[Federal Register Volume 84, Number 211 (Thursday, October 31, 2019)]
[Rules and Regulations]
[Pages 58305-58309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23679]
=======================================================================
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701 and 741
RIN 3313-AF00
Public Unit and Nonmember Shares
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The NCUA Board (Board) is amending the NCUA's public unit and
nonmember share rule to allow federal credit unions (FCU) to receive
public unit and nonmember shares up to 50 percent of the credit union's
net amount of paid-in and unimpaired capital and surplus less any
public unit and nonmember shares. This final rule also makes a
conforming change to the NCUA's regulations that apply the public unit
and nonmember share limit to all federally insured credit unions
(FICUs). The final rule follows publication of a May 30, 2019, proposed
rule and takes into consideration the public comments received on the
proposed rule.
DATES: This final rule is effective January 29, 2020.
FOR FURTHER INFORMATION CONTACT: Ariel Pereira, Staff Attorney, Office
of General Counsel, 1775 Duke Street, Alexandria, Virginia 22314, or by
telephone at (703) 548-2778.
SUPPLEMENTARY INFORMATION:
I. Introduction
II. This Final Rule; Changes to Proposed Rule
III. Legal Authority
IV. Discussion of Public Comments Received on Proposed Rule
V. Regulatory Procedures
I. Introduction
A. Background
Section 107(6) of the Federal Credit Union Act (FCU Act) provides
that an FCU may receive payment on shares from its members (including
public units that are members) and from other credit unions.\1\ Section
107(6) also permits an FCU to receive payments on shares from
nonmembers under certain circumstances, including payment on shares
from nonmember public units and their political subdivisions.\2\ The
term ``public unit'' generally refers to ``the United States, any state
of the United States, the District of Columbia, the Commonwealth of
Puerto Rico, the Panama Canal Zone, any territory or possession of the
United States, any county, municipality, or political subdivision
thereof, or any Indian tribe as defined in section 3(c) of the Indian
Financing Act of 1974.'' \3\
---------------------------------------------------------------------------
\1\ 12 U.S.C. 1757(6).
\2\ Id.
\3\ 12 CFR 745.1(c).
---------------------------------------------------------------------------
Moreover, an FCU that predominantly serves low-income members may
receive payment on shares from any source regardless of membership.\4\
Section 701.34 of the NCUA's regulations defines a ``low-income
member'' as, among other things, a member ``whose family income is 80
[percent] or less than the median family income for the metropolitan
area where [the member] live[s] or [the] national metropolitan area,
whichever is greater.'' \5\ Alternatively, a ``low-income member'' is a
member ``who earn[s] 80 [percent] or less than the total median
earnings for individuals for the metropolitan area where [the member]
live[s] or [the] national metropolitan area, whichever is greater.''
\6\
---------------------------------------------------------------------------
\4\ Supra note 1.
\5\ 12 CFR 701.34(a)(2).
\6\ Id.
---------------------------------------------------------------------------
Section 701.32 of the NCUA's regulations limits the total amount of
nonmember shares that an FCU may receive up to 20 percent of the credit
union's total shares, or $3 million, whichever is greater, unless the
shares are U.S. Treasury accounts or matching funds accounts required
by the NCUA's Community Development Revolving Loan Fund Program.\7\
This limit also applies to public unit shares regardless of whether the
public unit is a member of the credit union.
---------------------------------------------------------------------------
\7\ 12 CFR 701.32(b), (c).
---------------------------------------------------------------------------
B. Regulatory Reform Agenda
Consistent with the spirit of Executive Order 13777, entitled
``Enforcing the Regulatory Reform Agenda,'' \8\ the Board established a
Regulatory Reform Task Force (Task Force) to identify NCUA regulations
that the agency should repeal, replace, or modify. The Task Force
reviewed the NCUA regulations and submitted its first report to the
Board in June 2017. In August 2017, the Board published the substance
of the Task Force's first report in the Federal Register for public
comment.\9\ After the close of the public comment period, the Board
published the Task Force's second and final report in the Federal
Register in December 2018.\10\
---------------------------------------------------------------------------
\8\ Executive Order 1377 was issued on February 24, 2017, and
subsequently published in the Federal Register on March 1, 2017 (82
FR 12285).
\9\ 82 FR 39702 (August 22, 2017).
\10\ 83 FR 65926 (December 21, 2018).
---------------------------------------------------------------------------
The Task Force's final report recommended that the Board increase
the public unit and nonmember share limit in Sec. 701.32 of the NCUA's
regulations.\11\ Specifically, the Task Force recommended raising the
nonmember deposit limit from 20 percent to 50 percent. The Task Force
stated that public unit and nonmember shares are the functional
equivalent of borrowings. The change will parallel the ability of FCUs,
as authorized under section 107(9) of the FCU Act,\12\ to borrow from
any source up to 50 percent of the credit union's paid-in and
unimpaired capital and surplus subject to such rules and regulations as
the Board may prescribe.\13\ However, this limitation does not apply to
discounts or sales of eligible obligations to any federal intermediate
credit bank or loans from the Central Liquidity Facility.\14\
---------------------------------------------------------------------------
\11\ Id. at 65940.
\12\ 12 U.S.C. 1757(9).
\13\ The term ``paid-in and unimpaired capital and surplus''
means shares and undivided earnings, plus net income or minus net
loss. See 12 CFR 741.2.
\14\ Supra note 13. For rules governing loans from the Central
Liquidity Facility, see 12 CFR part 725.
---------------------------------------------------------------------------
C. NCUA's May 30, 2019, Proposed Rule
On May 30, 2019, the NCUA published a proposed rule to implement
the Task Force's recommendation.\15\ Specifically, the Board proposed
to amend Sec. 701.32 of the NCUA's regulations to allow an FCU to
receive public unit and nonmember shares up to 50 percent of the credit
union's net amount of paid-in and unimpaired capital and surplus less
any public unit and nonmember shares. The Board also proposed making
conforming amendments to Sec. 741.204, which applies to all FICUs, to
reflect the changes to Sec. 701.32. (Hereinafter, this preamble will
refer to FICUs when discussing the applicability of the proposed and
final rules, except where the discussion specifically applies to FCUs
or federally insured, state-chartered credit unions (FISCUs)).
---------------------------------------------------------------------------
\15\ 84 FR 35525.
---------------------------------------------------------------------------
The change in standard from ``total shares'' to ``paid-in and
unimpaired capital and surplus less any public unit and nonmember
shares'' is not only consistent with the treatment of borrowings under
the FCU Act, but is also intended to provide FICUs with greater ability
to accept public unit and nonmember deposits because undivided earnings
are included in the measurement of a FICU's paid-in and
[[Page 58306]]
unimpaired capital and surplus, thus increasing the base. The proposed
rule subtracts public unit and nonmember shares from unimpaired capital
and surplus for purposes of this 50 percent limit.\16\ This restriction
is intended to provide a meaningful limit on the ability of an FICU to
increase its leverage indefinitely, which could pose a clear risk to
FICUs and the National Credit Union Share Insurance Fund (NCUSIF).
---------------------------------------------------------------------------
\16\ In mathematical terms, the limitation is calculated as
total public unit and nonmember shares/paid-in and unimpaired
capital and surplus - total public unit and nonmember shares =
maximum of 50%.
---------------------------------------------------------------------------
The proposed rule does not allow a waiver process for a FICU to
exceed the 50 percent limit as a matter of safety and soundness. The
proposed rule also requires a FICU to develop and maintain a written
plan if its public unit and nonmember shares, taken together with
borrowings, exceed 70 percent of paid-in and unimpaired capital and
surplus. This approach was designed to provide a FICU with flexibility
to adopt a diverse funding structure without the regulatory burden of
developing a plan regarding the intended use of those funds unless the
credit union borrows a significant amount of funds or accepts a
significant number of public unit and nonmember shares.
The proposed rule provided for a 60-day comment period, which
closed on July 29, 2019.
II. This Final Rule; Change to Proposed Rule
This final rule follows publication of the May 30, 2019, proposed
rule and takes into consideration the public comments received on the
proposed rule. The NCUA received 17 public comments on the proposal.
Comments were received from: (1) Individual FICUs; (2) national, state,
and regional organizations representing FICUs; and (3) national banking
trade organizations.
Based on its review of the comments, and as further discussed in
Section IV of this preamble, the Board has revised the proposal by
retaining the alternative limit of $3 million. Specifically, the final
rule provides that a FICU may receive public unit and nonmember shares
in an amount up to 50 percent of the credit union's net amount of paid-
in and unimpaired capital and surplus less any public unit and
nonmember shares, or $3 million, whichever is greater.
III. Legal Authority
The Board is issuing this final rule pursuant to its authority
under the FCU Act. Under the FCU Act, the NCUA is the chartering and
supervisory authority for FCUs and the federal supervisory authority
for FICUs.\17\ The FCU Act grants the NCUA a broad mandate to issue
regulations governing both FCUs and all FICUs. Section 120 of the FCU
Act is a general grant of regulatory authority and authorizes the Board
to prescribe rules and regulations for the administration of the FCU
Act.\18\ Section 207 of the FCU Act is a specific grant of authority
over share insurance coverage, conservatorships, and liquidations.\19\
Section 209 of the FCU Act is a plenary grant of regulatory authority
to the Board to issue rules and regulations necessary or appropriate to
carry out its role as share insurer for all FICUs.\20\ In addition,
Section 107 of the FCU Act specifically recognizes that the Board may
prescribe limitations governing shares accepted by FCUs.\21\
Accordingly, the FCU Act grants the Board broad rulemaking authority to
ensure that the credit union industry and the NCUSIF remain safe and
sound.
---------------------------------------------------------------------------
\17\ 12 U.S.C. 1752-1775.
\18\ 12 U.S.C. 1766(a).
\19\ 12 U.S.C. 1787(b)(1).
\20\ 12 U.S.C. 1789(a)(11).
\21\ 12 U.S.C. 1757(6).
---------------------------------------------------------------------------
IV. Discussion of the Public Comments Received on the Proposed Rule
A. The Public Comments, Generally
The comments from FICUs and their representative organizations
generally supported the proposed rule. In particular, the FICUs
supported the revised aggregate limit. Several of the commenters
explicitly agreed with the statement in the proposed rule's preamble
that public unit and nonmember shares are the functional equivalent of,
and no more volatile than, borrowings and, therefore, warrant a higher
level of authority than what the current regulation allows. In general,
the commenters wrote that the proposal would provide a greater balance
between nonmember funding sources and borrowings, and better enable
FICUs to seek more reasonably priced funding options.
Several of these commenters also offered suggested changes to the
proposed rule. In particular, the commenters expressed concerns about
the proposed elimination of the $3 million alternative limit,
especially the effects on newly chartered FICUs and low-income credit
unions (LICUs).
In contrast to the support expressed by the FICUs, the comments
received from the banking trade organizations strongly objected to the
proposed rule. These commenters wrote that the proposal would undermine
the historical mission of FICUs, increase risk to the NCUSIF, and have
negative economic impacts.
B. Discussion of FICU Comments on Specific Provisions of the Proposed
Rule
1. Minor effect on most FICUs. One of the commenters, while writing
in overall support of the rule, indicated the proposal would have
minimal effect on most FICUs. Based on its review of March 2019, Call
Report data, the commenter wrote that the proposal would not increase
the overall funding capacity (i.e., aggregate nonmember/public unit
deposits and borrowings) for 51 percent of FICUs. The commenter
believes the proposal will be most beneficial to small FICUs and LICUs
because they tend to have the higher net worth ratios necessary to take
full advantage of the proposed limit. The Board continues to believe
that the proposal will provide all FICUs, and in particular small
credit unions, with greater flexibility in their sources of funding.
The commenter also wrote that the majority of FICUs rely on member
shares for the ``overwhelming majority'' of their funds, and that this
is unlikely to change. Another commenter, however, wrote that the
current reluctance of some FICUs to use nonmember funding could be
explained by the fact that these credit unions, as a liquidity risk
management tool, have historically been reluctant to exhaust the
availability of nonmember funds. The increase in the aggregate limit
will provide these FICUs with additional flexibility in managing their
liquidity needs and encourage them to seek more reasonably priced
funding options. Further, this commenter noted other incentives for
FICUs to increase their use of nonmember funds. According to the
commenter, in recent years FICUs that have employed nonmember deposits
have tended to be more active lenders and, therefore, achieved higher
earnings on average than their peers.
2. $3 million alternative limit. The NCUA specifically sought
comment on the proposed elimination of the alternative limit of $3
million. As noted, the current regulation limits FICUs to accepting
public unit and nonmember shares up to 20 percent of total shares, or
$3 million, whichever is greater. The Board thought that the proposed
regulatory limit of 50 percent of the FICU's net amount of paid-in and
unimpaired capital and surplus less any public unit and nonmember
shares was appropriate and that an alternative $3 million limit would
no longer be necessary. However, the Board also noted in the preamble
to the proposed
[[Page 58307]]
rule that some small credit unions, particularly LICUs that rely on
large volumes of nonmember shares as a necessary source of funding or
newly chartered credit unions, might be adversely impacted by the
elimination of the $3 million dollar limit. Consequently, the Board
noted that it was actively considering retaining the alternative $3
million limit and specifically sought comments on whether to retain it
or provide a special exemption for small LICUs.
The majority of the comments on this issue supported retaining some
form of the alternative limit. At a minimum, these commenters urged the
Board to either ``grandfather'' FICUs that currently use the limit or
establish an exemption for newly chartered FICUs and LICUs. A minority
of commenters supported the elimination of the alternative limit;
however, several of them also suggested that the NCUA monitor the
change for adverse consequences. These commenters recommended that the
Board use the review to consider re-instituting the alternative limit.
One of the commenters also urged that the alternative limit be
increased to at least $5 million. The commenter wrote that the NCUA, in
its 2011-2012 rulemaking raising the limit to $3 million, had
benchmarked the amount on a hypothetical FCU with $7.5 million in total
shares.\22\ According to the commenter, the increase to $5 million is
necessary to maintain parity for a similarly situated FCU in 2019
(i.e., the 36th percentile of credit unions ranked by share value).
---------------------------------------------------------------------------
\22\ The proposed rule to raise the alternative limit to $3
million was published on December 28, 2011 (76 FR 81 421). The
subsequent final rule was published on May 31, 2012 (77 FR 31981).
---------------------------------------------------------------------------
The Board has decided to revise its proposal given the broad
support from the commenters for keeping the alternative limit.
Specifically, the final rule retains the current alternative limit of
$3 million. Upon further consideration, the Board agrees that the
elimination of the limit could negatively impact some small credit
unions, particularly those that are newly chartered and have not had
the time to become adequately capitalized, which may rely on nonmember
funding. The final rule, therefore, provides that a FICU may receive
public unit and nonmember shares in an amount up to 50 percent of the
FICU's net amount of paid-in and unimpaired capital and surplus less
any public unit and nonmember shares, or $3 million, whichever is
greater.
3. Waivers from the appropriate regional director. The proposed
rule would eliminate the procedures for obtaining a waiver from the
appropriate regional director. The majority of commenters on this
provision supported the removal of the waiver procedures. The
commenters opposed to the change wrote that a regulatory waiver might
be necessary to address fact-specific situations that merit a higher
limit without increasing risk to the NCUSIF.
The Board has not revised the proposal in response to these
comments. Although the Board seeks to provide FICUs with greater
flexibility, it also continues to believe that the removal of the
waiver procedures is prudent given the increased regulatory limit. The
NCUA does not envision situations arising like the hypothetical posed
by the commenter that would merit a higher aggregate limit without
consequently increasing the risk to the NCUSIF. Allowing a FICU to
exceed this limit could lead to safety and soundness concerns and
unnecessary risk for the NCUSIF.
The Board also notes that currently effective waivers granted
pursuant to the existing regulations are superseded by the final rule.
These waivers are no longer necessary given the higher aggregate limit
established by the rule. Accordingly, any such waivers will be
considered expired upon the effective date of this final rule.
4. Plan Regarding Use of Funds. Under the proposed rule, a FICU
would be required to develop a plan regarding the intended use of any
borrowings, public unit, or nonmember shares that, taken together,
exceed 70 percent of the FICU's paid-in and unimpaired capital and
surplus. The majority of the commenters writing on this issue supported
the plan requirement, with only a single commenter disagreeing. The
commenter opposing the plan requirement wrote that any risk associated
with such a high level of borrowing should more appropriately be
addressed in the contract between the lender and the FICU.
This final rule adopts the proposed plan requirements without
change. The Board believes that requiring a plan for material levels of
external funding sources is prudent due diligence. The Board expects
FICUs that accept elevated levels of public unit and nonmember shares
and borrowings to document how the credit union will use those funds
consistent with prudent risk management principles. As the Board
explained in the proposed rule, FICUs will not need to submit these
plans for approval before accepting funds that in total would exceed 70
percent of paid-in and unimpaired capital and surplus. Instead, they
must simply maintain the plan and make it available to NCUA examiners.
Even though the Board expects that most FICUs will not need to
develop a specific plan regarding the use of external funds, a FICU
should continue to manage its balance sheet in a prudent manner. The
NCUA will continue to review a FICU's business model and liquidity
management to ensure the FICU is operating in a safe and sound manner.
Unsafe or unsound funding sources or utilization of funds in an unsafe
and unsound manner may affect a credit union's CAMEL \23\ and risk
ratings and could result in supervisory action.
---------------------------------------------------------------------------
\23\ CAMEL is an internal rating system used for evaluating the
soundness of credit unions on a uniform basis and for identifying
those institutions requiring special supervisory attention or
concern. The name CAMEL is an acronym derived from the first letter
of each of the five critical elements of the credit union's
operations: (1) Capital Adequacy, (2) Asset Quality, (3) Management,
(4) Earnings, and (5) Liquidity/Asset-Liability Management.
---------------------------------------------------------------------------
One commenter urged the NCUA to not establish new or more complex
supervisory procedures for review of the plans. At the same time,
however, the commenter also suggested that the NCUA communicate its
expectations for such plans in advance of examinations to ensure
consistent review. Given the changes to the regulation and the higher
level of combined non-member funding allowed before a plan is required,
the NCUA will be updating the related examination procedures and
supervisory expectations accordingly. This information will be
incorporated into the Examiner's Guide, which is posted on the NCUA's
website. As always, the NCUA will continue to emphasize the importance
of timely, ongoing and open communications between examiners and credit
union management and officials.
5. Applicability to FISCUs. One commenter wrote that the
incorporation of regulations by reference in part 741 and the repeated
use of the term ``federal credit union'' within regulations applicable
to FISCUs is confusing and creates regulatory burden. The commenter
suggested that the NCUA incorporate the limits for public unit and
nonmember shares applicable to FISCUs, in their entirety, within part
741.
At this time, the Board is not prepared to adopt the change
suggested by the commenter. The Board, however, has taken the
suggestion under advisement for future rulemakings and has elaborated
in this preamble on how the rule applies to FISCUs.
[[Page 58308]]
C. Discussion of Comments From the Banking Trade Organizations
The two comments from the banking trade organizations were strongly
opposed to the proposal. Both commenters wrote that the proposed rule
would undermine the cooperative character of FICUs and make them
beholden to nonmember institutions. The commenters also saw little
reason for the change, writing that concerns regarding fraud have
arguably only grown since the NCUA originally promulgated the limit to
address this problem. One of the banking trade organizations also
asserted that the broad application of the ``low-income'' designation,
which allows FICUs to secure nonmember deposits from any source,
amplifies the safety and soundness concerns of the proposal. This
commenter also raised potential impacts on the broader economy, writing
that the peak of the economic cycle is the wrong time to increase
leverage and fuel growth in expensive funding sources. Further, the
commenter asserted that providing a new funding source for tax-free
lending would decrease lendable funds at taxpaying financial
institutions. The commenter wrote that this reallocation of deposits
would reduce tax receipts to municipalities, thus reducing available
government revenue to support necessary government programs.
The Board disagrees with the assertions made by the banking trade
organizations, and has not revised the proposal in response to these
comments. Contrary to the statements made by the commenters that the
proposal will undermine the purpose of credit unions, Congress
explicitly recognized that nonmember shares could be a valuable source
of funding for FICUs. As noted above, the FCU Act, which establishes
the federal credit union system, authorizes FICUs to receive payment on
shares from nonmembers, ``within limitations prescribed by the Board.''
\24\ The final rule will amend the nonmember share regulations to
better reflect congressional intent. Specifically, the final rule
updates the regulations to recognize the significant changes the credit
union industry has undergone in the 31 years since this limit was
adopted, including credit unions' growing need for diversified sources
of funding to serve their members.
---------------------------------------------------------------------------
\24\ Supra note 1. State law governs the authority for FISCUs to
accept nonmember shares.
---------------------------------------------------------------------------
The banking trade organizations also expressed concerns regarding
fraud and safety and soundness. Unfortunately, as the 2008 housing
crisis demonstrated, these are potential issues for the financial
services sector as a whole. The Board remains committed to addressing
market risks and to ensuring FICU compliance with applicable laws and
regulations. The final rule adopts a balanced approach that provides
FICUs with greater flexibility to determine an appropriate funding
structure to support ongoing credit union operations in a financially
sound and prudent manner. The commenters also raised potential impacts
on the national and local economies but did not provide any data on
which to assess these concerns. The Board believes that, by enabling
FICUs to better serve the needs of their communities, any impact of the
rule on the broader economy will be positive. However, the Board, as it
does for all its regulations, will monitor the effects of this final
rule and make necessary policy adjustments as the circumstances
warrant.
While this final rule will provide individual credit unions with
additional flexibility regarding funding options, it will not
materially increase the aggregate level of public unit and nonmember
shares and borrowings the credit union system can collectively utilize.
Credit unions could grow by 56 percent in aggregate if they all
utilized the full authority under current regulation and net worth
constraints.\25\ With this final rule, credit unions could grow by 65
percent in aggregate. Thus, this final rule only provides a modest
amount of additional balance sheet leverage in total. Additionally,
credit unions currently have about $69 billion in outstanding public
unit, nonmember shares, and borrowings representing only 4 percent of
total assets.\26\
---------------------------------------------------------------------------
\25\ These percentages take into account a practical limit on
the amount of funding credit unions can obtain before their net
worth ratio would decline below 7 percent--the level necessary to be
well capitalized for prompt corrective action purposes. See 12 CFR
part 702.
\26\ The total amount of public unit and nonmember shares is $16
billion or 1 percent of total assets and the total amount of
borrowings is $53 billion or 3 percent of total assets.
---------------------------------------------------------------------------
V. Regulatory Procedures
A. Regulatory Flexibility Act
The Regulatory Flexibility Act \27\ requires the NCUA to prepare an
analysis to describe any significant economic impact a regulation may
have on a substantial number of small entities (primarily those under
$100 million in assets).\28\ This rule will provide FICUs with
additional flexibility to accept public unit and nonmember shares.
Accordingly, the Board believes that the rule will not have a
significant economic impact on a substantial number of small credit
unions. Therefore, a regulatory flexibility analysis is not required.
---------------------------------------------------------------------------
\27\ 5 U.S.C. 601 et seq.
\28\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.)
requires that the Office of Management and Budget (OMB) approve all
collections of information by a Federal agency from the public before
they can be implemented. Respondents are not required to respond to any
collection of information unless it displays a current, valid OMB
control number. In accordance with the PRA, the information collection
requirements included in this final rule has been submitted to OMB for
approval under control number 3133-0114.
C. Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.\29\
The NCUA, an independent regulatory agency, as defined in 44 U.S.C.
3502(5), voluntarily complies with the executive order to adhere to
fundamental federalism principles. The final rule will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government. The Board
has therefore determined that this final rule does not constitute a
policy that has federalism implications for purposes of the executive
order.
---------------------------------------------------------------------------
\29\ 64 FR 43255 (Aug. 4, 1999).
---------------------------------------------------------------------------
D. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this final rule will not affect family
well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
E. Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA) \30\ generally provides for congressional review of agency
rules. A reporting requirement is triggered in instances where the NCUA
issues a final rule as defined by section 551 of the Administrative
Procedure Act.\31\ An agency rule, in addition to being subject
[[Page 58309]]
to congressional oversight, may also be subject to a delayed effective
date if the rule is a ``major rule.'' The NCUA does not believe this
rule is a ``major rule'' within the meaning of the relevant sections of
SBREFA. As required by SBREFA, the NCUA has submitted this final rule
to the Office of Management and Budget (OMB) for it to determine if the
final rule is a ``major rule'' for purposes of SBREFA. The OMB
determined that the rule is not major. The NCUA also will file
appropriate reports with Congress and the Government Accountability
Office so this rule may be reviewed.
---------------------------------------------------------------------------
\30\ Public Law 104-121.
\31\ 5 U.S.C. 551.
---------------------------------------------------------------------------
List of Subjects
12 CFR Part 701
Credit unions, Public units, Nonmember accounts.
12 CFR Part 741
Bank deposit insurance, Credit unions, Reporting and recordkeeping
requirements.
By the National Credit Union Administration Board on October 24,
2019.
Gerard Poliquin,
Secretary of the Board.
For the reasons stated above, NCUA amends 12 CFR parts 701 and 741
as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
1. The authority for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 1787, 1789. Section
701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also
authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601-3610.
Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
0
2. In Sec. 701.32, revise paragraph (b) to read as follows:
Sec. 701.32 Payment on shares by public units and nonmembers.
* * * * *
(b) Limitations--(1) Aggregate limit on public unit and nonmember
shares. Except as permitted under paragraph (c) of this section, a
federal credit union may not receive public unit and nonmember shares
in excess of the greater of:
(i) 50 percent of the net amount of paid-in and unimpaired capital
and surplus less any public unit and nonmember shares, as measured at
the time of acceptance of each public unit or nonmember share (i.e.,
[GRAPHIC] [TIFF OMITTED] TR31OC19.019
(ii) $3 million.
(2) Required due diligence. Before receiving public unit or
nonmember shares that, taken together with any borrowings, exceed 70
percent of paid-in and unimpaired capital and surplus, the board of
directors must adopt a specific written plan concerning the intended
use of these funds that is consistent with prudent risk management
principles.
* * * * *
PART 741--REQUIREMENTS FOR INSURANCE
0
3. The authority for part 741 continues to read as follows:
Authority: 12 U.S.C. 1757, 1766(a), 1781-1790, and 1790d; 31
U.S.C. 3717.
0
4. In Sec. 741.204, revise paragraph (a) to read as follows:
Sec. 741.204 Maximum public unit and nonmember accounts, and low-
income designation.
* * * * *
(a) Adhere to the requirements of Sec. 701.32 of this chapter
regarding public unit and nonmember accounts, provided it has the
authority to accept such accounts.
* * * * *
[FR Doc. 2019-23679 Filed 10-30-19; 8:45 am]
BILLING CODE 7535-01-P