[Federal Register Volume 81, Number 61 (Wednesday, March 30, 2016)]
[Rules and Regulations]
[Pages 17601-17602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07151]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 81, No. 61 / Wednesday, March 30, 2016 / 
Rules and Regulations

[[Page 17601]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 703

RIN 3133-AE55


Investment and Deposit Activities--Bank Notes

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is finalizing a rule that amends 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.''

DATES: This rule is effective April 29, 2016.

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. Comments on the October 2015 Proposal
III. Final Rule
IV. Regulatory Procedures

I. Background

    In October 2015, the Board issued a proposed rule to amend the 
maturity requirement for bank notes to be permissible investments for 
FCUs by removing the word ``original'' from the requirement that bank 
notes have ``original weighted average maturities of less than 5 
years.'' \1\ As the Board noted in the proposal, the authority for FCUs 
to invest in bank notes is derived from the provision in the Federal 
Credit Union Act (the Act) that permits FCUs to make deposits in, among 
other things, national and state banks.
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    \1\ 80 FR 63932 (Oct. 22, 2015).
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    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 the Federal Reserve Board's 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\
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    \2\ NCUA's regulations do not require that all of these criteria 
be met for bank notes to be permissible investments.
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    The Board stated in the proposal that removing the word 
``original'' would better align NCUA's requirements for bank notes with 
the Regulation D definition of a deposit. Further, the Board noted that 
this amendment would also 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. 
Specifically, FCUs will be permitted to purchase bank notes that had 
original maturities of greater than five years but have remaining 
maturities of less than five years. Expanding the list of permissible 
offerings for FCUs will result in: (1) Cheaper execution prices; (2) 
flexibility for FCUs; and (3) greater efficiency for FCUs in finding 
suitable offerings. The weighted average maturity of less than five 
years will also maintain safety and soundness by avoiding excessive 
interest rate risk.

II. Comments on the October 2015 Proposal

    The Board received eight comment letters in response to the October 
2015 proposal. Generally, all of the commenters supported the rule as 
proposed. Several of those commenters, however, suggested ways to 
improve the rule.
    One commenter suggested the Board eliminate the maturity 
requirement for bank notes completely. This commenter suggested that, 
because there is no statutory requirement for the Board to align the 
definition of deposit with Regulation D, the Board should define 
deposit in a way that would allow FCUs to invest in bank notes with any 
maturities. However, the Federal Reserve Board's Regulation D 
definition provides sufficient flexibility for FCUs, and maintains 
safety and soundness in this context. The Board, therefore, will 
continue to follow NCUA's long-standing policy to use the definition of 
deposit in Regulation D to determine permissible bank notes that may be 
purchased by FCUs under the Act.
    Another commenter requested the Board issue guidance on 
concentration limits for FCUs investing in bank notes. The Board notes 
that there are no regulatory concentration limits on bank notes due to 
the limited exposure to FCUs that the asset class currently represents.
    A final commenter suggested the Board authorize additional 
investments for FCUs under part 703. This comment raises an issue that 
is outside the scope of this rulemaking. However, part 703 was included 
in the Office of General Counsel's review of one-third of NCUA's 
regulations in 2015. As a result, the Board is considering whether 
additional amendments to part 703 are warranted. If the Board 
determines to promulgate such amendments, it will do so in a separate 
rulemaking.

III. Final Rule

    For the reasons stated above, the Board is adopting as final the 
proposed amendment without change.

IV. 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 $100 
million in assets).\3\ This final rule will have a minimal economic 
impact on small credit unions as bank notes are just one small fraction 
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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    \3\ 5 U.S.C. 603(a); 12 U.S.C. 1787(c)(1).

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[[Page 17602]]

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.\4\ 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 final 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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    \4\ 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 final 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 final rule 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 final 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

12 CFR Part 703

    Credit unions, Investments.

    By the National Credit Union Administration Board on March 24, 
2016.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the National Credit Union 
Administration amends 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. 2016-07151 Filed 3-29-16; 8:45 am]
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