union industry, while not 
restricting credit union activities by requiring a credit union to hold 
excessive levels of capital. Requiring a credit union to hold excess 
capital above what is necessary to account for risk limits its ability 
to increase lending or provide necessary services to members. 
Specifically, potential consequences of the higher capital requirements 
include: Reduced or higher-cost lending, limited products, higher 
compliance cost, and increased merger activity.
    In 2018, the NCUA determined that increasing the applicability 
threshold for RBC to $500 million did not pose undue risk to the NCUSIF 
because credit unions with assets greater than $500 million account for 
the majority of industry assets (both total assets and complex assets, 
as explained below). Based on September 30, 2020 data, credit unions 
with assets between $50 million and $500 million account for 15.9 
percent of industry assets and 33.8 percent of credit unions. The 
average asset size of a credit union in this cohort is $164 million. 
Conversely, credit unions with assets greater than $500 million account 
for 81.6 percent of industry assets and only 12.4 percent of total 
credit unions. Therefore, raising the risk-based net worth requirement 
threshold to $500 million would still cover the majority of assets in 
the credit union system and not pose undue risk to the NCUSIF for the 
same reasons that the Board found in the 2018 Supplemental Rule. In the 
2015 Final Rule and 2018 Supplemental Rule, the NCUA determined a 
credit union was complex by evaluating whether its portfolios of assets 
and liabilities were complex based on the products and services in 
which such credit unions engaged. An asset size threshold was developed 
as a proxy measure based on a detailed analysis performed by the 
NCUA.\29\ The threshold set forth a clear demarcation line, above which 
the NCUA determined all credit unions engaged in complex activities, 
and where almost all such credit unions were involved in multiple 
complex activities.
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    \29\ See the 2015 Final Rule and 2018 Supplemental Rule for 
reasons the NCUA believes a single asset-size threshold is 
appropriate for determining whether a credit union is complex for 
purposes of prompt corrective action. See 80 FR 66626 (Oct. 29, 
2015) and 83 FR 55467 (Nov. 6, 2018).
---------------------------------------------------------------------------

    The asset threshold adopted in the 2015 Final Rule and revised in 
the 2018 Supplemental Rule for determining whether a credit union is 
complex was based on a complexity index.\30\ The 2018 Supplemental Rule 
also used a complexity ratio, a ratio of complex assets and liabilities 
to total assets, to evaluate the extent to which credit unions are 
involved in complex activities. The 2018 Supplemental Rule noted that 
of the $497 billion in complex assets and liabilities in the credit 
union system, $423 billion (85 percent)--the majority of complex assets 
and liabilities in the credit union system--are held among credit 
unions with more than $500 million in assets.\31\ In general, two-
thirds of credit unions with more than $500 million in total assets had 
complex assets and liabilities ratios above 30 percent. Only 11 percent 
of credit unions with less than $500 million had complexity ratios 
above 30 percent.
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    \30\ The 2015 Final Rule and 2018 Supplemental Rule both used a 
complexity index, however the original complexity index used in the 
2015 Final Rule was amended in the 2018 Supplemental Rule. The 2018 
Supplemental Rule used a revised complexity index that amended six 
of the indicators in the original complexity index so the index more 
accurately reflected ``complexity'' in credit unions and took into 
account certain regulatory changes that were made after the 2015 
Final Rule was approved.
    \31\ This was based on available data at the time of the 2018 
Supplemental Rule.
---------------------------------------------------------------------------

    Using both the revised complexity index and the complexity ratio, 
the 2018 Supplemental Rule noted the $500 million threshold for 
defining complex credit unions would not represent undue risk to the 
NCUSIF as approximately 76 percent of the assets held by federally 
insured credit unions would still be covered. As noted above, credit 
unions with assets above $500 million represent 81.6 percent of 
industry assets as of September 30, 2020.
    The Board believes this change would provide relief to many credit 
unions and help to maintain confidence in the system of cooperative 
credit, consistent with the NCUA's mission.

IV. Impact of the Proposed Rule

    Increasing the complexity threshold to $500 million would provide 
potential relief to 1,737 credit unions. While all complex credit 
unions meet their risk-based net worth requirement as of September 30, 
2020, because their net worth ratio exceeds their risk-based net worth 
requirement, immediate capital relief can be provided to some of these 
credit unions. As shown in Table 1, there are 94 complex credit unions 
with assets totaling $66 billion which are required to hold capital 
above 7 percent to be well capitalized based on their risk-based net 
worth requirement. Of the 94 credit unions, 67 have assets less than 
$500 million and would no longer be required to hold more capital to 
remain well capitalized. Additionally, increasing the complexity 
threshold now rather than when the 2015 Final Rule goes into effect 
will not pose

[[Page 10875]]

undue risk to the NCUSIF as the 67 credit unions provided relief 
represent less than 1 percent of industry assets.

          Table 1--Complex Credit Unions With a Risk Based Net Worth Requirement Greater Than 7 Percent
----------------------------------------------------------------------------------------------------------------
                                                                                                    Percent of
                         Asset category                              Number of     Total assets      industry
                                                                   credit unions     (million)        assets
----------------------------------------------------------------------------------------------------------------
Assets >$50M \32\...............................................              94           $66.0             3.7
Assets >$500M \33\..............................................              27            54.6             3.1
$50M< Assets <$500M.............................................              67            11.4             0.6
----------------------------------------------------------------------------------------------------------------

    Therefore, this proposed rule would provide immediate relief for 
the 67 credit unions that must currently manage their capital levels to 
a risk-based net worth requirement above seven percent.\34\ 
Additionally, it would also provide relief to all credit unions with 
assets between $50 million and $500 million, which would be able to 
expand their portfolios and simply manage their capital levels to meet 
the seven percent leverage requirement to be well capitalized.
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    \32\ This reflects the current threshold for complex credit 
unions.
    \33\ This reflects the proposed threshold for complex credit 
unions.
    \34\ This would reduce the amount of capital they are required 
to hold to be well capitalized by $82 million in aggregate, based on 
September 30, 2020 data.
---------------------------------------------------------------------------

    The NCUA invites comments on all aspects of the proposal.\35\
---------------------------------------------------------------------------

    \35\ Because of the straightforward nature of the proposed 
change and the extensive comment period offered on the various RBC 
rulemakings, the Board is not providing the usual 60-day comment 
period. See NCUA Interpretive Ruling and Policy Statement (IRPS) 87-
2, as amended by IRPS 03-2 and IRPS 15-1. 80 FR 57512 (Sept. 24, 
2015), available at https://www.ncua.gov/files/publications/irps/IRPS1987-2.pdf.
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V. Regulatory Procedures

A. Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a notice of proposed rulemaking, an agency prepare and 
make available for public comment an initial regulatory flexibility 
analysis that describes the impact of a proposed rule on small 
entities. A regulatory flexibility analysis is not required, however, 
if the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA to include federally insured credit unions with 
assets less than $100 million) and publishes its certification and a 
short, explanatory statement in the Federal Register together with the 
rule. The proposed rule would only exempt additional credit unions from 
any risk-based net worth requirement in part 702 of the NCUA's 
regulations applicable to complex credit unions. As a result, it will 
not cause any increased burden on credit unions and will not have an 
impact on small credit unions. Accordingly, the NCUA certifies that the 
proposed rule will not have a significant economic impact on a 
substantial number of small credit unions.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or modifies an existing burden (44 U.S.C. 3507(d)). For 
purposes of the PRA, a paperwork burden may take the form of a 
reporting, recordkeeping, or a third-party disclosure requirement, 
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 valid Office of Management 
and Budget (OMB) control number. This proposed rule contains no 
provisions constituting a collection of information under the Paperwork 
Reduction Act of 1995 (44 U.S.C. et seq.).

C. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. 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.
    This proposed rule would 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 proposed rule does not constitute a policy that has federalism 
implications for purposes of the Executive order.

D. 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 in 12 CFR Part 702

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the NCUA Board on January 14, 2021.
Melane Conyers-Ausbrooks,
Secretary of the Board.

    For the reasons discussed in the preamble, the Board proposes to 
amend part 702 of chapter VII of title 12 of the Code of Federal 
Regulations as follows:

PART 702--CAPITAL ADEQUACY

0
1. The authority citation for part 702 continues to read as follows:

    Authority:  12 U.S.C. 1766(a), 1790d.


Sec.  702.103   [Amended]

0
2. Amend Sec.  702.103(a) by removing the words ``fifty million dollars 
($50,000,000)'' and add in their place ``five hundred million dollars 
($500,000,000).''

[FR Doc. 2021-01400 Filed 2-22-21; 8:45 am]
BILLING CODE 7535-01-P