CAMELS Rating System, 13494-13498 [2021-01396]
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13494
Proposed Rules
Federal Register
Vol. 86, No. 44
Tuesday, March 9, 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 Parts 700, 701, 703, 704, and
713
RIN 3133–AF32
CAMELS Rating System
National Credit Union
Administration (NCUA).
ACTION: Proposed rule with request for
comments.
AGENCY:
The Board is proposing to add
the ‘‘S’’ (Sensitivity to Market Risk)
component to the existing CAMEL
rating system and redefine the ‘‘L’’
(Liquidity Risk) component, thus
updating the rating system from CAMEL
to CAMELS. The proposal to add the
‘‘S’’ component will enhance
transparency and allow the NCUA, State
Supervisory Authorities, and federally
insured credit unions to better
distinguish between liquidity risk (‘‘L’’)
and sensitivity to market risk (‘‘S’’). The
amendment would also enhance
consistency between the regulation of
credit unions and other financial
institutions. The Board is proposing to
implement the addition of the ‘‘S’’
rating component and a redefined ‘‘L’’
rating as early as the first quarter of
2022.
SUMMARY:
Comments must be received on
or before May 10, 2021.
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: Send messages to
regcomments@ncua.gov. Use the subject
line: ‘‘[Your name] Comments on Notice
of Proposed Rulemaking Regarding
CAMELS Rating System.’’
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DATES:
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• Fax: (703) 518–6319. Include
‘‘[Your name] Comments on Notice of
Proposed Rulemaking Regarding
CAMELS Rating System’’ on the cover
page.
• USPS/Hand Delivery/Courier:
Address to Melane Conyers-Ausbrooks,
Secretary of the Board, National Credit
Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314–
3428.
Public Inspection: All public
comments will be made available on the
NCUA’s website (https://www.ncua.gov/
Legal/Regs/Pages/PropRegs.aspx) 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.
FOR FURTHER INFORMATION CONTACT:
Thomas Fay, Director of Capital Markets
at (703) 518–1179 or Robert Bruneau,
Senior Capital Markets Specialist at 703
945–2491, Office of Examination and
Insurance, or Marvin Shaw, Staff
Attorney Office of General Counsel at
(703) 518–6554.
SUPPLEMENTARY INFORMATION:
I. Background
The NCUA adopted its current rating
system, known as CAMEL, in 1987.1
The current CAMEL rating is based
upon an evaluation of five critical
elements of a credit union’s operations:
Capital adequacy, asset quality,
management, earnings, and liquidity
and asset-liability management. CAMEL
is designed to take into account and
reflect all significant financial,
operational, and management factors
examiners assess in their evaluation of
a credit union’s performance and risk
profile.
Under this system, the NCUA assigns
each credit union a composite CAMEL
rating based on the agency’s evaluation
and rating of five components of an
institution’s financial condition and
operations. As specified in the 2007
Letter to Credit Unions,2 these
components address a credit union’s:
• Capital adequacy;
• Asset quality;
• Management;
• Earnings; and
1 NCUA Letter No. 93. Letter to Credit Unions,
(September 25, 1987).
2 NCUA Letter to Credit Unions 07–CU–12 (Dec.
2007).
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• Liquidity and asset liability
management.
Examiners assign composite and
component CAMEL ratings using a scale
that ranges from ‘‘1’’ to ‘‘5.’’ The highest
rating is a ‘‘1,’’ indicating the strongest
performance and risk management
practices, and the least degree of
supervisory concern. The lowest rating
is a ‘‘5,’’ indicating the weakest
performance, inadequate risk
management practices, and the highest
degree of supervisory concern. When
evaluating these components, examiners
use their professional judgement and
consider both qualitative and
quantitative factors when analyzing a
credit unions performance.
In 1997, members of the Federal
Financial Institution Examination
Council (FFIEC),3 with the exception of
the NCUA, proposed and subsequently
adopted revisions to the Uniform
Financial Institutions Rating System
(UFIRS) and a Policy Statement that
reaffirmed the five CAMEL rating
system components and added a sixth
component, Sensitivity to Market Risk
(‘‘S’’), to address price and interest rate
risks (IRR).4 The NCUA opted not to use
the ‘‘S’’ component and retained its
existing CAMEL rating system based on
the relative lack of complexity in the
consolidated balance sheets of credit
unions at the time. However, since
1997, credit unions have increased in
size and complexity by significantly
increasing their mortgage-related assets
from 19 percent of total assets to 42
percent at September 2020.
The NCUA has made several pertinent
modifications to the CAMEL rating
system since 1997. These involve
changes to financial ratios,5 adding and
subsequently eliminating a CAMEL
matrix,6 accommodating the adoption of
Prompt Corrective Action (PCA),7 and
3 At the time, the FFIEC was comprised of the
Federal Deposit Insurance Corporation (FDIC), the
Board of Governors of the Federal Reserve (Federal
Reserve), and the Office of Comptroller of the
Currency (OCC), the NCUA, and the Office of Thrift
Supervision (OTS). OTS merged into OCC as a
result of the Dodd Frank Wall Street Reform and
Consumer Protection Act. See Section 312 of Public
Law 111–203.
4 62 FR 752, (Jan. 6, 1997).
5 Letter to Credit Unions 00–CU–08 (Nov. 2000).
6 NCUA Letter to Credit Unions 07–CU–12 (Dec.
2007).
7 In 1998, Congress enacted the Credit Union
Membership Access Act (‘‘CUMAA’’). (Pub. L. 105–
219, 112 Stat. 913 (1998). CUMAA amended the
Federal Credit Union Act (‘‘the Act’’) to require the
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incorporating the NCUA’s risk-focused
exam approach.8
As balance sheets of credit unions
have become larger and more complex,
the NCUA consistently provided
supervision and guidance regarding
exposures to market risk to the credit
union industry. The NCUA also advised
credit unions that IRR was a supervisory
priority from 2012 through 2019.
Since 2012, the Board implemented
regulations that introduced standards
and expectations affecting examiner
procedures and the NCUA’s IRR
assessment requirements. The NCUA’s
IRR rule became effective for credit
unions in September 2012.9 The rule
requires credit unions that have more
than $50 million in assets to maintain
a written IRR policy and an effective
risk management program. The NCUA
also finalized its derivatives rule in
April 2014 providing authority for
qualified federal credit unions to use
financial derivatives to conduct hedging
activities to better optimize their
interest rate risk management.10
The NCUA also implemented its
revised IRR supervision program in
January 2017 11 incorporating the
regulatory requirements from parts 741
(IRR) and 703 (derivatives), enhancing
examiner guidance, improving the
consistency of IRR ratings, and to
identify outlier credit unions with
excessive risk levels.
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II. Rationale for Proposed Rule
The NCUA’s existing CAMEL rating
process addresses both sensitivity to
market risk and liquidity risk within the
‘‘L’’ component.12 While there is an
interrelationship between sensitivity to
market risk and liquidity risk, there are
also differences that support separating
the risks into distinct components. The
proposed rule would enhance the
existing CAMEL rating system by
adding an ‘‘S’’ component to assess
sensitivity to market risk and modify the
‘‘L’’ component to include only
liquidity evaluation content and rating
criteria.
Adding an ‘‘S’’ component and
modifying the ‘‘L’’ component will
provide greater clarity and transparency
NCUA to adopt, by regulation, a system of prompt
corrective action (PCA) consisting of minimum
capital standards and corresponding remedies to
improve the net worth of federally-insured ‘‘natural
person’’ credit unions.
8 NCUA Letter to Credit Unions –03–CU–04
(March 2003).
9 77 FR 5155 (Feb. 2, 2012).
10 79 FR 5228 (Jan 31, 2014).
11 Revised Interest Rate Risk Supervision √
National Credit Union Administration (ncua.gov)
16–CU–08/October 2016.
12 NCUA Letter to Credit Unions 07–CU–12,
CAMEL Rating System. (Dec. 2007).
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regarding credit unions’ sensitivity to
market risk and liquidity risk exposures.
The proposed addition would make the
NCUA’s rating system more consistent
with the other financial institution
regulators’ ratings system both at the
federal and state levels.13
Separating the ‘‘S’’ and ‘‘L’’
component ratings will allow NCUA to
enhance the:
• Monitoring of sensitivity to market
risk and liquidity risk in the credit
union system;
• Communication of specific
concerns to individual credit unions;
and
• Allocation of resources.
Evaluating, rating, and disclosing
assessments of interest rate and
liquidity risks to credit union
management is a long-standing
examination procedure at the NCUA.
The proposed change to add the ‘‘S’’
provides greater transparency into the
NCUA’s evaluation and conclusions
regarding these two risks.
In 2015, the NCUA Office of Inspector
General (OIG) recommended the
addition of an ‘‘S’’ component to better
capture a credit union’s sensitivity to
market risk and improve clarity and
transparency in the CAMEL rating
system.14 The NCUA OIG also
recommended the NCUA revise its ‘‘L’’
component rating to reflect only
liquidity factors.
Also in 2015, the NCUA initiated a
comprehensive restructuring of its
supervision activities through the
Enterprise Solution Modernization
program (ESM). The ESM is a multi-year
introduction of emerging and secure
technology solutions supporting the
NCUA’s examination, data collection,
and reporting efforts to improve key,
integrated business processes. The
NCUA planned the implementation of
the OIG’s 2015 CAMELS
recommendations as part of the
development of a new examination
platform, known as the Modern
Examination and Risk Identification
Tool, or MERIT. The NCUA anticipates
completing the transition from its legacy
examination software to MERIT (which
has been configured to support the ‘‘S’’
in ‘‘CAMELS’’) in 2021. Other revisions
to examiner supervision guidance and
procedures will also be updated as part
of the transition.
In general, the NCUA Board expects
that adopting a sixth CAMELS rating
13 The banking regulators (Federal Reserve, FDIC,
and OCC) each include the ‘‘S’’ component to
evaluate sensitivity to market place risk. In
addition, 24 state supervisory authorities adopted
the ‘‘S’’ component.
14 OIG–15–11 Review of NCUA’s Interest Rate
Risk Program.
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component will not have any adverse
effect on a credit union’s CAMEL
composite rating. The proposed
separation of sensitivity to market risk
and liquidity risk into individual
CAMELS rating components will reduce
potential rating inconsistencies.
Currently, examiners combine the risk
evaluation of these related, but separate,
risk areas into the ‘‘L’’ component. The
separation into two components
provides greater clarity of the
assessment of each risk area. The Board
anticipates the agency can make this
transition smoothly and without
significant disruption to the exam
process or agency operations as early as
the first quarter of 2022.
III. Summary of the Proposed Rule
The Board is proposing to add the ‘‘S’’
component to the existing CAMEL
rating system and redefine the current
‘‘L’’ component. Evaluation of these as
individual components will enhance the
communication and monitoring of
credit unions’ sensitivity to market risk
and liquidity risk. The Board is
requesting comments on this proposal,
such as, but not limited to, the
definitions of both the ‘‘L’’ and ‘‘S’’
components and the criteria for each of
the specific 1–5 assigned ratings. For
example, the Board may consider
modifying the rating descriptions used
for the ‘‘L’’ and ‘‘S’’ ratings used by the
other banking agencies rating system
(The Uniform Financial Institutions
Rating System (UFIRS)), detailed below
in Sections IIA and IIB of this
proposal.15
A. ‘‘S’’ Component for Sensitivity to
Market Risk
The sensitivity to market risk reflects
the exposure of a credit union’s current
and prospective earnings level and
economic capital position arising from
changes in market prices and the
general level of interest rates. Effective
risk management programs include
comprehensive interest rate risk
policies, appropriate and identifiable
risk limits, clearly defined risk
mitigation strategies, and a suitable
governance framework.
Sensitivity to Market Risk ratings are
based on, but not limited to, the
following evaluation factors:
• Sensitivity of a credit union’s
current and future earnings and
economic value of capital to adverse
changes in market prices and interest
rates;
• Management’s ability to identify,
measure, monitor, and control exposure
15 https://www.fdic.gov/regulations/laws/rules/
5000-900.html.
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• The nature and complexity of
interest rate risk exposure.
Examiners will rate a credit union’s
‘‘S’’ CAMELS rating component on a
to market risk considering a credit
union’s size, complexity, and risk
profile; and
‘‘S’’ rating
Description
1 ........................
• Market risk sensitivity is well controlled and that there is minimal potential that the earnings performance or capital position
will be adversely affected;
• Risk management practices are strong for the size, sophistication, and market risk accepted by the institution; and
• The level of earnings and capital provide substantial support for the degree of market risk taken by the institution.
• Market risk sensitivity is adequately controlled and that there is only moderate potential that the earnings performance or
capital position will be adversely affected;
• Risk management practices are satisfactory for the size, sophistication, and market risk accepted by the institution; and
• The level of earnings and capital provide adequate support for the degree of market risk taken by the institution.
• Control of market risk sensitivity needs improvement or that there is significant potential that the earnings performance or
capital position will be adversely affected;
• Risk management practices need to be improved given the size, sophistication, and level of market risk accepted by the institution; and
• The level of earnings and capital may not adequately support the degree of market risk taken by the institution.
• Control of market risk sensitivity is unacceptable or that there is high potential that the earnings performance or capital position will be adversely affected;
• Risk management practices are deficient for the size, sophistication, and level of market risk accepted by the institution;
and
• The level of earnings and capital provide inadequate support for the degree of market risk taken by the institution.
• Control of market risk sensitivity is unacceptable or that the level of market risk taken by the institution is an imminent
threat to its viability; and
• Risk management practices are wholly inadequate for the size, sophistication, and level of market risk accepted by the institution.
2 ........................
3 ........................
4 ........................
5 ........................
The Board also requests comments on
the proposal to describing the ‘‘L’’
component and the criteria used in
determining the 1–5 assigned ratings.
B. ‘‘L’’ Component for Liquidity Risk
In evaluating the adequacy of a credit
union’s liquidity profile, examiners
consider the current and prospective
sources of liquidity compared to
funding needs and the adequacy of
liquidity risk management relative to a
credit union’s size, complexity, and risk
profile. A credit union’s liquidity risk
management practices should ensure
the credit union maintains sufficient
liquidity to timely meet its financial
obligations and member share and loan
demands. These practices should reflect
the credit union’s ability to manage
unplanned changes in funding sources,
changes in market conditions affecting
its ability to quickly liquidate assets
with minimal loss, ensure liquidity is
maintained at a reasonable cost and
limit reliance on funding sources that
may not be available in times of
financial stress or adverse changes in
market conditions.
A credit union’s liquidity risk
management practices should also be
commensurate with the complexity of
the balance sheet and its capital
adequacy. This includes evaluating the
reporting mechanisms in place to
monitor and control risk, management’s
response when risk exposure
approaches or exceeds the credit
union’s risk limits, and the prescribed
corrective action taken when necessary.
Examiners will rate a credit union’s
‘‘L’’ CAMELS rating component on a
scale of ‘‘1’’ to ‘‘5’’ using the same rating
descriptions for ‘‘L’’ as the other
banking agencies.
‘‘L’’ rating
Description
1 ........................
• Strong liquidity levels and well-developed funds management practices; and
• The institution has reliable access to sufficient sources of funds on favorable terms to meet present and anticipated liquidity
needs.
• Satisfactory liquidity levels and funds management practices;
• The institution has access to sufficient sources of funds on acceptable terms to meet present and anticipated liquidity
needs; and
• Modest weaknesses may be evident in funds management practices.
• Liquidity levels or funds management practices in need of improvement; and
• Institutions rated 3 may lack ready access to funds on reasonable terms or may evidence significant weaknesses in funds
management practices.
• Deficient liquidity levels or inadequate funds management practices; and
• Institutions rated 4 may not have or be able to obtain a sufficient volume of funds on reasonable terms to meet liquidity
needs.
• Liquidity levels or funds management practices so critically deficient that the continued viability of the institution is threatened; and
• Institutions rated 5 require immediate external financial assistance to meet maturing obligations or other liquidity needs.
2 ........................
3 ........................
4 ........................
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scale of ‘‘1’’ to ‘‘5’’ using the same rating
descriptions for ‘‘S’’ as the other
banking agencies.
5 ........................
The CAMEL rating system is not set
forth in a separate section or part in the
NCUA’s regulations. Rather, references
to CAMEL appear in several parts in the
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Code of Federal Regulations (CFR).
NCUA regulations regularly refer to
CAMEL composite ‘‘1’’ or ‘‘2’’ rated
credit unions, which indicate the ability
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to safely support additional regulatory
flexibility, or CAMEL composite ‘‘4’’ or
‘‘5’’ rated credit unions, which warrant
increased regulatory scrutiny.
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Proposed Rules
The Board is planning technical
amendments to the following sections in
which the term ‘‘CAMEL’’ appears by
changing the term to ‘‘CAMELS.’’ These
sections include:
• Section 700.2 definition of
‘‘Troubled condition’’
• Section 701.14 Change in official or
senior executive officer in credit
unions that are newly chartered or are
in troubled condition
• Section 701.23 Purchase, sale, and
pledge of eligible obligations
• Section 703.13 Permissible
investment activities
• Section 703.14 Permissible
investments
• Section 703.108 Eligibility
• Section 704.4 Prompt corrective
action
• Section 713.6 Fidelity Bond and
Insurance Coverage for FCUS—What
is the permissible deductible?
In addition to amendments in the
CFR, the Board notes the agency will
modify certain documents and systems
related to its supervisory activities to
reflect the addition of the ‘‘S’’ CAMEL
rating component.
IV. Regulatory Procedures
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A. Regulatory Flexibility Act
The Regulatory Flexibility Act
requires the NCUA to prepare an
analysis to describe any significant
economic impact a regulation may have
on a substantial number of small
entities.16 For purposes of this analysis,
the NCUA considers small credit unions
to be those having under $100 million
in assets.17 This rule would not affect
FCUs regardless of asset size because it
is not adding any substantive
requirement. Accordingly, the
associated cost is minimal. The NCUA
certifies the rule will not have a
significant economic impact on 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.18 For
purposes of the PRA, a paperwork
burden may take the form of either a
reporting or a recordkeeping
requirement, both referred to as
information collections. This proposed
rule imposes no new paperwork-related
requirements. Therefore, this proposed
rule will not create new paperwork
burdens or modify any existing
paperwork burdens.
C. Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests. In adherence to
fundamental federalism principles, the
NCUA, an independent regulatory
agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive
order. This rule will not have a
substantial direct effect on the states, on
the connection between the national
government and the states, or on the
distribution of power and
responsibilities among the various
levels of government. The NCUA has
determined this 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,
1999.19
List of Subjects
U.S.C. 603(a).
17 Interpretive Ruling and Policy Statement
(‘‘IRPS’’) 03–2, 68 FR 31949 (May 29, 2003) as
amended by IRPS 13–1, 78 FR 4032 (Jan. 18, 2013).
18 44 U.S.C. 3507(d); 5 CFR part 1320.
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[Amended]
2. In § 700.2, amend the definition of
‘‘troubled condition’’, by removing the
word, ‘‘CAMEL’’, and adding, in its
place, the word, ‘‘CAMELS’’, wherever
it appears.
■
PART 701—ORGANIZATION AND
OPERATION OF FEDERAL CREDIT
UNIONS
3. The authority citation 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, 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.
§ 701.14
[Amended]
4. Amend § 701.14(b) by removing the
word, ‘‘CAMEL’’, and adding, in its
place, the word, ‘‘CAMELS’’, wherever
it appears.
■
§ 701.23
[Amended]
5. Amend § 701.23(b)(2) by removing
the word, ‘‘CAMEL’’, and adding, in its
place, the word, ‘‘CAMELS.’’
■
PART 703—INVESTMENT AND
DEPOSIT ACTIVITIES
6. The authority citation for part 703
continues to read as follows:
■
12 CFR Part 700
Credit unions.
Authority: 12 U.S.C. 1757(7), 1757(8), and
1757(15).
12 CFR Part 701
Credit unions. Insurance. Reporting
and recordkeeping requirements.
12 CFR Part 703
Credit unions. Investments. Reporting
and recordkeeping requirements.
12 CFR Part 704
§ 703.13
[Amended]
7. Amend § 703.13(d)(3)(iii) by
removing the word, ‘‘CAMEL’’, and
adding, in its place, the word,
‘‘CAMELS.’’
■
§ 703.14
[Amended]
8. Amend § 703.14 by removing the
word, ‘‘CAMEL’’, and adding, in its
place, the word, ‘‘CAMELS’’, wherever
it appears.
■
Corporate Credit Unions, Prompt
Corrective Action.
12 CFR Part 713
Bonds. Credit unions. Insurance.
By the National Credit Union
Administration Board on January 14, 2021
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed above, the
Board proposes to amend 12 CFR parts
700, 701, 703, 704, and 713 as follows:
PART 700—DEFINITIONS
1. The authority citation for part 700
continues to read as follows:
■
16 5
§ 700.2
Authority: 12 U.S.C. 1752, 1757(6), 1766.
PART 704—CORPORATE CREDIT
UNIONS
9. The authority citation for part 704
continues to read as follows:
■
Authority: 12 U.S.C. 1766(a), 1781, 1789.
§ 704.4
[Amended]
10. Amend § 704.4(d)(3)(ii) by
removing the word, ‘‘CAMEL’’, and
adding, in its place, the word,
‘‘CAMELS.’’
■
PART 713—FIDELITY BOND AND
INSURANCE COVERAGE FOR
FEDERAL INSURED CREDIT UNIONS
11. The authority citation for part 713
continues to read as follows:
■
19 Public
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Law 105–277, 112 Stat. 2681 (1998).
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Authority: 12 U.S.C. 1761a, 1761b,
1766(a), 1766(h), 1789(a)(11).
§ 713.6
[Amended]
12. Amend § 713.6 by removing the
word, ‘‘CAMEL’’, and adding, in its
place, the word, ‘‘CAMELS’’, wherever
it appears.
■
[FR Doc. 2021–01396 Filed 3–8–21; 8:45 am]
BILLING CODE 7535–01–P
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Parts 702 and 703
[NCUA–2021–0010]
RIN 3133–AF35
Simplification of Risk Based Capital
Requirements
National Credit Union
Administration.
ACTION: Advance notice of proposed
rulemaking.
AGENCY:
The National Credit Union
Administration (NCUA) Board (Board)
is issuing this advance notice of
proposed rulemaking (ANPR) to solicit
comments on two approaches to
simplify its risk-based capital
requirements. The Board’s risk-based
capital requirements are set forth in a
final rule dated October 29, 2015, which
is currently scheduled to become
effective on January 1, 2022. The
delayed effective date has provided the
Board with additional time to evaluate
the capital standards for federallyinsured credit unions (FICUs) that are
classified as ‘‘complex’’ (those with total
assets greater than $500 million). The
first approach would replace the riskbased capital rule with a Risk-based
Leverage Ratio (RBLR) requirement,
which uses relevant risk attribute
thresholds to determine which complex
credit unions would be required to hold
additional capital (buffers). The second
approach would retain the 2015 riskbased capital rule but enable eligible
complex FICUs to opt-in to a ‘‘complex
credit union leverage ratio’’ (CCULR)
framework to meet all regulatory capital
requirements. The CCULR approach
would be modeled on the ‘‘Community
Bank Leverage Ratio’’ framework, which
is available to certain banks.
DATES: Comments must be received on
or before May 10, 2021.
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. The docket
number for this advance notice of
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SUMMARY:
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proposed rulemaking is NCUA–2021–
0010. Follow the instructions for
submitting comments.
• Fax: (703) 518–6319. Include
‘‘[Your name] Comments on
‘‘Simplification of Risk Based Capital
Requirements’’ in the transmittal.
• Mail: Address to Melane Conyers
Ausbrooks, 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 Federal
eRulemaking Portal at https://
www.regulations.gov as submitted,
except as may not be possible for
technical reasons. Public comments will
not be edited to remove any identifying
or contact information.
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: Thomas Fay, Director, Division
of Capital Markets, Office of
Examination and Insurance, at (703)
518–1179; Legal: Rachel Ackmann, at
(703) 548–2601 or Ariel Pereira, at (703)
548–2778; or by mail at National Credit
Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314.
SUPPLEMENTARY INFORMATION:
I. Background
II. This ANPR
III. Legal Authority
IV. Risk-Based Leverage Ratio (RBLR)
V. Complex Credit Union Leverage Ratio
(CCULR)
VI. Timeline
VII. Conclusion
I. Background
Capital adequacy standards are a
prudential tool to protect the safety and
soundness of individual credit unions
and the credit union system as a whole.
Capital serves as a buffer for credit
unions to prevent institutional failure
during times of stress. During a financial
crisis, a buffer can mean the difference
between the financial institution
surviving or failing. Higher levels of
capital insulate credit unions from the
effects of adverse developments in
assets and liabilities, allowing credit
unions to continue to serve as credit
providers during times of stress without
government intervention. Higher levels
of capital also reduce the probability of
a systemic crisis, producing benefits
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
that generally outweigh the associated
costs.
On August 7, 1998, Congress enacted
the Credit Union Membership Access
Act (CUMAA).1 CUMAA addressed
credit union capital adequacy standards
by adding section 216 to the Federal
Credit Union Act (FCUA).2 Section 216
directed the Board to adopt a regulation
to establish a system of prompt
corrective action (PCA) to restore the net
worth of all FICUs if they are
inadequately capitalized. Section 216
requires supervisory actions indexed to
five statutory net worth categories,
ranging from well capitalized to
critically undercapitalized. The
mandatory actions and conditions
triggering conservatorship and
liquidation are expressly prescribed by
statute.3 To supplement the mandatory
actions, section 216 charged the NCUA
with developing discretionary actions
which are comparable to the
discretionary safeguards available under
section 38 of the Federal Deposit
Insurance Act—the statute that applies
PCA to other federally insured
depository institutions.4
Section 216(d)(1) of the FCUA
requires that the NCUA’s PCA system
include, in addition to the statutorily
defined net worth ratio requirement, ‘‘a
risk-based net worth requirement’’ for
credit unions that are complex, as
defined by the Board.5 The FCUA
directs the NCUA to base its definition
of ‘‘complex’’ credit unions ‘‘on the
portfolios of assets and liabilities of
credit unions.’’ 6 If a credit union is not
classified as complex, as defined by the
NCUA, it is not subject to a risk-based
net worth requirement. The NCUA
implemented the regulatory PCA system
mandated by section 216 through a final
rule published on February 18, 2000.7
The NCUA’s PCA regulations are
codified in 12 CFR part 702.
Following the 2007–2009 recession,
the NCUA substantially reevaluated the
capital adequacy standards codified in
part 702. On October 29, 2015, the
Board published a final rule
restructuring the PCA regulations (2015
Final Rule).8 The overarching intent of
1 Public
Law 105–219, 112 Stat. 913 (1998).
FCUA is codified at 12 U.S.C. 1751 et seq.
Section 216 of the act is codified at 12 U.S.C.
1790d.
3 12 U.S.C. 1790d(e), (f), (g), (i); 12 U.S.C.
1786(h)(1)(F), 1787(a)(3)(A).
4 12 U.S.C. 1790d(b)(1)(A). Section 38 of the FDI
Act, 12 U.S.C. 1831o, was added by section 131 of
the Federal Deposit Insurance Corporation
Improvement Act, Public Law 102–242, 105 Stat.
2236 (1991).
5 12 U.S.C. 1790d(d)(1).
6 12 U.S.C. 1790d(d).
7 65 FR 8560 (Feb. 18, 2000).
8 80 FR 66626 (Oct. 29, 2015).
2 The
E:\FR\FM\09MRP1.SGM
09MRP1
]]>Agencies
[Federal Register Volume 86, Number 44 (Tuesday, March 9, 2021)]
[Proposed Rules]
[Pages 13494-13498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01396]
========================================================================
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. 44 / Tuesday, March 9, 2021 /
Proposed Rules
[[Page 13494]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 700, 701, 703, 704, and 713
RIN 3133-AF32
CAMELS Rating System
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Board is proposing to add the ``S'' (Sensitivity to Market
Risk) component to the existing CAMEL rating system and redefine the
``L'' (Liquidity Risk) component, thus updating the rating system from
CAMEL to CAMELS. The proposal to add the ``S'' component will enhance
transparency and allow the NCUA, State Supervisory Authorities, and
federally insured credit unions to better distinguish between liquidity
risk (``L'') and sensitivity to market risk (``S''). The amendment
would also enhance consistency between the regulation of credit unions
and other financial institutions. The Board is proposing to implement
the addition of the ``S'' rating component and a redefined ``L'' rating
as early as the first quarter of 2022.
DATES: Comments must be received on or before May 10, 2021.
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: Send messages to ncua.gov">[email protected]ncua.gov. Use the
subject line: ``[Your name] Comments on Notice of Proposed Rulemaking
Regarding CAMELS Rating System.''
Fax: (703) 518-6319. Include ``[Your name] Comments on
Notice of Proposed Rulemaking Regarding CAMELS Rating System'' on the
cover page.
USPS/Hand Delivery/Courier: Address to Melane Conyers-
Ausbrooks, Secretary of the Board, National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428.
Public Inspection: All public comments will be made available on
the NCUA's website (https://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx)
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.
FOR FURTHER INFORMATION CONTACT: Thomas Fay, Director of Capital
Markets at (703) 518-1179 or Robert Bruneau, Senior Capital Markets
Specialist at 703 945-2491, Office of Examination and Insurance, or
Marvin Shaw, Staff Attorney Office of General Counsel at (703) 518-
6554.
SUPPLEMENTARY INFORMATION:
I. Background
The NCUA adopted its current rating system, known as CAMEL, in
1987.\1\ The current CAMEL rating is based upon an evaluation of five
critical elements of a credit union's operations: Capital adequacy,
asset quality, management, earnings, and liquidity and asset-liability
management. CAMEL is designed to take into account and reflect all
significant financial, operational, and management factors examiners
assess in their evaluation of a credit union's performance and risk
profile.
---------------------------------------------------------------------------
\1\ NCUA Letter No. 93. Letter to Credit Unions, (September 25,
1987).
---------------------------------------------------------------------------
Under this system, the NCUA assigns each credit union a composite
CAMEL rating based on the agency's evaluation and rating of five
components of an institution's financial condition and operations. As
specified in the 2007 Letter to Credit Unions,\2\ these components
address a credit union's:
---------------------------------------------------------------------------
\2\ NCUA Letter to Credit Unions 07-CU-12 (Dec. 2007).
---------------------------------------------------------------------------
Capital adequacy;
Asset quality;
Management;
Earnings; and
Liquidity and asset liability management.
Examiners assign composite and component CAMEL ratings using a
scale that ranges from ``1'' to ``5.'' The highest rating is a ``1,''
indicating the strongest performance and risk management practices, and
the least degree of supervisory concern. The lowest rating is a ``5,''
indicating the weakest performance, inadequate risk management
practices, and the highest degree of supervisory concern. When
evaluating these components, examiners use their professional judgement
and consider both qualitative and quantitative factors when analyzing a
credit unions performance.
In 1997, members of the Federal Financial Institution Examination
Council (FFIEC),\3\ with the exception of the NCUA, proposed and
subsequently adopted revisions to the Uniform Financial Institutions
Rating System (UFIRS) and a Policy Statement that reaffirmed the five
CAMEL rating system components and added a sixth component, Sensitivity
to Market Risk (``S''), to address price and interest rate risks
(IRR).\4\ The NCUA opted not to use the ``S'' component and retained
its existing CAMEL rating system based on the relative lack of
complexity in the consolidated balance sheets of credit unions at the
time. However, since 1997, credit unions have increased in size and
complexity by significantly increasing their mortgage-related assets
from 19 percent of total assets to 42 percent at September 2020.
---------------------------------------------------------------------------
\3\ At the time, the FFIEC was comprised of the Federal Deposit
Insurance Corporation (FDIC), the Board of Governors of the Federal
Reserve (Federal Reserve), and the Office of Comptroller of the
Currency (OCC), the NCUA, and the Office of Thrift Supervision
(OTS). OTS merged into OCC as a result of the Dodd Frank Wall Street
Reform and Consumer Protection Act. See Section 312 of Public Law
111-203.
\4\ 62 FR 752, (Jan. 6, 1997).
---------------------------------------------------------------------------
The NCUA has made several pertinent modifications to the CAMEL
rating system since 1997. These involve changes to financial ratios,\5\
adding and subsequently eliminating a CAMEL matrix,\6\ accommodating
the adoption of Prompt Corrective Action (PCA),\7\ and
[[Page 13495]]
incorporating the NCUA's risk-focused exam approach.\8\
---------------------------------------------------------------------------
\5\ Letter to Credit Unions 00-CU-08 (Nov. 2000).
\6\ NCUA Letter to Credit Unions 07-CU-12 (Dec. 2007).
\7\ In 1998, Congress enacted the Credit Union Membership Access
Act (``CUMAA''). (Pub. L. 105-219, 112 Stat. 913 (1998). CUMAA
amended the Federal Credit Union Act (``the Act'') to require the
NCUA to adopt, by regulation, a system of prompt corrective action
(PCA) consisting of minimum capital standards and corresponding
remedies to improve the net worth of federally-insured ``natural
person'' credit unions.
\8\ NCUA Letter to Credit Unions -03-CU-04 (March 2003).
---------------------------------------------------------------------------
As balance sheets of credit unions have become larger and more
complex, the NCUA consistently provided supervision and guidance
regarding exposures to market risk to the credit union industry. The
NCUA also advised credit unions that IRR was a supervisory priority
from 2012 through 2019.
Since 2012, the Board implemented regulations that introduced
standards and expectations affecting examiner procedures and the NCUA's
IRR assessment requirements. The NCUA's IRR rule became effective for
credit unions in September 2012.\9\ The rule requires credit unions
that have more than $50 million in assets to maintain a written IRR
policy and an effective risk management program. The NCUA also
finalized its derivatives rule in April 2014 providing authority for
qualified federal credit unions to use financial derivatives to conduct
hedging activities to better optimize their interest rate risk
management.\10\
---------------------------------------------------------------------------
\9\ 77 FR 5155 (Feb. 2, 2012).
\10\ 79 FR 5228 (Jan 31, 2014).
---------------------------------------------------------------------------
The NCUA also implemented its revised IRR supervision program in
January 2017 \11\ incorporating the regulatory requirements from parts
741 (IRR) and 703 (derivatives), enhancing examiner guidance, improving
the consistency of IRR ratings, and to identify outlier credit unions
with excessive risk levels.
---------------------------------------------------------------------------
\11\ Revised Interest Rate Risk Supervision National
Credit Union Administration (ncua.gov) 16-CU-08/October 2016.
---------------------------------------------------------------------------
II. Rationale for Proposed Rule
The NCUA's existing CAMEL rating process addresses both sensitivity
to market risk and liquidity risk within the ``L'' component.\12\ While
there is an interrelationship between sensitivity to market risk and
liquidity risk, there are also differences that support separating the
risks into distinct components. The proposed rule would enhance the
existing CAMEL rating system by adding an ``S'' component to assess
sensitivity to market risk and modify the ``L'' component to include
only liquidity evaluation content and rating criteria.
---------------------------------------------------------------------------
\12\ NCUA Letter to Credit Unions 07-CU-12, CAMEL Rating System.
(Dec. 2007).
---------------------------------------------------------------------------
Adding an ``S'' component and modifying the ``L'' component will
provide greater clarity and transparency regarding credit unions'
sensitivity to market risk and liquidity risk exposures. The proposed
addition would make the NCUA's rating system more consistent with the
other financial institution regulators' ratings system both at the
federal and state levels.\13\
---------------------------------------------------------------------------
\13\ The banking regulators (Federal Reserve, FDIC, and OCC)
each include the ``S'' component to evaluate sensitivity to market
place risk. In addition, 24 state supervisory authorities adopted
the ``S'' component.
---------------------------------------------------------------------------
Separating the ``S'' and ``L'' component ratings will allow NCUA to
enhance the:
Monitoring of sensitivity to market risk and liquidity
risk in the credit union system;
Communication of specific concerns to individual credit
unions; and
Allocation of resources.
Evaluating, rating, and disclosing assessments of interest rate and
liquidity risks to credit union management is a long-standing
examination procedure at the NCUA. The proposed change to add the ``S''
provides greater transparency into the NCUA's evaluation and
conclusions regarding these two risks.
In 2015, the NCUA Office of Inspector General (OIG) recommended the
addition of an ``S'' component to better capture a credit union's
sensitivity to market risk and improve clarity and transparency in the
CAMEL rating system.\14\ The NCUA OIG also recommended the NCUA revise
its ``L'' component rating to reflect only liquidity factors.
---------------------------------------------------------------------------
\14\ OIG-15-11 Review of NCUA's Interest Rate Risk Program.
---------------------------------------------------------------------------
Also in 2015, the NCUA initiated a comprehensive restructuring of
its supervision activities through the Enterprise Solution
Modernization program (ESM). The ESM is a multi-year introduction of
emerging and secure technology solutions supporting the NCUA's
examination, data collection, and reporting efforts to improve key,
integrated business processes. The NCUA planned the implementation of
the OIG's 2015 CAMELS recommendations as part of the development of a
new examination platform, known as the Modern Examination and Risk
Identification Tool, or MERIT. The NCUA anticipates completing the
transition from its legacy examination software to MERIT (which has
been configured to support the ``S'' in ``CAMELS'') in 2021. Other
revisions to examiner supervision guidance and procedures will also be
updated as part of the transition.
In general, the NCUA Board expects that adopting a sixth CAMELS
rating component will not have any adverse effect on a credit union's
CAMEL composite rating. The proposed separation of sensitivity to
market risk and liquidity risk into individual CAMELS rating components
will reduce potential rating inconsistencies. Currently, examiners
combine the risk evaluation of these related, but separate, risk areas
into the ``L'' component. The separation into two components provides
greater clarity of the assessment of each risk area. The Board
anticipates the agency can make this transition smoothly and without
significant disruption to the exam process or agency operations as
early as the first quarter of 2022.
III. Summary of the Proposed Rule
The Board is proposing to add the ``S'' component to the existing
CAMEL rating system and redefine the current ``L'' component.
Evaluation of these as individual components will enhance the
communication and monitoring of credit unions' sensitivity to market
risk and liquidity risk. The Board is requesting comments on this
proposal, such as, but not limited to, the definitions of both the
``L'' and ``S'' components and the criteria for each of the specific 1-
5 assigned ratings. For example, the Board may consider modifying the
rating descriptions used for the ``L'' and ``S'' ratings used by the
other banking agencies rating system (The Uniform Financial
Institutions Rating System (UFIRS)), detailed below in Sections IIA and
IIB of this proposal.\15\
---------------------------------------------------------------------------
\15\ https://www.fdic.gov/regulations/laws/rules/5000-900.html.
---------------------------------------------------------------------------
A. ``S'' Component for Sensitivity to Market Risk
The sensitivity to market risk reflects the exposure of a credit
union's current and prospective earnings level and economic capital
position arising from changes in market prices and the general level of
interest rates. Effective risk management programs include
comprehensive interest rate risk policies, appropriate and identifiable
risk limits, clearly defined risk mitigation strategies, and a suitable
governance framework.
Sensitivity to Market Risk ratings are based on, but not limited
to, the following evaluation factors:
Sensitivity of a credit union's current and future
earnings and economic value of capital to adverse changes in market
prices and interest rates;
Management's ability to identify, measure, monitor, and
control exposure
[[Page 13496]]
to market risk considering a credit union's size, complexity, and risk
profile; and
The nature and complexity of interest rate risk exposure.
Examiners will rate a credit union's ``S'' CAMELS rating component
on a scale of ``1'' to ``5'' using the same rating descriptions for
``S'' as the other banking agencies.
------------------------------------------------------------------------
``S'' rating Description
------------------------------------------------------------------------
1........................ Market risk sensitivity is well
controlled and that there is minimal
potential that the earnings performance or
capital position will be adversely affected;
Risk management practices are strong
for the size, sophistication, and market
risk accepted by the institution; and
The level of earnings and capital
provide substantial support for the degree
of market risk taken by the institution.
2........................ Market risk sensitivity is
adequately controlled and that there is only
moderate potential that the earnings
performance or capital position will be
adversely affected;
Risk management practices are
satisfactory for the size, sophistication,
and market risk accepted by the institution;
and
The level of earnings and capital
provide adequate support for the degree of
market risk taken by the institution.
3........................ Control of market risk sensitivity
needs improvement or that there is
significant potential that the earnings
performance or capital position will be
adversely affected;
Risk management practices need to be
improved given the size, sophistication, and
level of market risk accepted by the
institution; and
The level of earnings and capital
may not adequately support the degree of
market risk taken by the institution.
4........................ Control of market risk sensitivity
is unacceptable or that there is high
potential that the earnings performance or
capital position will be adversely affected;
Risk management practices are
deficient for the size, sophistication, and
level of market risk accepted by the
institution; and
The level of earnings and capital
provide inadequate support for the degree of
market risk taken by the institution.
5........................ Control of market risk sensitivity
is unacceptable or that the level of market
risk taken by the institution is an imminent
threat to its viability; and
Risk management practices are wholly
inadequate for the size, sophistication, and
level of market risk accepted by the
institution.
------------------------------------------------------------------------
The Board also requests comments on the proposal to describing the
``L'' component and the criteria used in determining the 1-5 assigned
ratings.
B. ``L'' Component for Liquidity Risk
In evaluating the adequacy of a credit union's liquidity profile,
examiners consider the current and prospective sources of liquidity
compared to funding needs and the adequacy of liquidity risk management
relative to a credit union's size, complexity, and risk profile. A
credit union's liquidity risk management practices should ensure the
credit union maintains sufficient liquidity to timely meet its
financial obligations and member share and loan demands. These
practices should reflect the credit union's ability to manage unplanned
changes in funding sources, changes in market conditions affecting its
ability to quickly liquidate assets with minimal loss, ensure liquidity
is maintained at a reasonable cost and limit reliance on funding
sources that may not be available in times of financial stress or
adverse changes in market conditions.
A credit union's liquidity risk management practices should also be
commensurate with the complexity of the balance sheet and its capital
adequacy. This includes evaluating the reporting mechanisms in place to
monitor and control risk, management's response when risk exposure
approaches or exceeds the credit union's risk limits, and the
prescribed corrective action taken when necessary.
Examiners will rate a credit union's ``L'' CAMELS rating component
on a scale of ``1'' to ``5'' using the same rating descriptions for
``L'' as the other banking agencies.
------------------------------------------------------------------------
``L'' rating Description
------------------------------------------------------------------------
1........................ Strong liquidity levels and well-
developed funds management practices; and
The institution has reliable access
to sufficient sources of funds on favorable
terms to meet present and anticipated
liquidity needs.
2........................ Satisfactory liquidity levels and
funds management practices;
The institution has access to
sufficient sources of funds on acceptable
terms to meet present and anticipated
liquidity needs; and
Modest weaknesses may be evident in
funds management practices.
3........................ Liquidity levels or funds management
practices in need of improvement; and
Institutions rated 3 may lack ready
access to funds on reasonable terms or may
evidence significant weaknesses in funds
management practices.
4........................ Deficient liquidity levels or
inadequate funds management practices; and
Institutions rated 4 may not have or
be able to obtain a sufficient volume of
funds on reasonable terms to meet liquidity
needs.
5........................ Liquidity levels or funds management
practices so critically deficient that the
continued viability of the institution is
threatened; and
Institutions rated 5 require
immediate external financial assistance to
meet maturing obligations or other liquidity
needs.
------------------------------------------------------------------------
The CAMEL rating system is not set forth in a separate section or
part in the NCUA's regulations. Rather, references to CAMEL appear in
several parts in the Code of Federal Regulations (CFR). NCUA
regulations regularly refer to CAMEL composite ``1'' or ``2'' rated
credit unions, which indicate the ability to safely support additional
regulatory flexibility, or CAMEL composite ``4'' or ``5'' rated credit
unions, which warrant increased regulatory scrutiny.
[[Page 13497]]
The Board is planning technical amendments to the following
sections in which the term ``CAMEL'' appears by changing the term to
``CAMELS.'' These sections include:
Section 700.2 definition of ``Troubled condition''
Section 701.14 Change in official or senior executive officer
in credit unions that are newly chartered or are in troubled condition
Section 701.23 Purchase, sale, and pledge of eligible
obligations
Section 703.13 Permissible investment activities
Section 703.14 Permissible investments
Section 703.108 Eligibility
Section 704.4 Prompt corrective action
Section 713.6 Fidelity Bond and Insurance Coverage for FCUS--
What is the permissible deductible?
In addition to amendments in the CFR, the Board notes the agency
will modify certain documents and systems related to its supervisory
activities to reflect the addition of the ``S'' CAMEL rating component.
IV. Regulatory Procedures
A. Regulatory Flexibility Act
The Regulatory Flexibility Act requires the NCUA to prepare an
analysis to describe any significant economic impact a regulation may
have on a substantial number of small entities.\16\ For purposes of
this analysis, the NCUA considers small credit unions to be those
having under $100 million in assets.\17\ This rule would not affect
FCUs regardless of asset size because it is not adding any substantive
requirement. Accordingly, the associated cost is minimal. The NCUA
certifies the rule will not have a significant economic impact on small
credit unions.
---------------------------------------------------------------------------
\16\ 5 U.S.C. 603(a).
\17\ Interpretive Ruling and Policy Statement (``IRPS'') 03-2,
68 FR 31949 (May 29, 2003) as amended by IRPS 13-1, 78 FR 4032 (Jan.
18, 2013).
---------------------------------------------------------------------------
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.\18\ For purposes
of the PRA, a paperwork burden may take the form of either a reporting
or a recordkeeping requirement, both referred to as information
collections. This proposed rule imposes no new paperwork-related
requirements. Therefore, this proposed rule will not create new
paperwork burdens or modify any existing paperwork burdens.
---------------------------------------------------------------------------
\18\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------
C. Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, the NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive order. This rule will not have
a substantial direct effect on the states, on the connection between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government. The NCUA
has determined this 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.\19\
---------------------------------------------------------------------------
\19\ Public Law 105-277, 112 Stat. 2681 (1998).
---------------------------------------------------------------------------
List of Subjects
12 CFR Part 700
Credit unions.
12 CFR Part 701
Credit unions. Insurance. Reporting and recordkeeping requirements.
12 CFR Part 703
Credit unions. Investments. Reporting and recordkeeping
requirements.
12 CFR Part 704
Corporate Credit Unions, Prompt Corrective Action.
12 CFR Part 713
Bonds. Credit unions. Insurance.
By the National Credit Union Administration Board on January 14,
2021
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed above, the Board proposes to amend 12 CFR
parts 700, 701, 703, 704, and 713 as follows:
PART 700--DEFINITIONS
0
1. The authority citation for part 700 continues to read as follows:
Authority: 12 U.S.C. 1752, 1757(6), 1766.
Sec. 700.2 [Amended]
0
2. In Sec. 700.2, amend the definition of ``troubled condition'', by
removing the word, ``CAMEL'', and adding, in its place, the word,
``CAMELS'', wherever it appears.
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
3. The authority citation 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, 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.
Sec. 701.14 [Amended]
0
4. Amend Sec. 701.14(b) by removing the word, ``CAMEL'', and adding,
in its place, the word, ``CAMELS'', wherever it appears.
Sec. 701.23 [Amended]
0
5. Amend Sec. 701.23(b)(2) by removing the word, ``CAMEL'', and
adding, in its place, the word, ``CAMELS.''
PART 703--INVESTMENT AND DEPOSIT ACTIVITIES
0
6. The authority citation for part 703 continues to read as follows:
Authority: 12 U.S.C. 1757(7), 1757(8), and 1757(15).
Sec. 703.13 [Amended]
0
7. Amend Sec. 703.13(d)(3)(iii) by removing the word, ``CAMEL'', and
adding, in its place, the word, ``CAMELS.''
Sec. 703.14 [Amended]
0
8. Amend Sec. 703.14 by removing the word, ``CAMEL'', and adding, in
its place, the word, ``CAMELS'', wherever it appears.
PART 704--CORPORATE CREDIT UNIONS
0
9. The authority citation for part 704 continues to read as follows:
Authority: 12 U.S.C. 1766(a), 1781, 1789.
Sec. 704.4 [Amended]
0
10. Amend Sec. 704.4(d)(3)(ii) by removing the word, ``CAMEL'', and
adding, in its place, the word, ``CAMELS.''
PART 713--FIDELITY BOND AND INSURANCE COVERAGE FOR FEDERAL INSURED
CREDIT UNIONS
0
11. The authority citation for part 713 continues to read as follows:
[[Page 13498]]
Authority: 12 U.S.C. 1761a, 1761b, 1766(a), 1766(h),
1789(a)(11).
Sec. 713.6 [Amended]
0
12. Amend Sec. 713.6 by removing the word, ``CAMEL'', and adding, in
its place, the word, ``CAMELS'', wherever it appears.
[FR Doc. 2021-01396 Filed 3-8-21; 8:45 am]
BILLING CODE 7535-01-P
