[Federal Register Volume 80, Number 204 (Thursday, October 22, 2015)]
[Proposed Rules]
[Pages 63932-63933]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26788]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 80, No. 204 / Thursday, October 22, 2015 /
Proposed Rules
[[Page 63932]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 703
RIN 3133-AE55
Investment and Deposit Activities--Bank Notes
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
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SUMMARY: The NCUA Board (Board) proposes to amend the maturity
requirement for bank notes to be permissible investments for federal
credit unions (FCUs) by removing the word ``original'' from the current
requirement that bank notes have ``original weighted average maturities
of less than 5 years.'' This amendment will provide regulatory relief
for FCUs.
DATES: Comments must be received on or before November 23, 2015.
ADDRESSES: You may submit comments by any of the following methods, but
please send comments by one method only:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the
instructions for submitting comments.
Email: Address to [email protected]. Include ``[Your
name] -- Comments on Proposed Rule-- Bank Notes'' in the email subject
line.
Fax: (703) 518-6319. Use the subject line described above
for email.
Mail: Address to Gerard Poliquin, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
FOR FURTHER INFORMATION CONTACT: John Nilles, Senior Capital Markets
Specialist, Office of Examination and Insurance, at the above address
or telephone (703) 518-6360; or Justin M. Anderson, Senior Staff
Attorney, Office of General Counsel, at the above address or telephone
(703) 518-6540.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Proposed Amendments
III. Regulatory Procedures
I. Background
By NCUA regulation, bank notes with original weighted average
maturities of less than 5 years are permissible investments for
FCUs.\1\ The authority for FCUs to invest in these bank notes is
derived from the provision of the Federal Credit Union Act (the Act)
that permits FCUs to make deposits in, among other things, national and
state banks. The Act does not provide authority for FCUs to purchase
bank notes that are not deposits. The Act, however, does not define
``deposit.'' NCUA's long-standing policy has been to use the definition
of deposit in Regulation D. Regulation D provides, in relevant part,
that a liability of a depository institution can be a ``deposit'' if,
among other things: (1) It is insured; (2) it is not subordinated to
the claims of depositors; and (3) it has a weighted average maturity of
less than five years.\2\ The Board notes that the third prong of the
above test does not include the word ``original.''
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\1\ 12 CFR 703.14(f)(5).
\2\ 12 CFR 204.2(a)(1)(vii)(C).
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When the Board first added ``bank notes'' as a permissible
investment to its investment regulation, Part 703, the Board noted in
the preamble to that proposed rule that it was codifying the position
NCUA had taken in previously issued legal opinions on the topic.\3\
Those legal opinions articulated NCUA's policy of using the Regulation
D definition of ``deposit'' and interpreting ``weighted average
maturity'' as being the original weighted average maturity.\4\ While
this interpretation made it easier for FCUs to calculate the weighted
average maturity,\5\ the Board is aware that this may now be
unintentionally burdensome to FCUs by limiting the offerings in which
FCUs may invest. As such, the Board proposes to remove the word
``original'' from the maturity requirement and thereby more closely
align NCUA's requirements regarding bank notes with Regulation D.
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\3\ 62 FR 32989, 32998 (June 18, 1997).
\4\ See OGC Ops. 96-0625 (July 22, 1996) and 02-0830 (Dec. 4,
2002).
\5\ Id.
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II. Proposed Amendments
This proposed rule will amend the maturity requirement for bank
notes to be permissible investments for FCUs by removing the word
``original'' from the current requirement that bank notes have
``original weighted average maturities of less than 5 years.'' As
noted, this will more closely align NCUA's investment restrictions with
the definition of ``deposit'' in Regulation D. This proposed rule also
will provide FCUs with some measure of regulatory relief. By removing
the word ``original,'' which ties the bank note's maturity to its
original date of issuance, FCUs will be permitted to select from a much
larger pool of possible bank note offerings. Expanding the list of
permissible offerings will result in: (1) Cheaper execution prices, as
the ``less than 5 years'' element resulted in those bank notes often
selling at a premium; (2) flexibility for FCUs to purchase bank notes
that were originally issued \6\ with maturities greater than 5 years;
and (3) FCUs being able to spend less time and effort in finding
suitable offerings.
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\6\ Under this proposal FCUs could purchase a bank note that was
originally issued with a maturity longer than five years, provided
that, at the time of purchase, the bank note has a remaining
maturity of five years or less.
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Further, removing the word ``original'' will not pose any safety or
soundness concerns. Safety and soundness concerns generally apply to an
FCU's overall maturity risk on a portfolio-wide basis and not to any
one investment. If this rule is finalized as proposed, FCUs would be
permitted to purchase bank notes that had original maturities greater
than 5 years but have remaining maturities of less than 5 years.
The Board is issuing this proposal with a 30-day comment period
rather than its traditional 60-day comment period. The shortened period
reflects the simplicity of the proposed amendment and also enables the
Board to provide expedited regulatory relief in this area.
[[Page 63933]]
III. Regulatory Procedures
1. Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
of any significant economic impact a regulation may have on a
substantial number of small entities (primarily those under $50 million
in assets).\7\ This proposed rule will have a minimal economic impact
on credit unions as bank notes are just one small portion of a typical
investment portfolio. Accordingly, NCUA certifies the rule will not
have a significant economic impact on a substantial number of small
credit unions.
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\7\ 5 U.S.C. 603(a); 12 U.S.C. 1787(c)(1).
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2. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in
which an agency by rule creates a new paperwork burden or increases an
existing burden.\8\ For purposes of the PRA, a paperwork burden may
take the form of a reporting or recordkeeping requirement, both
referred to as information collections. This proposed rule creates new
investment options for FCUs but will not create any new burdens or
increase any existing burdens. Therefore, a PRA analysis is not
required.
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\8\ 44 U.S.C. 3507(d); 5 CFR part 1320.
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3. 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. The proposed rule does 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,
therefore, determined that this proposal does not constitute a policy
that has federalism implications for purposes of the executive order.
4. Assessment of Federal Regulations and Policies on Families
NCUA has determined that this proposed rule will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects in 12 CFR Part 703
Credit unions, Investments.
By the National Credit Union Administration Board on October 15,
2015.
Gerard Poliquin,
Secretary of the Board.
For the reasons discussed above, the National Credit Union
Administration proposes to amend 12 CFR part 703 as follows:
PART 703--INVESTMENT AND DEPOSIT ACTIVITIES
0
1. The authority citation for part 703 continues to read as follows:
Authority: 12 U.S.C. 1757(7), 1757(8), and 1757(15).
Sec. 703.14 [Amended]
0
2. Amend Sec. 703.14(f)(5) by removing the word ``original''.
[FR Doc. 2015-26788 Filed 10-21-15; 8:45 am]
BILLING CODE 7535-01-P