[Federal Register Volume 67, Number 233 (Wednesday, December 4, 2002)]
[Proposed Rules]
[Pages 72113-72114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30090]


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 Proposed Rules
                                                 Federal Register
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 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. 67, No. 233 / Wednesday, December 4, 2002 / 
Proposed Rules  

[[Page 72113]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 791


Rules of NCUA Board Procedure; Promulgation of NCUA Rules and 
Regulations; Public Observance of NCUA Board Meetings

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed Rule, Interpretive Ruling and Policy Statement 02-4, 
Developing and Reviewing Government Regulations.

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SUMMARY: This proposed rule, Interpretive Ruling and Policy Statement 
(IRPS) 02-4, amends the Regulatory Flexibility Act provisions of NCUA's 
IRPS 87-2. The Regulatory Flexibility Act generally requires federal 
agencies to prepare analyses to describe the impact of proposed and 
final rules on small entities. Since 1981, the NCUA has defined small 
entity in this context to mean those credit unions with less than one 
million dollars in assets. The proposed rule redefines small entity to 
mean those credit unions with less than ten million dollars in assets. 
In addition, the proposed rule amplifies a provision regarding NCUA's 
policy of reviewing all existing regulations every three years by 
stating that one-third of existing regulations will be reviewed each 
year and the public will receive notice of those regulations under 
review.

DATES: Comments must be received on or before February 3, 2003.

ADDRESSES: Send comments to Becky Baker, Secretary to the NCUA Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428. You may also fax comments to (703) 837-2914, or e-
mail comments to [email protected]. Please send comments by one 
method only.

FOR FURTHER INFORMATION CONTACT: Paul M. Peterson, Staff Attorney, 
Office of General Counsel, National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518-
6555.

SUPPLEMENTARY INFORMATION: 

Background

    The Regulatory Flexibility Act (the Act) encourages federal 
agencies to use innovative administrative procedures in dealing with 
small entities that would otherwise be unnecessarily affected by 
federal regulations. 5 U.S.C. 601 et seq.; S. Rep. No. 96-878, at 1 
(1980). The Act requires federal agencies to conduct a special analysis 
for each proposed rule that will have a significant economic impact on 
a substantial number of small entities. 5 U.S.C. 603, 605(b). The 
analysis must describe the impact of the proposed rule on small 
entities and include a description of any significant alternatives to 
the rule that minimize the impact. 5 U.S.C. 604.
    The term ``small entities'' as used in the Act includes small 
businesses, small organizations, and small government jurisdictions. 5 
U.S.C. 601(6). Credit unions, as not-for-profit associations, fall 
within the definition of ``organization.'' 5 U.S.C. 601(4). An agency 
that regulates small organizations may unilaterally establish its own 
definition of small organizations for purposes of the Act. Id. In 1981, 
the NCUA defined small credit union for purposes of the Act as any 
credit union having less than one million dollars in assets. NCUA IRPS 
81-4, 46 FR 29248, June 1, 1981. IRPS 87-2 superseded IRPS 81-4, but 
continued the definition of small credit unions for purposes of the Act 
as those with less than one million dollars in assets. 52 FR 35231, 
35232, September 8, 1987. IRPS 87-2 is incorporated by reference into 
NCUA's current rule governing the promulgation of regulations. 12 CFR 
791.8(a).
    The NCUA Board is opposed to placing unnecessary regulatory burdens 
on any credit union, regardless of size. Still, the Act requires 
particularly close analysis of the burden federal regulators, including 
NCUA, place on smaller entities. The Act's legislative history 
indicates that small entities need special consideration because they 
cannot absorb the impact of additional regulation as well as large 
entities. S. Rep. No. 96-878, at 4 (1980). Large entities are better 
able to withstand additional regulation for two reasons. First, large 
entities can spread the incremental cost of regulatory compliance over 
more units of output, or production, than smaller entities. Second, 
large entities can keep the incremental cost of compliance down because 
they are likely to employ internal staff with some compliance 
responsibilities. This internal staff may be able to absorb additional, 
incremental compliance burdens. Smaller entities, on the other hand, 
may have to hire additional staff or purchase expensive consulting 
services to handle any additional compliance burden. Id.
    In light of this legislative history, the Board believes that 
NCUA's current definition of small credit union as one with less than 
one million dollars in assets, adopted in 1981, is now outdated. Today, 
some credit unions with significantly more than one million dollars in 
assets may not be able to maintain the staffing level of many 1981-era 
credit unions that had less than one million dollars in assets.\1\
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    \1\ Due to inflation, the purchasing power of a dollar has 
decreased by almost half since 1981, and the cost of hiring staff 
has increased accordingly. It takes approximately $1.98 to purchase 
in 2002 what $1.00 purchased in 1981. Data obtained from Oregon 
State University, www.orst.edu/Dept/pol-sci/fac/sahr/cv2002.pdf 
(Sept. 10, 2002).
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    The Board proposes to change the qualifying asset size for a small 
credit union from less than one million dollars in assets to less than 
ten million dollars in assets. The Board notes that today's credit 
unions with approximately one million dollars in assets average only 
0.5 full-time and 1.2 part-time employees, indicating that there may be 
little or no staff time available for compliance issues. In contrast, 
federally insured credit unions with about ten million dollars in 
assets currently employ an average of 4.5 full-time employees and 1.3 
part-time employees, which together constitute more than five full-time 
employee equivalents. Accordingly, a credit union with ten million 
dollars in assets employs on average about five times more staff than a 
credit union with one million dollars in assets employs. Part of this 
additional staffing may be available to perform compliance oversight 
and absorb incremental compliance burdens.
    The proposed definition of small credit union is consistent with 
recent statutes and NCUA regulations providing regulatory compliance 
relief. For example, in 1998 Congress amended the Federal Credit Union 
Act (FCUA) to require that credit unions follow

[[Page 72114]]

generally accepted accounting principles, but at the same time excused 
credit unions with less than ten million dollars in assets under a de 
minimus exception. 12 U.S.C. 1782(a)(6)(C)(i), (iii). Another 1998 
amendment to the FCUA requires NCUA to provide ``small credit unions,'' 
defined as those under ten million dollars in assets, with special 
assistance in meeting prompt corrective action requirements. 12 U.S.C. 
1790d(f)(2). Finally, NCUA regulations provide that federally insured 
credit unions with less than ten million dollars in assets may file a 
short form call report in the spring and fall. 12 CFR 741.6(a). The 
Board is not aware of any federal statute or any NCUA rule, regulation, 
or policy that defines small credit union in a manner that includes 
credit unions with more than ten million dollars in assets.
    The Board also notes that by increasing the threshold from one 
million dollars in assets to ten million dollars in assets the 
percentage of federally insured credit unions considered to be small 
will return to a percentage much closer to the percentage captured by 
the size standard first adopted in 1981. In 1981, about 63% of all 
federally insured credit unions had assets of less than one million 
dollars and so were considered to be small. Today, due in part to 
credit union consolidation, only about 12% of all federally insured 
credit unions have assets of less than one million dollars. In 
contrast, credit unions with less than ten million dollars in assets 
currently constitute about 52% of all federally insured credit unions.
    The Board proposes to add a provision in Section IV of IRPS 87-2 
stating how NCUA carries out the policy of reviewing all existing 
regulations every three years. For several years, the Office of General 
Counsel has identified and reviewed one-third of existing regulations 
on a rolling schedule to ensure that all regulations are reviewed at 
least every three years. In addition, the Board believes in encouraging 
public participation in the review of regulations and proposes to amend 
IRPS 87-2 to provide for notice to the public of that portion of the 
regulations that are under review each year.

Request for Comment

    The NCUA Board is interested in receiving comments on the proposed 
IRPS 02-4 amending IRPS 87-2.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires the NCUA to prepare an 
analysis to describe any significant economic effect any regulation may 
have on a substantial number of small credit unions, currently meaning 
those under one million dollars in assets. The proposed regulation will 
change the definition of small credit union to increase the number of 
credit unions receiving the procedural benefits of the Regulatory 
Flexibility Act and will provide notice to the public and opportunity 
to comment on regulations under internal review. The NCUA Board has 
determined and certifies that the final rule will not have a 
significant economic impact on a substantial number of small credit 
unions. Accordingly, the NCUA Board has determined that a regulatory 
flexibility analysis is not required.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. This proposed rule, if adopted, will 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 
determined that this proposal does not constitute a policy that has 
federalism implications for purposes of the executive order.

Paperwork Reduction Act

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

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The 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, Pub. L. 105-277, 112 Stat. 
2681 (1998).

Lists of Subjects in 12 CFR Part 790

    Organization and functions (Government agencies).

    By the National Credit Union Administration Board on November 
21, 2002.
Becky Baker,
Secretary of the Board.

Interpretative Ruling and Policy Statement 02-4, Developing and 
Reviewing Government Regulations

    For the reasons stated above, IRPS 02-4 amends IRPS 87-2 (52 FR 
35231, September 18, 1987) by revising the second sentence in Section 
II, paragraph 2., and adding a sentence to the end of Section IV to 
read as follows:

II. Procedures for the Development of Regulations

* * * * *
    2. * * * Credit unions having less than ten million dollars in 
assets will be considered to be small entities. * * *
* * * * *
    IV. Review of Existing Regulations. * * * To accomplish a review 
every three years of all regulations, the Office of General Counsel 
will maintain a rolling review schedule that identifies one-third of 
existing regulations for review each year and will provide notice to 
the public of that portion of the regulations under review each year so 
the public may have an opportunity to comment.
* * * * *

Conforming Amendment to NCUA Regulations, 12 CFR Part 791

    For the reasons stated above, amend 12 CFR Part 791 as follows:

PART 791--RULES OF NCUA BOARD PROCEDURE; PROMULGATION OF NCUA RULES 
AND REGULATIONS; PUBLIC OBSERVATION OF NCUA BOARD MEETINGS

    1. The authority for part 791 continues to read as follows:

    Authority: 12 U.S.C. 1766, 1789 and 5 U.S.C. 552b.

    2. Amend Sec.  791.8 by revising paragraph (a) to read as follows:


Sec.  791.8  Promulgation of NCUA Rules and Regulations.

    (a) NCUA's procedures for developing regulations are governed by 
the Administrative Procedure Act (5 U.S.C. 551 et seq.), the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), and NCUA's policies for the 
promulgation of rules and regulations as set forth in its Interpretive 
Ruling and Policy Statement 87-2 as amended by Interpretive Ruling and 
Policy Statement 02-4.
* * * * *
[FR Doc. 02-30090 Filed 12-3-02; 8:45 am]
BILLING CODE 7535-01-P