Federal Register, Volume 78 Issue 13 (Friday, January 18, 2013)

[Federal Register Volume 78, Number 13 (Friday, January 18, 2013)]
[Rules and Regulations]
[Pages 4032-4038]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00864]

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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 702, 741 and 791

RIN 3133-AE07

Prompt Corrective Action, Requirements for Insurance, and
Promulgation of NCUA Rules and Regulations

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is issuing a final rule to amend
Interpretive Ruling and Policy Statement (IRPS) 87-2, as amended by
IRPS 03-2, and two NCUA regulations that apply asset thresholds to
grant relief from risk-based net worth and interest rate risk
requirements. The amended IRPS increases the asset threshold that
identifies credit unions to which NCUA will give more robust
consideration of regulatory relief in future rulemakings. The amended
regulations similarly include increased asset thresholds, granting
immediate and prospective relief from existing regulatory burden to a
larger group of small credit unions.

DATES: This rule is effective February 19, 2013.

FOR FURTHER INFORMATION CONTACT: Kevin Tuininga, Trial Attorney, Office
of General Counsel, National Credit Union Administration, 1775 Duke

[[Page 4033]]

Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518-6543.

SUPPLEMENTARY INFORMATION:

I. Background
II. Summary of Public Comments
III. Final Rule
IV. Regulatory Procedures

I. Background

What changes does this final rule make?

The Regulatory Flexibility Act, Public Law 96-354, as amended
(RFA), generally requires federal agencies to determine and specially
consider the impact of proposed and final rules on small entities.
Since 2003, NCUA has defined ``small entity'' in this context as a
credit union with less than $10 million in assets.\1\ This final rule
and IRPS 13-1 redefines ``small entity'' as a credit union with less
than $50 million in assets. The final rule also amends 12 CFR 702.103,
increasing to $50 million the asset threshold used to define a
``complex'' credit union for determining whether risk-based net worth
requirements apply, and 12 CFR 741.3(b)(5), exempting all federally
insured credit unions (referred to as FICUs or credit unions) with
assets of $50 million or less from interest rate risk rule
requirements. To cross-reference IRPS 13-1, the final rule makes a
technical amendment to 12 CFR 791.8.
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\1\ IRPS 03-2, 68 FR 31949 (May 29, 2003).
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What changes were proposed?

On September 20, 2012, the Board issued a proposed rule and IRPS
with a 30-day comment period, which the Board later extended to 60
days. The proposal increased from $10 million to $30 million the asset
thresholds used to define small entity under the RFA and to determine
the applicability of interest rate risk and risk-based net worth
requirements, subject to review every three years.\2\ This increase
addressed the Board's concern that various asset thresholds affecting
regulatory relief for small FICUs were outdated. By proposing an
increase to the applicable thresholds to $30 million, the Board
intended to account for industry asset growth, consolidation, and
inflation, while avoiding undue risk to the National Credit Union Share
Insurance Fund (NCUSIF).
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\2\ The proposal also included a technical amendment to 12 CFR
791.8.
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What is the history and purpose of the RFA?

Congress enacted the RFA in 1980 and amended it with the Small
Business Regulatory Enforcement Fairness Act of 1996, Public Law 104-
121. The RFA requires federal agencies to determine whether a proposed
or final rule will have a significant economic impact on a substantial
number of small entities.\3\ If so, agencies must prepare an analysis
that describes the rule's impact on small entities.\4\ The analysis
must include descriptions of any significant alternatives that minimize
the impact.\5\ This requirement encourages federal agencies to give
special consideration to the ability of smaller entities to absorb
compliance burden imposed by new rules.
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\3\ 5 U.S.C. 603, 604, 605(b). The term ``small entity'' as used
in the RFA includes small businesses, small organizations, and small
government jurisdictions. 5 U.S.C. 601(6). Credit unions fall within
the definition of organization. 5 U.S.C. 601(4). The RFA gives
agencies authority, under certain conditions, to establish their own
definition of ``small entity.'' Id.
\4\ Id.
\5\ Id.
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In IRPS 81-4, the Board initially defined ``small entity'' for
purposes of the RFA as any credit union with less than $1 million in
assets.\6\ IRPS 87-2 superseded IRPS 81-4 but retained the definition
of ``small entity'' as a credit union with less than $1 million in
assets.\7\ The Board updated the definition in 2003 to include credit
unions with less than $10 million in assets.\8\ IRPS 87-2 and IRPS 03-2
were incorporated by reference into NCUA's rule governing the
promulgation of regulations.\9\
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\6\ 46 FR 29248 (June 1, 1981).
\7\ 52 FR 35231 (Sept. 8, 1987).
\8\ 68 FR at 31949.
\9\ 12 CFR 791.8(a).
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When the Board updated its RFA threshold to $10 million, it noted
that amendments to the Federal Credit Union Act (FCU Act) in 1998
employed a $10 million threshold for multiple new provisions.\10\ These
new provisions addressed the use of generally accepted accounting
principles and voluntary audits; prompt corrective action (PCA) for new
credit unions; and assistance for small credit unions in filing net
worth restoration plans.\11\ IRPS 03-2 set the threshold in NCUA's RFA
definition consistent with the $10 million threshold in the new FCU Act
provisions. The Board has not increased the RFA threshold since 2003.
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\10\ 68 FR at 31950.
\11\ 12 U.S.C. 1782(a)(6); 1790d.
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II. Summary of Public Comments

The public comment period for the proposed rule and IRPS ended on
November 26, 2012. NCUA received 51 comments from 52 commenters. The
commenters included 19 federal credit unions, 13 state-chartered credit
unions, four trade associations (representing credit unions and state
credit union regulators), 15 state credit union leagues, and one
individual.
Almost all commenters expressly supported the Board's efforts to
relieve regulatory burden, with just over half advocating for changes
to the proposed asset threshold, the criteria NCUA uses to define small
entity, and/or the proposed three-year review period. In addition to
resource concerns, multiple commenters drew comparisons between FICUs
and non-credit union institutions with which they compete to advocate
for a higher RFA threshold. The general comments on the proposal are
described in detail below.

What were the general comments supporting the proposed rule or
advocating for a higher asset threshold?

Commenters generally fell into groups that supported or advocated
three different asset thresholds or ranges, including (a) $30 million;
(b) $40 million to approximately $50 million; and (c) approximately
$100 million to $500 million. The first group, comprised of 22
commenters, supported the rule without advocating changes. These
commenters noted that raising the threshold would give them more time
and resources to serve members. Seventeen of these commenters submitted
similar form letters.
A second group of six commenters advocated for a threshold between
$40 million and $51.5 million. Two of these commenters suggested NCUA
reference the Home Mortgage Disclosure Act reporting threshold
(currently $42 million) to support increasing the RFA threshold to $40
million or $50 million. One commenter suggested an increase to $45
million, noting minimal operational differences between credit unions
of $30 million and $45 million. Finally, one of these six commenters
suggested NCUA adopt a threshold of $51.5 million based on an industry
risk assessment.
A third group, comprised of 16 commenters, suggested NCUA reference
the $175 million asset threshold the Small Business Administration
(SBA) uses in its small business size standards.\12\ Most of these
commenters suggested that NCUA simply adopt the SBA's threshold for the
RFA, stating that the Consumer Financial Protection Bureau and Federal
Reserve Board have done so.\13\ These commenters also

[[Page 4034]]

generally supported the SBA's proposal to increase its size standard to
$500 million and suggested that NCUA follow such an increase, if
finalized.\14\ One of these commenters suggested NCUA weigh three
different metrics, including industry percentages, loss history, and
the SBA's size standard to support a threshold of $99 million. Two of
these commenters acknowledged $40 million and $50 million,
respectively, as minimum alternatives to the SBA threshold.
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\12\ 13 CFR 121.201.
\13\ One commenter that advised referencing the SBA's threshold
suggested $150 million as a threshold for NCUA. Another advised a
comparison to the Consumer Financial Protection Bureau in suggesting
a $150 million threshold.
\14\ 77 FR 55737, 55747 (Sept. 11, 2012).
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What were the general comments on the three-year review period and
criteria for defining small entities?

Eleven commenters thought NCUA's RFA threshold should be reviewed
or automatically adjusted every 18 months, or at least more frequently
than every three years, asserting that the SBA reviewed its threshold
on such a schedule. The other supportive commenters (over two-thirds of
all commenters) either expressed support for the three-year review
period or did not mention the review period in their comments
supporting the proposal. A few commenters suggested using one or more
additional or alternative criteria to define small entity, including
number of branches, number of employees, relative risk, and gross
revenues.

What were the comments opposing or not expressly supporting the
proposed rule?

One commenter stated that the RFA is bad policy for financial
institutions and that smaller institutions have more risk and should be
subject to equally or more stringent standards and oversight. This
commenter thought the proposed rule would create a tiered regulatory
system and impede consolidation and efficiency that benefits members.
One commenter noted the challenge and expense of regulatory compliance
but did not expressly support or oppose any aspect of the proposed
rule. Finally, one commenter advocated for three groups of small credit
unions: A micro small group (less than $10 million), a small group ($10
million to $30 million), and a mid-small group ($30 million to $50
million).

What other comments did NCUA receive?

A few commenters made suggestions that no other commenters proposed
or made suggestions on matters the Board did not address in the
proposed rule. One commenter, who otherwise supported reference to the
SBA's threshold, suggested NCUA use an alternative threshold of $50
million for the interest rate risk and risk-based net worth rules.
Several commenters that supported reference to the SBA threshold stated
that NCUA should use a separate threshold of $50 million for assistance
eligibility from the Office of Small Credit Union Initiatives to avoid
strain on NCUA's budget. One commenter suggested a longer period
between examinations for well-run FICUs.
One commenter criticized NCUA for requiring compliance with the
interest rate risk rule on the rule's September 30, 2012 effective date
and stated that failing to relieve small credit unions from proposed
Financial Accounting Standards Board requirements further negated the
benefit of increasing the asset threshold in that rule.\15\ Another
requested that NCUA include more discussion in the final rule's
preamble of the proposed emergency liquidity rule and discuss which
rules would remain unchanged by the new threshold.\16\ One commenter
suggested removal of the term ``complex'' from NCUA regulations and an
immediate effective date for the final rule.\17\
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\15\ The Board understands that some FICUs exempt from interest
rate risk rule requirements because of this final rule nevertheless
adopted an interest rate risk policy and program as of September 30,
2012 to comply with the interest rate risk rule's deadline. The
Board determined an extension of the September deadline was
imprudent due to uncertainty about when the proposed rule would
become final and what threshold amount the final rule would
incorporate after consideration of public comments. With respect to
FASB requirements, the FCU Act contains provisions governing
compliance with generally accepted accounting principles. See, e.g.,
12 U.S.C. 1782(a)(6). Only Congress can amend these FCU Act
provisions; the Board cannot alter them by regulation.
\16\ The Board will consider regulatory burden in the emergency
liquidity rule in a manner consistent with the principles expressed
here and seeks to avoid blending parallel, ongoing rulemakings.
Further, the Board believes a discussion of unaffected thresholds
would make this rulemaking confusing and more cumbersome without
contributing to its clarity. This final rule and IRPS will affect
only the thresholds it expressly addresses.
\17\ The term ``complex'' appears in the FCU Act in connection
with risk-based net worth requirements. See 12 U.S.C. 1790d(d). Only
Congress can amend the FCU Act.
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Multiple commenters stated that NCUA's complexity index from the
proposed rule's preamble was not a reliable indicator of risk and would
unnecessarily reduce the scope of regulatory relief and become a
disincentive to diversify products and services.\18\ A couple
commenters also requested more rigorous RFA analysis for NCUA
regulations.\19\
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\18\ The complexity index is only one reference point that
helped the Board develop a proposed threshold. While the index is a
good indicator of a FICU's relative risk, it does not necessarily
measure whether a particular risk presented by an exemption from a
specific rule is acceptable.
\19\ The Board welcomes general comments in this respect and
also particular comments on ensuring an effective RFA analysis in
future regulations.
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The Board has carefully considered all the public comments it
received in response to the proposed rule and IRPS. Recognizing the
concerns and suggestions the above commenters raised, the Board has
made a substantial adjustment in the final rule. The final rule and the
Board's response to the public comments are discussed below.

III. Final Rule

What changes does this final rule make?

a. The RFA Asset Threshold
This final rule and IRPS 13-1 amends IRPS 87-2 and partially
supersedes IRPS 03-2 by changing the definition of ``small entity'' to
include credit unions with less than $50 million in assets. Several
commenters advocated for a threshold near $50 million based on industry
characteristics, risk data, and the Home Mortgage Disclosure Act
reporting threshold set by the Consumer Financial Protection Bureau.
The Board believes increasing the RFA threshold to $50 million is
reasonable and supportable. As the starting point for its analysis in
the proposed rule, the Board used industry percentages for credit
unions of less than $10 million in assets from 1998, when Congress
established a $10 million threshold in multiple provisions of the FCU
Act. Based on Call Report data from September 30, 2012, a threshold of
$50 million would still approximate several of the industry percentages
from 1998 that the Board referenced in the proposed rule.
As shown in the table below, FICUs with less than $50 million in
assets currently represent 569.6 percent of the NCUSIF, which is very
close to the percentage represented by credit unions with less than $10
million in assets in 1998 (562.0 percent).\20\ Further, using a $50
million threshold, the percentage of system assets and system net worth
would remain within one percentage point of 1998 ratios. A $50 million
threshold also makes a reasonable allowance for asset growth before the
Board's next review of the threshold.
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\20\ The table also shows percentages for various other asset
thresholds, based on the most recent Call Report, for comparison to
the 1998 percentages. The percentages for FICUs with less than $10
million in assets from 1998 and for FICUs with less than $50 million
in assets today are shaded for ease of comparison.

[[Page 4035]]

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% System % System net
Threshold ($M) % Units assets worth % NCUSIF Units
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< $10 (1998).................... 60.4 5.5 6.9 561.2 6,637
< $10........................... 34.9 1.0 1.3 80.4 2,402
< $25........................... 54.2 3.1 4.0 264.3 3,731
< $30........................... 58.0 3.8 4.8 325.5 3,997
< $35........................... 61.2 4.5 5.6 384.2 4,213
< $40........................... 63.5 5.1 6.2 434.7 4,374
< $45........................... 65.8 5.8 7.0 490.9 4,532
< $50........................... 67.8 6.4 7.7 569.6 4,672
< $175.......................... 86.0 18.1 19.7 1534.5 5,925
< $500.......................... 94.2 34.5 36.3 2931.4 6,485
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Commenters advocating that the Board set the threshold higher than
$50 million, including up to $175 million or $500 million, generally
suggested that the Board reference indicators outside of the credit
union industry. The Board believes it should establish NCUA's RFA
threshold by focusing primarily on credit union characteristics, rather
than external indicators and thresholds that apply across multiple and
distinct institution charters. A $50 million threshold will represent a
substantial majority of FICUs, close to 68 percent, and almost 6.5
percent of system assets. It will also align with the RFA's language
permitting agencies to establish a definition that is appropriate to
their own activities, as opposed to the activities of other
agencies.\21\
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\21\ See 12 U.S.C. 601(4) (permitting agencies to establish one
or more definitions that ``are appropriate to the activities of the
agency'').
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In the context of the SBA's broad mandate covering a host of
industries, a $175 million threshold encompasses only 54 percent of all
financial institutions and only three percent of total financial
institution assets. Under the narrower scope of NCUA's regulatory
authority, the SBA's $175 million threshold envelops 86 percent of
FICUs and over 18 percent of FICU assets. When compared in this
context, the percentages of FICUs (68 percent) and assets (6.4 percent)
under this rule's $50 million threshold are significantly higher than
the percentages of all financial institutions (54 percent) and their
assets (three percent) under the SBA's $175 million threshold.\22\
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\22\ 77 FR 55747.
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With respect to commenters advocating alternative criteria for the
RFA definition, the Board continues to believe that an asset threshold
is the best and most transparent measurement for NCUA's RFA definition.
Using an asset threshold is consistent with size standards that appear
elsewhere in the FCU Act and NCUA regulations. Further, regardless of a
FICU's business model, the Board believes the total assets measurement
remains the principal comparative tool that the industry uses to
determine a FICU's relative size.
b. The Review Period
The final rule sets an initial review period of two years, but it
retains the three-year period from the proposed rule for subsequent
reviews. The majority of commenters either expressly supported the
proposed review period or did not advocate for an alternative period.
As stated in the proposal, a three-year review period provides a
reasonable time within which to discern new trends in percentage, loss,
and risk data. In addition, a three-year period is consistent with the
longstanding review period NCUA uses for all its regulations. It
provides sufficient time to avoid the uncertainty of a continuous cycle
of rulemakings and policy adjustments that a shorter period could
create.
Finally, a three-year period will provide more frequent review than
that required of the SBA, which several commenters referenced. Under
the Small Business Jobs Act of 2010 (Jobs Act), the SBA must review at
least one-third of its size standards in 18-month intervals, starting
from date the Jobs Act was enacted, with no longer than five-year
review periods thereafter.\23\ Reviewing one-third of size standards at
18-month intervals would bring each standard up for SBA review every
4.5 years. The Board will initially review the size standards in this
rule, however, within two years of its effective date. After that, the
Board will review the standards every three years. The Board believes a
shorter initial review period is appropriate given the time passed
since the threshold was last reviewed and updated.
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\23\ 77 FR 55737.
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c. The Interest Rate Risk and Risk-Based Net Worth Rules
This final rule adopts a $50 million asset threshold for defining a
``complex'' credit union in 12 CFR 702.103(a). This update will
increase by approximately 2,270, to around 4,670, the number of FICUs
removed from the definition of ``complex'' based on asset size alone.
The increase eliminates the possibility that these FICUs could become
subject to additional PCA provisions due solely to a risk-based net
worth requirement.
In addition, the final rule exempts FICUs of $50 million or less in
assets from the requirements of 12 CFR 741.3(b)(5), NCUA's interest
rate risk rule. The final rule will streamline the tiered system in the
interest rate risk rule by simply requiring all FICUs with more than
$50 million in assets to adopt an interest rate risk policy and
program. FICUs with $50 million or less in assets will not be subject
to interest rate risk requirements by regulation, regardless of their
first mortgage loans and investment maturities. This change will
increase by approximately 2,270, to a total of around 4,670, the number
of FICUs that are exempt, based on asset size alone, from adopting an
interest rate risk policy and program.
In general, incremental risk elevation will accompany the exclusion
of more FICUs from regulations aimed principally at reducing risk. The
Board believes the incremental risk presented by raising the regulatory
thresholds to $50 million is acceptable, especially when weighed
against the advantages of implementing a uniform threshold across
multiple regulations and the benefits of regulatory relief.
The proposed rule's preamble acknowledged that FICU loss history
since 1998 shows that even FICUs with somewhat more than $30 million in
assets have caused a relatively small amount of losses to the NCUSIF.
Loss history data for FICUs of various asset sizes from 1998 through
September 30, 2012 appears below.

[[Page 4036]]

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Number of failures NCUSIF Loss ($M) Percentage of total NCUSIF
---------------------------------------------------------------- losses
-------------------------------
Assets ($M) Failures for Loss for asset Percent for
asset range Cumulative range Cumulative asset range Cumulative
(%) (%)
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< $10................................................... 205 205 $138.5 $138.5 14.3 14.3
$10 to < $20............................................ 12 217 31.0 169.5 3.2 17.5
$20 to < $30............................................ 8 225 22.8 192.2 2.4 19.9
$30 to < $40............................................ 9 234 36.2 228.4 3.7 23.6
$40 to < $50............................................ 4 238 11.3 239.7 1.2 24.8
$50 to < $60............................................ 1 239 3.3 243.1 0.3 25.1
$60 to < $70............................................ 0 239 0.0 243.1 0.0 25.1
$70 to < $80............................................ 2 241 11.3 254.4 1.2 26.3
$80 to < $90............................................ 4 245 22.4 276.8 2.3 28.6
$90 to < $100........................................... 3 248 66.1 342.9 6.8 35.4
$100 to < $200.......................................... 10 258 76.3 419.2 7.9 43.3
$200 to < $500.......................................... 7 265 512.7 931.9 53.0 96.3
>= $500................................................. 1 266 36.1 968.0 3.7 100.0
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As reflected in the table below, almost half of total losses over
the last ten years for FICUs under $50 million in assets occurred in
credit unions with under $10 million in assets, which were already
exempt from interest rate risk and risk-based net worth regulatory
requirements.

More specifically, NCUA determined that, as of the last Call
Report, only one credit union between the proposed $30 million
threshold and a $50 million threshold would have been subject to
additional PCA because it failed to meet risk-based net worth
requirements. Further, only 4.5 percent of FICUs with assets between
$10 million and $50 million have a net worth ratio below seven percent.
For the interest rate risk rule, 56.3 percent of the approximately
2,270 FICUs between $10 million and $50 million were not covered by the
rule as of the last Call Report, because their level of first mortgage
loans and investment maturities, relative to net worth, exempted them.
The 992 FICUs with assets between $10 million and $50 million that were
subject to the interest rate risk rule as of September 30, 2012
(because of their level of first mortgage loans and investment
maturities, relative to net worth) held only 2.7 percent of industry
assets. As with IRPS 13-1, the Board will review and consider adjusting
the thresholds in 12 CFR 702.103(a) and 741.3(b)(5) within two years of
the effective date of this final rule and, subsequently, at least once
every three years. This review period will permit the Board to adjust
the thresholds accordingly if the risk and losses attributable to
increased thresholds are greater than expected.

How does the final rule and IRPS affect FICUs?

The change to the RFA threshold will ensure that regulatory burden
will be more consistently and robustly considered for approximately
2,270 additional FICUs. Around 4,670 FICUs with less than $50 million
in assets would come within the RFA's mandates. Future regulations,
including the proposed emergency liquidity rule, 77 FR 44503 (July 30,
2012), will be more thoroughly evaluated to determine whether FICUs
below $50 million in assets should be exempt from some provisions or
separately considered.
The $50 million threshold for defining ``complex'' credit unions
would categorically exclude around 2,270 more FICUs from the definition
of ``complex'' based on asset size alone, bringing the total number of
excluded FICUs to approximately 4,670. NCUA previously defined a
``complex'' credit union in 12 CFR 702.103 as one with more than $10
million in assets and with a risk-based net worth requirement of more
than six percent. If a ``complex'' credit union fails its risk-based
net worth requirement, the credit union is subject to mandatory PCA
requirements that it otherwise would not be subject to when measured
solely by its net worth.\24\ These PCA requirements govern earnings
retention, net worth restoration plans, asset increases, and member
business loans. Of the 2,270 additional credit unions that the final
rule excludes, approximately 358 FICUs with at least six percent net
worth are no longer subject to a risk-based net worth requirement.
These FICUs are removed one step further from the possibility of PCA
requirements.
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\24\ 12 CFR 702.202(a).
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The new $50 million threshold in NCUA's interest rate risk rule
categorically excludes around 2,270 more FICUs from complying with the
interest rate risk rule based on asset size alone. Once again, this
change brings the total FICUs excluded to around 4,670. The prior
version of the regulation required FICUs between $10 million and $50
million in assets holding combined first mortgages and investments with
maturities greater than five years that equal or exceed net worth to
adopt and implement an interest rate risk policy. Of the approximately
2,270 additional FICUs that this final rule and IRPS excludes, 992 are
no longer required by regulation to adopt and implement an interest
rate risk policy.

IV. Regulatory Procedures

A. Regulatory Flexibility Act

The RFA requires NCUA to prepare an analysis to describe any
significant economic impact a final rule may have on a substantial
number of small entities (defined in this final rule and IRPS as credit
unions with under $50 million in

[[Page 4037]]

assets). In this case, the final rule and IRPS expands the number of
FICUs defined as small entities under the RFA from those with less than
$10 million in assets to those with less than $50 million. It similarly
expands the group of FICUs eligible for relief from risk-based net
worth and interest rate risk requirements. The final rule will reduce
compliance burden for approximately 2,270 more FICUs and, therefore,
will not raise costs in a manner that requires a regulatory flexibility
analysis or a discussion of alternatives for minimizing the final
rule's compliance burden.
With respect to additional FICUs covered by the RFA for future
regulations, the final rule and IRPS provides prospective relief in the
form of special and more robust consideration of their ability to
handle compliance burden. This prospective relief is not quantifiable.
Accordingly, NCUA has determined and certifies that the final rule and
IRPS will not have a significant economic impact on a substantial
number of small entities. No regulatory flexibility analysis is
required.

B. Paperwork Reduction Act

The Paperwork Reduction Act of 1995, Public Law 104-13 (PRA),
applies to rulemakings in which an agency creates a new paperwork
burden on regulated entities or modifies an existing burden. 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 final rule's changes to 12 CFR 702.103
and 741.3(b)(5) will cause an immediate and prospective reduction in
paperwork burden related to PCA requirements and interest rate risk
policies for FICUs between $10 million and $50 million in assets. The
changes to IRPS 87-2, as amended by IRPS 03-2, will not create any new
paperwork burden for FICUs. Thus, NCUA has determined that the
requirements of this final rule and IRPS do not increase the paperwork
requirements under the PRA and regulations of the Office of Management
and Budget.

C. Executive Order 13132

Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the Executive Order to adhere to fundamental
federalism principles. This final rule and IRPS does not have a
substantial direct effect 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.

D. Assessment of Federal Regulations and Policies on Families

NCUA has determined that this final rule and IRPS will not affect
family well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act of 1999, Public Law 105-277.

E. Small Business Regulatory Enforcement Fairness Act

The Small Business Regulatory Enforcement Fairness Act of 1996,
Public Law 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 in the Administrative Procedure
Act.\25\ NCUA believes this final rule is not a major rule for purposes
of the Small Business Regulatory Enforcement Fairness Act, but a
determination from the Office of Management and Budget is pending.
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\25\ 5 U.S.C. 551.
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List of Subjects

12 CFR Part 702

Credit unions, Reporting and recordkeeping requirements.

12 CFR Part 741

Credit unions, Requirements for insurance.

12 CFR Part 791

Administrative practice and procedure, Sunshine Act.

By the National Credit Union Administration Board on January 10,
2013.
Mary Rupp,
Secretary of the Board.

Interpretive Ruling and Policy Statement 87-2

For the reasons stated above, IRPS 13-1 amends IRPS 87-2 (52 FR
35231, September 18, 1987) and partially supersedes IRPS 03-2 (68 FR
31951, May 29, 2003) by revising the second sentence in Section II,
paragraph 2 of IRPS 87-2 and adding two sentences to the end of Section
II, paragraph 2 of IRPS 87-2 to read as follows:

II. Procedures for the Development of Regulations

* * * * *
2. * * * NCUA will designate credit unions with less than $50
million in assets as small entities. * * * Within two years of the
effective date of the increase to $50 million, the NCUA Board will
review and consider adjusting the asset threshold it uses to define
small entities for purposes of analyzing whether a regulation will have
a significant economic impact on a substantial number of small
entities. Thereafter, the NCUA Board will conduct reviews of the asset
threshold every three years.
* * * * *

Conforming Amendments to NCUA Regulations

For the reasons discussed above, the Board amends 12 CFR parts 702,
741 and 791 as follows:

PART 702--PROMPT CORRECTIVE ACTION

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

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

0
2. In Sec. 702.103, amend paragraph (a) by:
0
a. Removing ``ten'' and adding in its place ``fifty'', and
0
b. Removing ``($10,000,000)'' and adding in its place
``($50,000,000)''.

PART 741--REQUIREMENTS FOR INSURANCE

0
3. The authority citation 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. 741.3, revise paragraph (b)(5) to read as follows:

Sec. 741.3 Criteria.

* * * * *
(b) * * *
(5) The existence of a written interest rate risk policy (``IRR
policy'') and an effective interest rate risk management program
(``effective IRR program'') as part of asset liability management.
Federally insured credit unions (``FICUs'') with assets of more than
$50 million, as measured by the most recent Call Report filing, must
adopt a written IRR policy and implement an effective IRR program.
Appendix B to this Part 741 provides guidance on how to develop an IRR
policy and an effective IRR program. The guidance describes widely
accepted best practices in the management of interest rate risk for the
benefit of all FICUs.
* * * * *

[[Page 4038]]

PART 791--RULES OF NCUA BOARD PROCEDURES; PROMULGATION OF NCUA
RULES AND REGULATIONS; PUBLIC OBSERVATION OF NCUA BOARD MEETINGS

0
5. The authority citation for part 791 continues to read as follows:

Authority: 12 U.S.C. 1766, 1789 and 5 U.S.C. 552b.

0
6. In Sec. 791.8, revise paragraph (a) to read as follows:

Sec. 791.8 Promulgation of NCUA rules and regulations.

* * * * *
(a) NCUA's procedures for developing regulations are governed by
the Administrative Procedure Act (5 U.S.C. 551 et seq.), the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.), and NCUA's policies for the
promulgation of rules and regulations as set forth in its Interpretive
Ruling and Policy Statement 87-2 as amended by Interpretive Ruling and
Policy Statements 03-2 and 13-1.
* * * * *
[FR Doc. 2013-00864 Filed 1-17-13; 8:45 am]
BILLING CODE 7535-01-P