[Federal Register Volume 62, Number 6 (Thursday, January 9, 1997)]
[Notices]
[Pages 1358-1360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-141]
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DEPARTMENT OF THE TREASURY
Office of the Secretary
Credit Union Study; Request for Comments
AGENCY: Office of the Secretary, DOT.
SUMMARY: Legislation recently enacted by Congress requires the
Secretary of the Treasury (Secretary) to conduct a study of credit
unions and submit a report to Congress by September 30, 1997.
This notice invites all interested parties to provide their views
on the topics listed below and on any other issues relating to the
study that they may wish to bring to our attention. We strongly
encourage all interested parties to submit comments for the record.
DATES: Comments should be in writing and must be received by February
28, 1997.
ADDRESSES: Send written comments to: Credit Union Study, Department of
the Treasury, Room 3025, 1500 Pennsylvania Avenue, NW, Washington, D.C.
20220.
FOR FURTHER INFORMATION CONTACT: For further information, please
contact: Joan
[[Page 1359]]
Affleck-Smith, Director, Office of Financial Institutions Policy, at
(202) 622-2740, or Edward DeMarco, Financial Economist, at (202) 622-
2792.
SUPPLEMENTARY INFORAMTION: Section 2606 of the Omnibus Consolidated
Appropriations Act for 1997 (Public Law No. 104-208) requires the
Secretary to conduct a study of corporate credit unions and other
credit union issues. In conducting the study, the Secretary must
consult with the National Credit Union Administration (NCUA), the
Federal Deposit Insurance Corporation (FDIC), and the Office of the
Comptroller of the Currency (OCC).
Suggested Format of Comments
Please comment on some or all of the issues under study, as listed
below.
I. National Credit Union Share Insurance Fund
In 1970, Congress created the National Credit Union Share Insurance
Fund (NCUSIF) as a way for credit unions to obtain federal deposit
insurance. Like the Federal Deposit Insurance Corporation's Bank
Insurance Fund and Savings Association Insurance Fund, the NCUSIF
insures each depositor for up to $100,000. However, the NCUSIF is
structured and administered differently than the insurance funds for
banks and thrifts. In the legislation, Congress directs the Secretary
to study specific issues pertaining to the NCUSIF.
First, the Secretary must evaluate the treatment of the NCUSIF's
required 1 percent deposit by member credit unions. Legislation enacted
in 1984 required each credit union to maintain a deposit with the
NCUSIF equal to 1 percent of its insured shares. Credit unions count
these deposits as assets while the NCUSIF counts these same funds as
part of its equity. Congress raises the question of whether or not the
accounting treatment of the 1 percent deposit is appropriate. Congress
also requires the Secretary to study how the NCUA uses the deposit
amounts when determining equity capital ratios.
Second, the Secretary must analyze the potential for, and potential
effects of, having some entity other than the NCUA administer the
NCUSIF.
We request comments on:
1. The NCUA's oversight of the NCUSIF;
2. The desirability of having credit unions expense the 1 percent
deposit that they maintain at the NCUSIF; and
3. The advantages and disadvantages of separating the NCUSIF from
the NCUA.
We also request responses to the following specific questions
regarding the NCUSIF:
4. Does the current accounting treatment of credit unions'' 1
percent deposit create risks to the NCUSIF, credit unions, or both? In
particular, what is the risk that large losses in the NCUSIF would
impair the 1 percent deposit at a time when credit unions were under
stress?
5. If you believe that the 1 percent deposit should remain
refundable (i.e., should continue to be treated as an asset), explain
why. In particular, identify how such treatment promotes safety and
soundness and protects the NCUSIF and ultimately the taxpayers. If the
1 percent deposit remains refundable, how should the deposit be used in
determining a credit union's equity capital ratio?
If you believe that the 1 percent deposit should be expensed,
explain why. In particular, identify how expensing the deposit would
promote safety and soundness and protect the NCUSIF and ultimately the
taxpayers. In addition, please describe how the existing deposits
should be expensed.
6. The NCUA currently has a single office--the Office of
Examination and Insurance--handle both examination and share insurance.
Do any conflicts arise from that structure? Would any such conflicts be
most properly handled by separating examination and insurance within
the NCUA or by establishing management and oversight of the NCUSIF
outside of the NCUA? If the latter, should the NCUSIF be a stand-alone
agency or incorporated into the FDIC or some other existing federal
agency? Explain.
7. What changes, if any, are needed in the NCUA's current oversight
or operation of the NCUSIF? If you advocate changes, explain why those
changes are needed. Identify the safety and soundness or taxpayer risk
issues involved, and how your proposed solution deals with the
identified problem.
II. Corporate Credit Unions
The network of corporate credit unions, including U.S. Central
Credit Union, emerged in the 1970s to meet the liquidity and investment
demands of the growing number of natural person credit unions.
Currently, corporate credit unions provide liquidity to member credit
unions, invest member credit unions' excess funds, and perform check-
clearing and other related transactional services for member credit
unions. In this study, we will examine, in cooperation with federal
banking agencies, the ten largest corporate credit unions, including
examining their investment practices, financial stability, financial
operations, and financial controls.
In addition, Congress directed the Secretary to evaluate the NCUA's
supervision of corporate credit unions. Concern has been raised that,
at least until recently, the NCUA did not adequately oversee the risk-
taking of corporate credit unions and had no specialized examination
group to deal with the unique circumstances of corporate credit unions.
While the NCUA has addressed many of these shortcomings, Congress
requested an assessment of the NCUA's supervision of corporates today.
At the time of this notice's publication, the NCUA is finalizing
substantial changes to its regulation governing corporate credit
unions, 12 CFR Part 704. The proposed changes to Part 704 would
significantly alter certain regulatory requirements applicable to
corporate credit unions. The NCUA received extensive public comments on
those proposed changes, and we have reviewed those comments. In your
comments, be careful to distinguish between Part 704 as in effect at
the time this notice is published and the revised Part 704 proposed by
the NCUA. Should the NCUA complete the rulemaking process and issue a
final Part 704 regulation before the comment period for this notice
ends, you should focus your comments on the new Part 704.
We request comments on:
8. The safety and soundness of corporate credit unions; and
9. The NCUA's supervision of corporate credit unions.
We also request responses to the following specific questions
regarding corporate credit unions:
10. What is the appropriate scope of activities for corporate
credit unions?
11. What risks, if any, do corporate credit unions pose today to
natural person credit unions or to the NCUSIF?
12. Are the current investment practices of corporate credit unions
appropriate? Are NCUA regulations and NCUA oversight adequate for the
risks undertaken by corporate credit unions?
III. NCUA Regulations
Congress directed the Secretary to examine the NCUA's current
regulations. In particular, we will focus on NCUA regulations affecting
(i) the NCUSIF, (ii) corporate credit unions, and (iii) credit union
safety and soundness.
At the time of this notice's publication, the NCUA is finalizing
substantial changes to its regulation governing the investment and
deposit activities of natural person credit unions
[[Page 1360]]
at 12 CFR Part 703. The proposed changes to Part 703 would
significantly alter certain regulatory requirements applicable to such
credit unions. The NCUA received extensive public comments on those
proposed changes, and we will review those comments. In your comments,
be careful to distinguish between Part 703 as in effect at the time
this notice is published and the revised Part 703 proposed by the NCUA.
Should the NCUA complete the rulemaking process and issue a final Part
703 regulation before the comment period for this notice ends, you
should focus your comments on the new Part 703.
We request comments on:
13. NCUA regulations in the specified areas.
We also request responses to the following specific questions
regarding NCUA regulations:
14. In order to improve credit unions' safety and soundness, what
changes, if any, should be made in the Federal Credit Union Act or the
NCUA's regulations? Explain.
15. Are there elements of safety and soundness regulation of banks
and thrifts that, if carried over to credit union regulation, would
make a meaningful improvement in the NCUA's oversight of credit unions'
safety and soundness? Explain.
Dated: December 26, 1996.
Richard S. Carnell,
Assistant Secretary for Financial Institutions.
[FR Doc. 97-141 Filed 1-8-97; 8:45 am]
BILLING CODE 4810-25-P