Proposed Rule Summary

Prepared by NASCUS State Regulatory Affairs Department
December, 2015

NCUA 12 CFR Chapter VII                          Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA)  # 4
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The NCUA has issued its fourth, and final, notice of regulatory review and request for comments regarding the Agency’s regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).  NCUA is not statutorily required to engage in EGRPRA review, but has elected to participate in the process by conducting an independent review that is “consistent and comparable” to the federal banking agencies process, taking into account the “unique circumstances of federally insured credit unions and their members.” NCUA’s review will be included in the formal EGRPRA report to Congress.

Comments on this final round of EGRPRA review are due March 22, 2016 (90 days from publication in the Federal Register).

The complete proposal may be read here.

EGRPRA mandates a review of the federal banking agencies’ regulations every 10 years in order to identify and minimize outdated, unnecessary, or unduly burdensome requirements.1 Each agency publishes a summary of the comments received in the Federal Register, addresses the significant issues raised, and eliminates unnecessary regulations “to the extent such action is appropriate.”  Under EGRPRA, the Federal Financial Institutions Examination Council (FFIEC) must submit a report to Congress analyzing whether the significant issues raised in the review can be addressed by regulation, or whether they require a legislative solution.  The FFIEC report will contain a separate section devoted to NCUA and credit union issues.

EGRPRA at-a-Glance:

  • NCUA requests comments that identify needed statutory change, suggest different approaches to achieving statutory goals that impose less of a burden, minimize burden on small credit unions, or alleviate reporting, recordkeeping or disclosure requirements.
  • NCUA seeks comments on two categories of rules: 1) Procedure; and 2) Safety & Soundness. The following chart specifies the provisions of NCUA’s rules subject to this notice:

Rules of Procedure

Subject

Provision

Applicability to FISCUs

Liquidation
Involuntary & Voluntary

Parts 709 & 710

Part 741.218  

Uniform Rules of Practice & Procedure

Part 747, Subpart A

Part 741.213

Local Rules of Practice & Procedure

Part 747, Subparts B-J

Part 741.213

Inflation Adjustment of Civil Money Penalty

Part 747, Subpart K

Part 741.213

Issuance, Review, & Enforcement of Orders Imposing PCA

Part 747, Subparts L&M

Part 741.213
Part 741.3(a)

Safety & Soundness

Lending

Part 701.21

Part 741.203

Investment & Deposit Activities

Part 703

Parts 741.3 & 741.219

Supervisory Committee Audit

Part 715

Part 741.202

Security Programs

Part 748

Part 741.214

Guidelines for Safeguarding Member Information

Part 748, Appendices A & B

Part 741.214

Records Preservation Program & Appendices

Part 749

Part 741.216

Appraisals

Part 722

Part 71.203

Examination

Part 741.1

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Liquidity & Contingency Funding Plans

Part 741.12

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Regulations Codified Elsewhere in NCUA’s Regulations as Applying to FCUs that also Apply to FISCUs

Part 741, Subpart B

 

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Summary

  1. Voluntary and Involuntary Liquidation; Parts 709 and 710

    Part 710, Voluntary Liquidation, does not apply to FISCUs. Involuntary Liquidation, § 709, applies to FISCUs by incorporation in § 741.218. Note however, that § 709.3 applies only to FCUs. Part 709 deals with creditor claims during the liquidation of federally insured credit union. Depositors/member claims are not included in § 709. Rather, those issues are controlled by share insurance provisions of § 745.

    The Involuntary Liquidation provisions establish NCUA’s responsibilities as liquidating agents and establishes payout priorities, including addressing low-income credit unions and secondary capital accounts but not future supplemental capital. See § 709.5(b)(8).

  2. Uniform Rules of Practice & Procedure, Part 747, Subpart A

    Subpart A of § 747 addresses the administrative procedure related to, and due process afforded, credit unions subject to an administrative order by NCUA. The provisions create recourse to an administrative law judge and the right of parties to have counsel and call witnesses.

  3. Local Rules of Practice & Procedure, Part 747, Subpart B-J

    Part 741.213 incorporates Subparts B-J of § 747 into the rules for FISCUs, however Subpart E of § 747 applies only to FCUs. In general, these provisions limit discovery in adjudication to document production, controls the adjudication of NCUA liquidation orders, and provides that NCUA may terminate insurance for 1) Engaging or having engaged in unsafe or unsound practices, is in unsafe or unsound condition, or has violated any applicable law, regulation, or order.

    Subpart D provides for removal of official charged in state or federal court for a crime of dishonesty. Subpart G allows a party prevailing over NCUA to seek attorney fees.

    Investigations conducted by the NCUA board, or its designees are governed by Subpart H. NCUA investigations may take place before the NCUA board, a single board member, the NCUA general counsel or any officer designated by the board. Subpart I governs witnesses in an NCUA investigation.

    Subpart J applies to credit union notice to NCUA to add or replace an official pursuant to § 1790a) and §700.2 where the credit union either has been chartered less than 2 years; or is in “troubled condition,” as defined by §701.14.

  4. Inflation Adjustment of Civil Monet Penalty, Part 747, Subpart K

    Part 747, Subpart K requires NCUA to adjust the maximum amount of its CMPs to the rate of inflation.

  5. Issuance, Review, & Enforcement of Orders Imposing PCA, Part 747, Subparts L & M

    Subpart L establishes the rules and procedures for federally insured credit unions subject to discretionary action under PCA. Credit unions are provided the right to a hearing before the NCUA board and the right to call witnesses. Credit unions may also seek the determination of the NCUA Ombudsman.  Subpart L also requires NCUA copy state regulators all related notices to a SCU under the provision.

    Subpart M establishes the rules and procedures for NCUA’s imposition of discretionary PCA actions against a corporate credit union.

  6. Lending, Part 701.21

    NCUA’s lending regulation, § 701.21, applies in part to FISCUs by incorporation in § 741.203. The applicable provisions are:

    • §701.21(c)(8), prohibited fees
    • §701.21(d)(5), non-preferential loans
    • §701.21(h), 3rd-party servicing of indirect vehicle loans

    NCUA Part 741.203(a) provides FISCUs an exemption from the prohibited fees and non-preferential loans if their state has promulgated substantially similar regulations.

  7. Investment & Deposit Activity, Part 703

    Part 703, FCU investment authority, applies in part to FISCUs by incorporation in
    § 741.3 and § 741.219. Part 741.3 provides that FISCUs must reserve for non-conforming investments. Non-conforming investments are investments not authorized for FCUs and not investment grade as defined by § 703.2. Part 741.219 requires FISCUs to follow Part 703.14(b) rules for investments with corporate credit unions, including:

    • aggregate amount of perpetual and non-perpetual capital in 1 corporate limited to 2% of investing credit union’s assets
    • aggregate amount of contributed capital in all corporates limited to 4% assets measured at the time of investment or adjustment
  8. Supervisory Committee Audit, Part 715

    Some, but not all, of NCUA’s § 715 audit provisions apply to FUSCUs by incorporation in Part 741.202. The full extent of § 715’s incorporation is unclear. Part 741.202(a) requires every FISCU to obtain an annual audit that meets the applicable requirements of § 715. Those requirements include:

    • Annual audit that complies with § 715
    • Verify all passbooks and accounts at least once every 2 years pursuant to §715.8
  9. Security Programs and Guidelines for Safeguarding Member Information, Part 748
  10. These provisions address Bank Secrecy Act (BSA) requirements, information security and physical security requirements. Part 748 applies to FISCUs by incorporation in § 741.214.

  11. Records Preservation Program, Part 749

    Incorporated by reference in § 741.216, NCUA’s record retention rule requires all federally insured credit unions to maintain a records preservation program to identify, store and reconstruct vital records in the event that the credit union's records are destroyed. Credit unions are required to maintain written policies and procedures for compliance with the provisions.  

  12. Appraisals, Part 722

    FISCUs are required to comply with NCUA’s appraisal rules for FCUs by incorporation in § 741.2013.

  13. Examination, Part 741.1

    This provision requires federally insured credit unions to submit to examination by NCUA. It also reiterates the statutory mandate that NCUA rely on examinations conducted by state regulators to the “maximum extent feasible.”

  14. Liquidity & Contingency Funding Plans, Part 741.12

    Part 741.12 establishes NCUA’s 3 tier approach to liquidity requirements. Credit unions with less than $50 million must have a board approved written policy that establishes a framework for managing liquidity. All other credit unions must have a detailed funding plan commensurate with their size and scope. Credit unions with assets greater than $250 million must have demonstrated access to one of 3 approved sources of emergency liquidity.

  15. Regulations Codified Elsewhere in NCUA’s Regulations that Apply to FISCUs, Part 741 Subpart B

    Part 741 Subpart B contains, most, but not all, of the rules codified elsewhere in NCUA’s regulations that apply to FISCUs. NASCUS notes that the following provisions of § 741 Subpart A also contain incorporated rules:

    • § 741.3
    • § 741.6
    • § 741.8
    • §741.9

1. The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) are subject to EGRPRA.  NCUA’s participation is voluntary.