[Federal Register Volume 78, Number 147 (Wednesday, July 31, 2013)]
[Pages 46374-46378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18300]



RIN 3133-AE16

Minority Depository Institution Preservation Program

AGENCY: National Credit Union Administration.

ACTION: Proposed Interpretive Ruling and Policy Statement 13-1, with 
request for comments.


SUMMARY: The National Credit Union Administration (NCUA) recognizes the 
importance of minority credit unions and the unique challenges they 
often face in serving their communities. NCUA is establishing a 
Minority Depository Institution Preservation Program to encourage the 
preservation of Minority Depository Institutions. The program, to be 
administered by NCUA's Office of Minority and Women Inclusion, would 
consist of outreach efforts, various forms of technical assistance, and 
educational opportunities to benefit eligible credit unions.

DATES: Comments must be received on or before September 30, 2013.

ADDRESSES: You may submit comments by any of the following methods 
(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/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
     Email: Address to regcomments@ncua.gov. Include ``[Your 
name]--Comments on Proposed IRPS 13-1, Minority Depository Institution 
Preservation Program'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: You can view all public comments on NCUA's Web 
site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as 
submitted, except for those we cannot post for technical reasons. NCUA 
will not edit or remove any identifying or contact information from the 
public comments submitted. You may inspect paper copies of comments in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an email to OGCMail@ncua.gov.

FOR FURTHER INFORMATION CONTACT: Tawana James, Director, Office of 
Minority and Women Inclusion, at (703) 518-1651; or Cynthia Vaughn, 
Diversity Outreach Program Analyst, Office of Minority and Women 
Inclusion, at (703) 518-1653.


I. Background

    In 1989, Congress enacted the Financial Institutions Reform, 
Recovery and Enforcement Act (FIRREA) \1\ in response to the failure of 
the Federal Savings and Loan Insurance Corporation (FSLIC). FSLIC 
insured the deposits of insolvent savings & loan institutions. Section 
308 of FIRREA established goals for preserving and promoting minority 
depository institutions.\2\ When established, Section 308 applied only 
to the Federal Deposit Insurance Corporation (FDIC) and Office of 
Thrift Supervision (OTS).\3\ The FDIC and OTS developed various 
initiatives, such as training, technical assistance, and educational 
programs, aimed at preserving federally insured banks and savings 
institutions that meet FIRREA's definition of a minority depository 
institution (MDI).\4\

    \1\ Public Law 101-73, 103 Stat. 183.
    \2\ 12 U.S.C. 1463 note (a).
    \3\ The Office of the Comptroller of the Currency (OCC) and 
Board of Governors of the Federal Reserve System (FRB) also 
initiated MDI programs to comply with the spirit of FIRREA Sec.  
308, even though they were not originally required to do so. The OTS 
became part of the OCC on July 21, 2011. OCC now administers the OTS 
MDI Program.
    \4\ 12 U.S.C. 1463 note (b).

    In 2010, Congress enacted the Dodd Frank Wall Street Reform and 
Consumer Protection Act (Dodd Frank).\5\ Section 367(4)(A) of Dodd 
Frank amended FIRREA Sec.  308 to require NCUA, OCC, and FRB to comply 
with its goals to preserve and encourage MDIs.\6\ In addition, Dodd 
Frank Sec.  367(4)(B) requires these agencies, along with FDIC, to each 
submit an annual report to Congress describing actions taken to carry 
out FIRREA Sec.  308.\7\

    \5\ Public Law 111-203, 124 Stat. 1376; 12 U.S.C. 5301 et seq.
    \6\ 124 Stat. 1556.
    \7\ 124 Stat. 1556.

II. Interpretive Ruling and Policy Statement (IRPS) 13-1

1. Why is the NCUA Board proposing this IRPS?

    The NCUA Board is proposing this IRPS as the basis for establishing 
a Minority Depository Institution Preservation Program (MDI Program) 
designed to achieve the goals of preserving and encouraging Minority 
Depository Institutions (MDIs) as FIRREA Sec.  308 directs. Recognizing 
the important role of MDIs in minority communities, the NCUA Board 
envisions a program of proactive steps and outreach efforts to promote 
and preserve minority ownership in the credit union industry. To this 
end, the IRPS prescribes an MDI Program featuring the eligibility 
criteria, initiatives and benefits.

[[Page 46375]]

2. What are the goals and objectives of the MDI Program?

    The MDI Program embraces goals and objectives related to credit 
union viability and access. Specifically, the program is consistent 
with NCUA's mission and the following two goals identified in NCUA's 
current strategic plan:
     To ensure a safe, sound, and healthy credit union system; 
     To promote access to credit unions for all eligible 
    The program also follows the preservation goals and objectives of 
FIRREA Sec.  308 for MDIs \8\ namely:

    \8\ Dodd Frank Sec.  367(4)(A) expanded the application of 
FIRREA Sec.  308 to NCUA.

     To preserve the present number of MDIs;
     To preserve the minority character of MDIs in cases 
involving (involuntary) mergers or acquisitions of an MDI by following 
the priority of the prescribed ``general preference guidelines'' in 
identifying a merger or acquisition partner; \9\

    \9\ In priority, the general preference guidelines for 
identifying an involuntary merger/acquisition partner are: (a) Same 
type of MDI in the same city; (b) Same type of MDI in the same 
state; (c) Same type of MDI nationwide; (d) Any type of MDI in the 
same city; (e) Any type of MDI in the same state; (f) Any type of 
MDI nationwide; and (g) Any other bidders (for merger/acquisition 
partners). 12 U.S.C. 1463 note (a)(2). Rules concerning FOM, least 
cost to NCUSIF, and safety and soundness still apply to all mergers.

     To provide technical assistance to prevent insolvency of 
MDIs not now insolvent;
     To promote and encourage the creation of new MDIs; and.
     To provide for training, technical assistance, and 
educational programs.

3. Who would be eligible to participate in the MDI Program?

    A credit union meeting the definition of an MDI is eligible to 
participate in the MDI Preservation Program. In defining an MDI, NCUA 
proposes to adapt criteria consistent with FIRREA Sec.  308's criteria 
for a minority depository institution.\10\ Accordingly, NCUA is 
proposing to define a Minority Depository Institution as follows:

    \10\ 12 U.S.C. 1463 note (b)(1). Compare 12 U.S.C. 5452(g)(3).

    (a) A federally insured credit union with more than 50 percent of 
its current or eligible potential members falling within any of the 
eligible minority groups; and
    (b) A federally insured credit union with more than 50 percent of 
the current management officials falling within any of the eligible 
minority groups.
    For a federally insured credit union to meet this MDI definition, 
the percentage of both (a) minority members and (b) minority management 
officials must exceed 50 percent.
    To identify an eligible minority group, NCUA will rely on FIRREA 
Sec.  308's definition of a minority as any ``Black American, Asian 
American, Hispanic American, or Native American.'' \11\ The following 
chart from the Equal Employment Opportunity Commission shows a detailed 
description of the minority groups falling within these four 

    \11\ 12 U.S.C. 1463 note (b)(2).
    NCUA defines a credit union management official as a member of the 
board of directors, supervisory committee or credit committee, and 
senior executive staff. Senior executive staff includes the credit 
union's chief executive officer (typically titled as President or 
Manager), Assistant Chief Executive Officers (e.g., Vice-President or 
Assistant Manager), Chief Financial Officer, and branch managers.
    To ensure the MDI has minority representation at the senior 
management level, NCUA is including management officials as part of the 
definition to meet the spirit of the FIRREA and Dodd Frank Act.

4. How will the MDI Program function?

    NCUA's Office of Minority and Women Inclusion (OMWI) will 
administer the MDI Program. A federally insured credit union can self-
certify that it qualifies as an MDI by affirmatively answering one of 
following two questions \12\ on NCUA's Credit Union Online System (CU 
Online System) accessible from our Web site (www.ncua.gov) or the CU 
Profile when submitting a Call Report:

    \12\ NCUA is changing the questions to inquire about the 
minority representation among members and management officials 
separately. NCUA is currently pursuing OMB approval for this change 
in conjunction with other changes to the call report.

    (a) Does your credit union have more than 50 percent of its current 
members and current management officials who

[[Page 46376]]

are Black American, Native American, Hispanic American, or Asian 
    (b) Does your credit union have more than 50 percent of its 
eligible potential members \13\ and current management officials who 
are Black American, Native American, Hispanic American, or Asian 

    \13\ Potential members correspond with the same definition used 
for FOM expansions, which include the community population for 
community chartered credit unions; total employees for occupational 
group(s); and total members for associational groups. There are no 
adjustments for family members.

    The credit union must certify that the eligibility criteria for 
members and management officials have been met. Credit unions with $50 
million or less in assets may self-certify based solely on knowledge of 
their membership. However, the management officials must also meet the 
50 percent MDI criterion. Credit unions with assets over $50 million 
may rely on one of the following methods to determine the minority 
composition of its current membership or its potential field of 
membership (FOM):
    (A) Ascertain the minority membership composition using 
demographics data from the U.S. Census by either:
    (1) The area(s) where the current or potential membership resides; 
    (2) The area(s) consisting of the credit union's service area(s) 
\14\ as prescribed in the FOM designated by the credit union's charter.

    \14\ A federal credit union's service area is the area that can 
reasonably be served by the service facilities accessible to the 
groups within the field of membership. The service area will most 
often coincide with the geographic area primarily served by the 
service facility. For a community credit union, this is the 
geographic community it serves as identified in the charter and FOM. 
For multiple common bond credit unions, it can be the areas where 
the select groups, in the charter and FOM, are located.

    If the U.S. Census data (e.g., census tracts, zip codes, townships, 
boroughs, cities, counties, etc.) shows the area's population is 
comprised mostly of eligible minorities, the credit union may assume 
its membership or service area(s) have that minority composition.
    (B) Use Home Mortgage Disclosure Act (HMDA) to calculate the 
reported number of minority mortgage applicants divided by the total 
number of mortgage applicants within the credit union's membership. If 
the share of minority applicants meets or exceeds the 50 percent 
threshold, the membership component may be met.
    (C) Elect to voluntarily collect data from members who choose to 
self-identify themselves as minority and use the data to determine the 
credit union's share of minority representation. The credit union may 
wish to consider using an unbiased party to administer the collection 
process. For example, data can be collected through a member survey 
assessing future services desired or during the mail election ballots.
    (D) Use any other reasonable form of data, such as membership 
address list, employer's demographic analysis of employees, etc.
    A credit union with assets greater than $50 million that self-
identifies as an MDI should maintain some form of documentation 
demonstrating how it determined the minority eligibility criteria of 
(a) membership and (b) management officials were met.\15\ Such 
documentation may consist of demographic data analysis obtained from 
the U.S. Census Bureau (www.census.gov), HDMA, or any other reasonable 
form of data (e.g., sponsor employee demographic or members' zip code 

    \15\ See sections 3(a) and 3(b) supra.

    When a credit union self-identifies as an MDI regardless of asset 
size, OMWI may assess the legitimacy of the certification (or the 
underlying data). If there is doubt that the credit union meets both 
minority criteria based on (a) membership and (b) management officials, 
the NCUA's OWMI will:
    (1) Notify the credit union in writing about its findings.
    (2) Provide the credit union an opportunity to submit documentation 
and/or rationale to support its MDI self-identification within 60 days 
of receiving OMWI's notification.
    (3) Review the credit union's information and inform the credit 
union on whether it meets the minority criteria based on the 
information submitted within 60 days of OMWI's receipt.
    (4) Deny the MDI designation if the credit union provides either no 
information or, in NCUA's discretion, insufficient information or 
rationale to support the certification on both minority criteria (a) 
membership and (b) management officials.
    A federally insured credit union may appeal the agency's denial of 
an MDI designation to the NCUA Board within 60 days of the date of 
OMWI's notice of denial.\16\

    \16\ Such an appeal must be filed with NCUA's OMWI Director and 
accompanied by documentation that demonstrates the federally insured 
credit union meets the MCU eligibility requirements. On appeal, the 
NCUA Board will determine whether the OMWI Director correctly 
applied the minority eligibility criteria.

    NCUA plans to develop and use a tool to determine the minority 
composition of a credit union's membership using their members' zip 
code data obtained from an AIRES download (similar to the current low-
income designation tool). NCUA will periodically review and determine 
whether an MDI continues to meet the MDI definition. Changes in the MDI 
definition can occur from FOM expansions (e.g., mergers, purchase and 
assumptions, new groups added to the FOM, or charter conversions) as 
well as changes in the management officials (e.g., elections, new 
hires, separations, etc.).
    An MDI should assess whether it continues to meet the MDI 
definition at least once a year (e.g., December 31st call report 
cycle), and update its status on NCUA's Credit Union Online system or 
Credit Union Profile of the Call Report system, if necessary.
    Participation in the MDI Program is voluntary. An MDI may 
discontinue its participation at any time by updating its status on 
NCUA's Credit Union Online system. Upon such action, the credit union 
would not be eligible to participate in any MDI Program initiatives 
(e.g., MDI merger/acquisition preference consideration, MDI 
partnerships, etc.).

5. What are the benefits of participating in the MDI Program?

    NCUA seeks to provide MDI Program participants with a variety of 
benefits to assist in preserving the economic viability of their 
institutions. These benefits include facilitating technical assistance 
and educational opportunities to MDIs in coordination with NCUA's 
Office of Small Credit Union Initiatives (OSCUI). Such technical 
assistance may include participating in the agency's Small Credit Union 
Program,\17\ including:

    \17\ The Small Credit Union Program's initiatives are generally 
offered to credit unions that have less than $50 million in assets 
or are low-income designated. Grants and loans from the CDRLF are 
only available to low-income designated credit unions. The workshops 
are open to all credit unions.

    (1) Participation in Small Credit Union Consulting Program;
    (2) Economic Development Specialist assistance in addressing 
examination concerns or topics of interest;
    (3) participation in an NCUA sponsored workshop; or
    (4) assistance in obtaining a grant or a loan through NCUA's 
Community Development Revolving Loan Fund (CDRLF).
    OMWI may aid in collaborating partnerships between MDIs and other 
organizations (e.g., MDIs, OSCUI, and other sources) as a means of 
providing technical and/or operational assistance to MDIs. The 
technical and/or operational assistance may include training for 
officials and staff, expertise

[[Page 46377]]

in technical areas (e.g., marketing, bidding on merger proposals, 
etc.), equipment and financial assistance for specific projects/goals, 
etc. Additionally, OMWI may assist in locating a CU mentor or merger 
partner for an MDI.
    NCUA will publish a list of federally insured MDIs on its Web site 
to enable organizations (e.g., banks, MDIs, third parties) to identify 
MDIs with which to partner, mentor, provide resources, and/or establish 
business relationships. For example, banks can obtain Community 
Reinvestment Act (CRA) credit for investing in MDIs. If a bank has an 
unused building, the bank could lease the space to an MDI for free or 
at low cost, and receive a corresponding CRA credit.
    NCUA will monitor the financial condition of MDIs, and will provide 
an annual report to Congress on the overall financial condition of 
MDIs. Through this process, the agency will also identify MDIs that 
might benefit from the MDI Program's support and technical assistance, 
such as mentoring, partnerships, workshops, roundtables, associations 
with other credit unions, and support through programs such as NCUA's 
Small Credit Union Program or the U.S. Treasury's Community Development 
Financial Institutions Fund.
    NCUA will attempt to preserve the minority character of failing 
MDIs that go through the involuntary merger or acquisition process by 
using the General Preference Guidelines outlined in Section 308 to the 
FIRREA. In the event of the merger of a troubled MDI, NCUA will invite 
MDIs that qualify to bid on failing MDIs, along with non-MDI credit 
unions. Such actions would only occur on involuntary mergers/
acquisitions. However, OMWI will offer assistance in locating an MDI 
partner for those MDIs wishing to voluntarily merge their operations 
into another MDI. To be considered an acquirer, an MDI must document 
its desire to acquire an MDI by registering itself on NCUA's Merger 
Registry via the CU Online System.
    Additionally, if any organization wishes to be considered as a 
candidate for managing a conservatorship of an MDI, it should document 
its interest by completing an NCUA Vendor Registration Form (NCUA 
1772). The vendor registration form can be accessed, completed and 
submitted on NCUA's Web site under Procurement/Contracting 
Opportunities. The form can also be accessed via the following link: 
OMWI will provide a list of diverse candidates to the regions for 
consideration as the interim Chief Executive Officer/Manager of the 
    Finally, NCUA will provide assistance to groups that may be 
interested in chartering a new MDI. Staff will be available to discuss 
the application process with such groups.

III. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires NCUA to prepare an 
analysis to describe any significant economic impact a proposed IRPS 
may have on a substantial number of small entities (currently defined 
by NCUA as credit unions with under $50 million in assets). In this 
case, credit unions under $50 million in assets can self-certify their 
credit unions as meeting the MDI definition based solely on their 
knowledge of their current or potential membership without any 
supporting documentation.
    Also, the economic impact of the MDI Program on small entities 
would be significantly beneficial in that the MDI Program offers 
various forms of technical assistance and educational opportunities to 
eligible credit unions, including those that qualify as small entities, 
at no cost. NCUA therefore certifies that the proposed IRPS will not 
have a significant adverse economic impact on a substantial number of 
credit unions under $50 million in assets. Accordingly, no regulatory 
flexibility analysis is required.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (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. NCUA has 
determined that the procedure for credit unions to self-identify as 
meeting the definition of an MDI creates a new information collection 
requirement. As required, NCUA has applied to the Office of Management 
and Budget (OMB) for approval of the information collection procedure 
described below.
    To participate in the MDI program, a credit union must answer two 
questions based on the minority composition of its (1) current or 
potential membership and (2) current management officials. The credit 
union must ascertain whether the minority ratio of the credit union 
members exceeds 50 percent and the ratio of current management 
officials exceeds 50 percent. The credit union may use (a) U.S. Census 
data (e.g., census tracts, zip codes, townships, boroughs, cities, 
counties, etc.) indicating that either the area where the credit 
union's potential membership resides, or which is its service area, is 
comprised mostly of eligible minorities; (b) Home Mortgage Disclosure 
Act (HMDA) data indicating that the ratio of minority mortgage 
applicants exceeds 50 percent of total mortgage applicants [within the 
credit union membership]; (c) voluntary collection of race, ethnicity, 
origin data from membership; or (d) any other reasonable form of data 
that support the minority composition of the membership. The credit 
union may answer the questions regarding minority membership and 
management composition on NCUA's Credit Union Online System or in its 
Call Report.\18\ If the credit union answers ``yes'' to both questions, 
it will qualify as an MDI and be eligible to participate in the MDI 

    \18\ In 2011, NCUA published a PRA notice to insert the MCU 
self-identification questions into the Call Report. 76 FR 54498 
(Sept. 1, 2011); 76 FR 62456 (Oct. 7, 2011).

    NCUA estimates that, with reasonable access to the internet, it 
typically would take credit union staff approximately 45 minutes to (1) 
locate, download and review the U.S. Census or HMDA data needed; (2) 
assess the minority composition of its membership; and (3) assess the 
minority composition of its management officials to support the credit 
union's answers to the two MDI self-identification questions. Certain 
credit unions must retain the supporting documentation in its files for 
verification of its MDI eligibility.
    NCUA has determined that 802 credit unions would qualify as MDIs 
based on their answers to the two questions as of June 17, 2013. Of the 
802 credit unions, 671 credit unions have assets of $50 million or 
less. NCUA proposes to allow these 671 credit unions to self-identify 
as an MDI based solely on the knowledge of their membership. As a 
result, the aggregate information collection burden for the remaining 
131 credit unions to self-identify as an MDI is 98.25 hours (45 minutes 
x 131 MDIs / 60 minutes). Also, we estimate that approximately five 
percent of the 671 credit unions whose self-certification is based on 
knowledge of membership may be subject to question. Thus, the aggregate 
information collection burden for those 40 credit unions (671 x .05) is 
30 hours (45 minutes x 40 MDIs / 60 minutes). Total hours estimated are 
128.25 hours annually.

[[Page 46378]]

    Organizations and individuals wishing to submit comments on this 
information collection requirement should direct them to the Office of 
Information and Regulatory Affairs, OMB, Attn: Shagufta Ahmed, Room 
10226, New Executive Office Building, Washington, DC 20503, with a copy 
to the Secretary of the Board, National Credit Union Administration, 
1775 Duke Street, Alexandria, Virginia 22314-3428. The PRA requires OMB 
to make a decision concerning the collection of information contained 
in the proposed regulation between 30 and 60 days after publication of 
this document in the Federal Register.
    NCUA considers comments by the public on this proposed collection 
of information in:
     Evaluating whether the proposed collection of information 
is necessary for the proper performance of the functions of the NCUA, 
including whether the information will have a practical use;
     Evaluating the accuracy of the NCUA's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology (e.g., permitting 
electronic submission of responses).

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 IRPS would 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 proposed rule does not constitute a policy that 
has federalism implications for purposes of the executive order.

Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this IRPS 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 

Agency Regulatory Goal

    The Board's goal is to promulgate clear and understandable 
regulations that impose minimal regulatory burden. We request your 
comments on whether this IRPS is understandable and minimally intrusive 
if implemented as proposed.

    By the National Credit Union Administration Board on July 25, 
Mary Rupp,
Secretary of the Board.
[FR Doc. 2013-18300 Filed 7-30-13; 8:45 am]