[Federal Register Volume 64, Number 102 (Thursday, May 27, 1999)]
[Rules and Regulations]
[Pages 28715-28717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13308]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701


Organization and Operations of Federal Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final Rule.

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SUMMARY: NCUA amends its regulation dealing with newly chartered and 
troubled credit unions that requires prior notice of the appointment or 
employment of directors and senior officers. The amendment clarifies 
when the notice period commences and when the new director or senior 
officer may begin service.
    Also, for corporate credit unions, the amendment clarifies that the 
definition of a ``troubled'' credit union will be based on the 
Corporate Risk Information System (CRIS), or on CAMEL for those state-
chartered corporate credit unions in states that do not adopt CRIS. 
Finally, the amendment reflects that corporate credit unions should 
submit notices of changes in officials or senior management to the 
Director of the Office of Corporate Credit Unions.

DATES: This rule is effective June 28, 1999.

FOR FURTHER INFORMATION CONTACT: Margaret E. McPartlin, Trial Attorney, 
Litigation Division, Office of General Counsel, telephone: (703) 518-
6566 or David A. Shetler, Corporate Program Specialist, Office of 
Corporate Credit Unions, telephone: (703) 518-6646.

SUPPLEMENTARY INFORMATION:

Background

    NCUA has a policy of periodically reviewing its regulations to 
``update, clarify and simplify existing regulations and eliminate 
redundant and unnecessary provisions.'' IRPS 87-2, Developing and 
Reviewing Government Regulations. 52 FR 35231 (September 18, 1987). As 
part of its regulatory review program, NCUA reviewed Sec. 701.14 of its 
regulations, 12 CFR 701.14, to determine whether the language of the 
regulation was clear and effective. Section 701.14 of NCUA's 
regulations requires that federally insured credit unions that have 
been

[[Page 28716]]

chartered less than two years or fall within the regulatory definition 
of a ``troubled credit union'' file a notice with NCUA prior to adding 
or replacing a member of the board of directors or a committee member, 
or employing or changing the responsibilities of an individual to a 
position as a senior executive officer. As a result of NCUA review and 
questions from credit unions, the Board proposed to clarify the 
language contained in Sec. 701.14(d)(1) (63 FR 59742, November 8, 
1998).
    There has been confusion as to when the Regional Director accepts 
the notice of a proposed change in an official or senior officer; how 
long the Regional Office has to process the notice; and when the 
official or senior officer may commence work. The amendment clarifies 
the language in Sec. 701.14(d)(1) to provide that the Regional 
Director, within 10 calendar days after receiving the notice package, 
will notify the credit union in writing either that the notice package 
is complete and ready for processing, or that specified additional 
information is needed and must be submitted within 30 calendar days. If 
the initial notice is complete, the Regional Director will issue a 
decision of approval or disapproval within 30 calendar days of receipt 
of the notice. If the initial notice is not complete, the Regional 
Director's decision period is tolled for the amount of time taken by 
the credit union to provide the requested additional information. If 
the requested additional information is not submitted within 30 
calendar days, the Regional Director may either disapprove the 
individual or review the notice based on the information submitted. 
Once a notice is complete, if the Regional Director does not issue a 
decision within the required period, the individual is approved.
    The NCUA Board has adopted the new CRIS rating system for corporate 
credit unions. The amendment clarifies that a CRIS rating of 4 or 5 in 
either the Financial Risk or Risk Management composite rating will be 
one of the conditions that defines a ``troubled'' federal corporate 
credit union. As is the case for all federally insured state credit 
unions in the present rule, the rating assigned by the state supervisor 
is utilized in determining the definition of a ``troubled'' federally 
insured, state-chartered corporate credit union.
    Language is added to clarify that a 4 or 5 CAMEL composite rating 
by the state supervisor will be a condition that defines a ``troubled'' 
federally insured, state-chartered corporate credit union in states 
that have not adopted the CRIS system. If the state has not adopted 
either system, NCUA will determine and apply a CRIS rating using the 
corporate credit union's core examination workpapers.
    Also, the existing language of Section 701.14 does not indicate 
that corporate credit unions should submit notices of changes in 
officials or senior management to the Director of the Office of 
Corporate Credit Unions (OCCU). Language was added to the final rule to 
clarify that corporate credit unions will submit notices to the 
Director of OCCU and that the Director of OCCU will act on such 
notices.

Summary of Comments

    The NCUA Board received four (4) comment letters regarding the 
proposal: three from national trade associations and one from a state-
chartered credit union. Of the four (4) commenters, three expressed 
general support for the proposed language. The three commenters, 
however, did not support the time frames set forth in the latter part 
of Sec. 701.14 (d)(1). The proposed time frames would have allowed the 
Regional Director or Director of OCCU ten business days to determine 
whether a credit union or corporate credit union's notice is complete. 
The Regional Director or OCCU Director would then have had an 
additional 30 days to approve or disapprove the proposed official or 
employee. Two commenters suggested that we allow the Regional Director 
or Director of OCCU only five (5) business days to determine whether 
the notice is complete and ready for processing. The same two 
commenters proposed that the 30 calendar day time frame begin on the 
day the agency receives the notice of the proposed action and not from 
the date that the RD or OCCU Director deems the notice complete. Both 
commenters stated that while the suggested change would limit the 
amount of time for agency approval, placement of new management would 
be expedited.
    The fourth commenter urged NCUA to draft separate rules and 
regulations for federally insured state chartered credit unions. The 
commenter did not make a general or specific objection to the proposed 
language of Sec. 701.14(d)(1).
    As previously described, the amendment partially incorporates the 
suggestions contained in the comment letters. It allows the Regional 
Director 30 calendar days from the date the notice is received to 
approve or disapprove the official or senior officer. Within the first 
10 calendar days, however, the Regional Director will send written 
notification that the notice package is complete and ready for 
processing. If the notice is incomplete, the Regional Director will 
notify the credit union in writing what additional information is 
needed and that the information must be submitted within 30 calendar 
days. This will prevent unreasonable delays on the part of the 
applicant, considering that pre-approved commencement of temporary 
service is permitted by Section 701.14(e) of the regulations. The 
Regional Director's 30 day time period from the date of receiving the 
notice will be tolled when additional information is requested and the 
Regional Director will suspend processing of the notice until the 
requested information is submitted. If the requested information is not 
received within 30 calendar days, the Regional Director may disapprove 
the proposed individual or may review the application based on the 
information provided.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact any proposed regulation may 
have on a substantial number of small entities (primarily those under 
$1 million in assets). The NCUA Board has determined and certifies that 
the final rule, if adopted, will not have a significant economic impact 
on a substantial number of small credit unions. Accordingly, the Board 
has determined that a Regulatory Flexibility Analysis is not required.

Paperwork Reduction Act

    NCUA has determined that the final rule does not increase paperwork 
requirements under the Paperwork Reduction Act of 1995 and regulations 
of the Office of Management and Budget.

Executive Order 12612

    Executive Order 12612 requires NCUA to consider the effect of its 
actions on state interests. NCUA has determined that the final rule 
does not constitute a significant regulatory action for the purposes of 
the Executive Order.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 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 by Section 551 of the Administrative 
Procedures Act. 5 U.S.C. 551. The Office of Management and Budget has 
reviewed this rule and has determined that for purposes of the Small 
Business Regulatory Enforcement

[[Page 28717]]

Fairness Act of 1996 this is not a major rule.

List of Subjects in 12 CFR Part 701

    Credit unions, Senior executive officials.

    By the National Credit Union Administration Board on May 19, 
1999.
Becky Baker,
Secretary of the Board.
    For the reasons set forth in the preamble, 12 CFR part 701 is 
amended as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

    1. The authority citation for part 701 continues to read as 
follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, and 1789. Section 701.6 is also 
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by 
15 U.S.C. 1601 et seq., 42 U.S.C. 1861 and 42 U.S.C. 3601-3610. 
Section 701.35 is also authorized by 42 U.S.C 4311-4312.

    2. Section 701.14 is amended as follows.
    a. Revise the introductory text of paragraph (b)(3) and add 
paragraph (b)(4).
    b. Revise paragraph (c)(2).
    c. Amend paragraph (d)(1) by adding two new sentences after the 
first sentence and by removing the last three sentences and adding five 
sentences. The revisions and additions to section 701.14 read as 
follows:


Sec. 701.14  Change in official or senior executive officer in credit 
unions that are newly chartered or are in troubled condition.

* * * * *
    (b) * * *
    (3) Except as provided in paragraph (b)(4) of this section for 
corporate credit unions, ``troubled condition'' means any insured 
credit union that has one or a combination of the following conditions:
* * * * *
    (4) In the case of a corporate credit union, ``troubled condition'' 
means any insured corporate credit union that has one or a combination 
of the following conditions:
    (i) Has been assigned
    (A) A 4 or 5 Corporate Risk Information System (CRIS) rating by 
NCUA in either the Financial Risk or Risk Management composites, in the 
case of a federal corporate credit union, or
    (B) An equivalent 4 or 5 CRIS rating in either the Financial Risk 
or Risk Management composites by the state supervisor in the case of a 
federally insured, state-chartered corporate credit union in a state 
that has adopted the CRIS system, or an equivalent 4 or 5 CAMEL 
composite rating by the state supervisor in the case of a federally 
insured, state-chartered corporate credit union in a state that uses 
the CAMEL system, or
    (C) A 4 or 5 CRIS rating in either the Financial Risk or Risk 
Management composites by NCUA based on core workpapers received from 
the state supervisor in the case of a federally insured, state-
chartered credit union in a state that does not use either the CRIS or 
CAMEL system. In this case, the state supervisor will be notified in 
writing by the Director of the Office of Corporate Credit Unions that 
the corporate credit union has been designated by NCUA as a troubled 
institution;
    (ii) has been granted assistance as outlined under Sections 116 or 
208 of the Federal Credit Union Act.
    (c) * * *
    (2) The credit union meets the definition of troubled condition as 
set forth in paragraph 701.14(b)(3) or (4).
* * * * *
    (d) Procedures for notice of proposed change in official or senior 
executive officer.
    (1) Filing and acceptance. * * * In the case of a corporate credit 
union, notice shall be filed with the Director of the Office of 
Corporate Credit Unions. Additional references herein to Regional 
Director will, for corporate credit unions, mean the Director of the 
Office of Corporate Credit Unions. * * * Within ten calendar days after 
receiving the notice, the Regional Director will inform the credit 
union either that the notice is complete or that additional specified 
information is needed and must be submitted within 30 calendar days. If 
the initial notice is complete, the Regional Director will issue a 
written decision of approval or disapproval to the individual and the 
credit union within 30 calendar days of receipt of the notice. If the 
initial notice is not complete, the Regional Director will issue a 
written decision within 30 calendar days of receipt of the original 
notice plus the amount of time taken by the credit union to provide the 
requested additional information. If the additional information is not 
submitted within 30 calendar days of the Regional Director's request, 
the Regional Director may either disapprove the proposed individual or 
review the notice based on the information provided. If the credit 
union and the individual have submitted all requested information and 
the Regional Director has not issued a written decision within the 
applicable time period, the individual is approved.
* * * * *
[FR Doc. 99-13308 Filed 5-26-99; 8:45 am]
BILLING CODE 7535-01-U