[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.

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                             Asset size                                   < $10M           < $20M           < $30M           < $40M           < $50M
--------------------------------------------------------------------------------------------------------------------------------------------------------
 Failures Last 10 years...................................            132              143              151              160              162
Losses ($M) Last 10 years..........................................           $104.4           $150.3           $171.7           $207.9           $212.8
Avg.  Failures Per Year...................................             12.3             13.3             14               14.9             15.1
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    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.
---------------------------------------------------------------------------

    \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