[Federal Register Volume 66, Number 245 (Thursday, December 20, 2001)]
[Rules and Regulations]
[Pages 65622-65624]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 01-31286]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 700, 701, 712, 715, 723, 725, and 790
Definitions; Organization and Operation of Federal Credit Unions;
Credit Union Service Corporations; Supervisory Committee Audits and
Verifications; Member Business Loans; Central Liquidity Facility;
Description of NCUA
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: NCUA is issuing a final rule to amend various rules to make
technical corrections and add and revise certain definitions. The Board
is adding a scope section and definitions of ``paid-in and unimpaired
capital and surplus'' and ``unimpaired capital and surplus'' to its
rule containing definitions. The Board also is removing obsolete
references from this rule and updating the rule concerning changes in
officials of newly chartered or troubled credit unions. The Board is
correcting a citation in the supervisory committee rule and making
clarifications to the credit union service organization (CUSO) rule and
the member business loan rule. In addition, the Board is updating and
clarifying the definition for ``paid-in and unimpaired capital and
surplus'' in the Central Liquidity Facility (CLF) rule. Finally, the
Board is changing a reference in Part 790 from the ``Office of
Community Development Credit Unions'' to the ``Office of Credit Union
Development.''
DATES: This rule is effective January 22, 2002.
FOR FURTHER INFORMATION CONTACT: Regina Metz, Staff Attorney, Division
of Operations, Office of General Counsel, at the National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428, or
telephone: (703) 518-6561; or Herbert S. Yolles, Deputy Director,
Office of Examination and Insurance, at the same address or telephone:
(703) 518-6360.
SUPPLEMENTARY INFORMATION:
Background
On June 21, 2001, NCUA issued a proposed rule on definitions and
technical corrections. 66 FR 33211, June 21, 2001. The proposed rule
resulted from NCUA's policy of continually reviewing its regulations to
``update, clarify and simplify existing regulations and eliminate
redundant and unnecessary provisions.'' Interpretive Rulings and Policy
Statement (IRPS) 87-2, Developing and Reviewing Government Regulations.
The NCUA Board is issuing the final rule unchanged from the proposed
rule.
The proposed rule replaced obsolete references in two parts of
NCUA's regulations related with new references to prompt corrective
action, section 216 of the Federal Credit Union Act. 12 CFR 700.1,
701.14. In the definitions part of the regulations, the proposed rule
added a scope section and definitions for ``paid-in and unimpaired
capital and surplus'' and ``unimpaired capital and surplus.'' 12 CFR
part 700. The proposed rule conformed definitions of paid-in and
unimpaired capital and surplus in the CUSO and CLF rules to the
proposed definitions in the definitions part. 12 CFR 712.2(d); 12 CFR
725.2(o). The proposed rule also corrected a citation in the
supervisory committee audit rule and clarified the member business loan
rule by changing a reference from ``federally insured credit unions''
to ``federally insured state-chartered credit unions.'' 12 CFR
715.2(l), 723.4. The proposed rule also updated NCUA's regulations by
changing a reference in Part 790 from the ``Office of Community
Development Credit Unions'' to the office's new name, the ``Office of
Credit Union Development.'' The NCUA Board is adopting all the proposed
changes in the final rule.
Summary of Comments
The NCUA Board requested comment on all aspects of the proposed
rule and received three comment letters: One from a national trade
association, one from a state trade association, and one from a federal
credit union (FCU). The two trade associations supported the proposal
without qualification. The FCU offered a substantive comment regarding
the definition of ``paid-in and unimpaired capital and surplus,''
discussed below. NCUA received no comment on the other provisions in
the proposed rule. This preamble does not repeat discussions from the
proposal for those provisions and the NCUA Board has adopted them as
proposed.
``Paid-in and Unimpaired Capital and Surplus'' and ``Unimpaired
Capital and Surplus''
To improve the clarity of NCUA's regulations, the Board proposed to
include definitions for ``paid-in and unimpaired capital and surplus''
and ``unimpaired capital and surplus'' in the general definitions part
of the regulations. The proposed rule defined ``unimpaired capital and
surplus'' as meaning the same as ``paid-in and unimpaired capital and
surplus'' and
[[Page 65623]]
cross-referenced its definition. The proposed definition for ``paid-in
and unimpaired capital and surplus'' was a refined statement of the
definitions currently in the FCU Bylaws, but did not change the meaning
of those definitions or the agency's long-standing interpretation.
The proposed definition for paid-in and unimpaired capital and
surplus was shares plus post-closing, undivided earnings. The preamble
to the proposed rule stated that the term ``post-closing'' was simpler
terminology that a credit union person, an examiner, and an accounting
professional would understand to encompass the closing of the books and
posting of all relevant and required period losses to undivided
earnings. Post-closing undivided earnings incorporates and means the
same as the language in the Bylaw provisions that define surplus
(``after all losses have been provided for and net earnings or net
losses have been added thereto or deducted therefrom'') and define
unimpaired capital (``less any losses that may have been incurred for
which there is no reserve or which have not been charged against
undivided earnings''). The proposed definition further clarified the
meaning of paid-in and unimpaired capital and surplus by including the
statement that: ``This does not include regular reserves or special
reserves required by law, regulation or special agreement between the
credit union and its regulator or share insurer.''
Amendment to Definition of ``Paid-in and Unimpaired Capital and
Surplus'' in the CLF Rule
As stated in the proposed rule, the CLF is a mixed-ownership
government corporation created to improve the general financial
stability of credit unions by meeting their liquidity needs. 12 CFR
725.1. Both state-chartered and federally-chartered credit unions may
become members. 12 CFR 725.3. The Board proposed to revise the current
definition in the CLF rule for paid-in and unimpaired capital and
surplus. The current CLF rule combines the definition for paid-in and
unimpaired capital in the FCU Bylaws with the definition of surplus in
the FCU Bylaws and is substantively identical to those provisions. 12
CFR 725.2(o). The current definition includes deposits because some
state-chartered credit unions are authorized to accept deposits.
The proposed rule defined paid-in and unimpaired capital and
surplus in the CLF rule as shares and deposits plus post-closing,
undivided earnings. The proposed definition further stated that the
term does not include regular reserves or special reserves required by
law, regulation or special agreement between the credit union and its
regulator or share insurer.
Comments on the Definitions of ``Paid-in and Unimpaired Capital and
Surplus''
One commenter expressed the view that the NCUA should simplify the
general definition of ``paid-in and unimpaired capital and surplus'' to
``shares and deposits plus unappropriated earnings,'' in order to
include the concept of ``unrealized gains or losses on investments'' as
part of ``unappropriated earnings.'' The Board disagrees. The Board's
view is that ``unappropriated earnings'' are equivalent to ``undivided
earnings,'' and neither term includes unrealized gains or losses on
investments, since these amounts are not yet earned or realized. Thus,
the final rule uses the term ``undivided earnings.''
Regarding the commenter's suggestion that the general definition
include deposits, for the reasons stated in the proposed rule, only the
CLF definition of ``paid-in and unimpaired capital and surplus''
includes deposits. The general definition does not include them in the
final rule.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact a rule may have on a
substantial number of small entities (primarily those under one million
dollars in assets). The final rule will not have a significant economic
impact on a substantial number of small credit unions, and therefore, a
regulatory flexibility analysis is not required.
Paperwork Reduction Act
NCUA has determined that the final rule would not increase
paperwork requirements under the Paperwork Reduction Act of 1995 and
regulations of the Office of Management and Budget.
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, NCUA, an independent
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order. This final rule would not have substantial
direct effects on the states, on the relationship between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government. NCUA has
determined that this final rule does not constitute a policy that has
federalism implications for purposes of the executive order.
The Treasury and General Government Appropriations Act, 1999--
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, Pub. L. 105-277, 112 Stat.
2681 (1998).
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-121) provides generally for congressional review of agency
rules. A reporting requirement is triggered in instances where NCUA
issues a final rule as defined by Section 551 of the Administrative
Procedures Act. 5 U.S.C. 551. The Office of Management and Budget
concurred with NCUA's opinion that the final rule does not constitute a
major rule, for purposes of the Small Business Regulatory Enforcement
Fairness Act of 1996.
Agency Regulatory Goal
NCUA's goal is to promulgate clear and understandable regulations
that impose minimal regulatory burden. NCUA requested comments on
whether its proposed rule was understandable and minimally intrusive,
but received no comments in response to this request.
List of Subjects
12 CFR Part 700
Credit unions, Definitions.
12 CFR Part 701
Credit unions.
12 CFR Part 712
Credit unions, Credit union service organizations.
12 CFR Part 715
Audits, Credit unions, Supervisory committees.
12 CFR Part 723
Credit, Credit unions.
12 CFR Part 725
Credit unions, Liquidity.
12 CFR Part 790
Credit unions.
[[Page 65624]]
By the National Credit Union Administration Board on December
13, 2001.
Becky Baker,
Secretary of the Board.
Accordingly, the NCUA amends 12 CFR parts 700, 701, 715, 723, 725,
and 790 as follows:
PART 700--DEFINITIONS
1. The authority citation for part 700 continues to read as
follows:
Authority: 12 U.S.C. 1752, 1757(6), 1766.
2. Redesignate current Sec. 700.1 as Sec. 700.2 and add a new
Sec. 700.1 to read as follows:
Sec. 700.1 Scope.
The definitions in Sec. 700.2 apply to terms used in this chapter.
Many additional definitions appear in the parts where the terms are
used.
3. In newly redesignated Sec. 700.2:
A. Remove paragraphs (h) and (j);
B. Redesignate paragraphs (e), (f), (g), and (i), as paragraphs
(g), (h), (i), and (e) respectively; and
C. Add new paragraphs (f) and (j), to read as follows:
Sec. 700.2 Definitions.
* * * * *
(f) Paid-in and unimpaired capital and surplus means shares plus
post-closing, undivided earnings. This does not include regular
reserves or special reserves required by law, regulation or special
agreement between the credit union and its regulator or share insurer.
``Paid-in and unimpaired capital and surplus'' for purposes of the
Central Liquidity Facility is defined in Sec. 725.2(o) of this chapter.
* * * * *
(j) Unimpaired capital and surplus means the same as ``paid-in and
unimpaired capital and surplus,'' as defined in paragraph (f) of this
section.
* * * * *
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
4. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, and 1789. Section 701.6 is also
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by
15 U.S.C. 1601 et seq., 42 U.S.C. 1861 and 42 U.S.C. 3601-3610.
Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
5. In Sec. 701.14, revise paragraphs (b)(3)(ii) and (b)(4)(ii) to
read as follows:
Sec. 701.14 Change in official or senior executive officer in credit
unions that are newly chartered or are in troubled condition.
* * * * *
(b) * * *
(3) * * *
(ii) Has been granted assistance as outlined under sections 208 or
216 of the Federal Credit Union Act.
(4) * * *
(ii) Has been granted assistance as outlined under sections 208 or
216 of the Federal Credit Union Act.
* * * * *
PART 712--CREDIT UNION SERVICE ORGANIZATIONS (CUSOs)
6. The authority citation for part 712 continues to read as
follows:
Authority: 12 U.S.C. 1756, 1757(5)(d) and (7)(I), 1766, 1782,
1784, 1785, and 1786.
7. Amend Sec. 712.2 by revising paragraph (d) to read as follows:
Sec. 712.2 How much can an FCU invest in or loan to CUSOs, and what
parties may participate?
* * * * *
(d) Measurement for calculating regulatory limitation. For purposes
of paragraphs (a) and (b) of this section:
(1) Paid-in and unimpaired capital and surplus means shares plus
post-closing, undivided earnings (this does not include regular
reserves or special reserves required by law, regulation or special
agreement between the credit union and its regulator or share insurer);
and
(2) Total investments in and total loans to CUSOs will be measured
consistent with GAAP.
* * * * *
PART 715--SUPERVISORY COMMITTEE AUDITS AND VERIFICATIONS
8. Revise the authority citation for part 715 to read as follows:
Authority: 12 U.S.C. 1761(b), 1761d, 1782(a)(6).
9. Amend Sec. 715.2(l) by revising the first sentence to read as
follows:
Sec. 715.2 Definitions used in this part.
* * * * *
(l) Supervisory committee refers to a supervisory committee as
defined in Section 111(b) of the Federal Credit Union Act, 12 U.S.C.
1761(b). * * *
* * * * *
PART 723--MEMBER BUSINESS LOANS
10. The authority citation for part 723 continues to read as
follows:
Authority: 12 U.S.C. 1756, 1757, 1757A, 1766, 1785, 1789.
11. Amend Sec. 723.4 by revising the second sentence to read as
follows:
Sec. 723.4 What are the other applicable regulations?
* * * Except as required by part 741 of this chapter, federally insured
state-chartered credit unions are not required to comply with the
provisions of Sec. 701.21(a) through (g) of this chapter.
PART 725--NATIONAL CREDIT UNION ADMINISTRATION CENTRAL LIQUIDITY
FACILITY
12. The authority citation for part 725 continues to read as
follows:
Authority: 12 U.S.C. 1795-1795f.
13. Amend Sec. 725.2 by revising paragraph (o) to read as follows:
Sec. 725.2 Definitions.
* * * * *
(o) Paid-in and unimpaired capital and surplus means shares and
deposits plus post-closing, undivided earnings. This does not include
regular reserves or special reserves required by law, regulation or
special agreement between the credit union and its regulator or share
insurer.
* * * * *
PART 790--DESCRIPTION OF NCUA; REQUESTS FOR AGENCY ACTION
14. The authority citation for part 790 continues to read as
follows:
Authority: 12 U.S.C. 1766, 1789, 1795f.
15. Amend Sec. 790.2(b)(13) by revising the heading to read as
follows:
Sec. 790.2 Central and regional office organization.
* * * * *
(b) * * *
(13) Office of Credit Union Development. * * *
* * * * *
[FR Doc. 01-31286 Filed 12-19-01; 8:45 am]
BILLING CODE 7535-01-U