[Federal Register Volume 68, Number 103 (Thursday, May 29, 2003)]
[Rules and Regulations]
[Pages 31949-31952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-13342]


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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: Final rule.

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SUMMARY: This final rule, Interpretive Ruling and Policy Statement 
(IRPS) 03-2, amends the Regulatory Flexibility Act provisions of NCUA's 
IRPS 87-2, Developing and Reviewing Government Regulations. 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. This final rule redefines small entity to mean those credit 
unions with less than ten million dollars in assets. In addition, the 
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. The rule also updates 
IRPS 87-2 with a reference to the U.S. Small Business Administration 
guidance on implementation of the Regulatory Flexibility Act and to a 
Small Business Regulatory Enforcement Fairness Act requirement for 
publication of the factual basis supporting any certification that a 
particular rule will not have a significant economic impact on a 
substantial number of small entities.

DATES: This rule is effective June 30, 2003.

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: 

A. Background

    In 1981, the NCUA defined small credit union for purposes of the 
Regulatory Flexibility Act (RFA), Pub. L. 96-354, 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 IRPS 87-2 superseded IRPS 81-4 but continued the 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 RFA 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 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. On November 21, 2002, the Board issued a Notice 
of Proposed Rulemaking (NPRM) to amend the definition of small credit 
union in IRPS 87-2. 67 FR 72113, December 4, 2002. The Board proposed 
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. This final rule adopts the proposed rule's definition of small 
credit union.
    As discussed in the NPRM, the RFA is intended in part to encourage 
federal agencies to give special attention when making rules to the 
inability of smaller entities to handle incremental compliance burdens 
created by new rules. Credit unions with ten or more million dollars in 
assets have staff that may devote some of their time to compliance 
issues and incremental compliance burdens, but credit unions with 
significantly less than ten million

[[Page 31950]]

dollars in assets may be forced to seek and pay for outside assistance 
when addressing incremental compliance burdens. Accordingly, credit 
unions with more than ten million dollars in assets should be able to 
handle incremental compliance burdens more easily than credit unions 
with less than ten million dollars in assets.
    A definition of small credit union as one with less than ten 
million dollars in assets is also consistent with recent statutes and 
NCUA regulations providing credit unions with regulatory compliance 
relief. For example, in 1998 Congress amended the Federal Credit Union 
Act to require that credit unions follow 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 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.
    The Board also proposed 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 and providing for notice to the public of 
that portion of the regulations that are under review each year. The 
final rule includes this provision.
    This final rule includes a reference to The Regulatory Flexibility 
Act: An Implementation Guide for Federal Agencies (U.S. Small Business 
Administration, November, 2002) and requires NCUA staff to consult it 
when interpreting and implementing the requirements of the RFA. While a 
regulatory flexibility analysis is unnecessary if the Board certifies a 
regulation will not have a significant economic effect on a substantial 
number of small entities, the Small Business Regulatory Enforcement 
Fairness Act of 1996 (SBREFA) requires that agencies publish a 
statement ``providing the factual basis for'' any such certification in 
the Federal Register. Pub. L. 104-121, 5 U.S.C. 605(b). IRPS 87-2 has 
provided that the certification will be published with a statement 
``explaining'' the certification. This final rule replaces 
``explaining'' with ``providing the factual basis for.''

B. Summary of Comments

    NCUA received seventeen comment letters on the proposed rule: two 
from federal credit unions, five from state credit unions, eight from 
credit union trade organizations, one from a bank trade organization, 
and one from the National Association of State Credit Union 
Supervisors.
    All of the commenters expressed support for changing the definition 
of small credit union to include more credit unions in the definition, 
with most of the commenters agreeing that small credit union should be 
redefined as a credit union with less than ten million dollars in 
assets. In addition, all the commenters who addressed the proposal to 
provide public notice of those regulations NCUA is reviewing each year 
as part of its three-year rolling review expressed approval for that 
notice.

Comments on the Asset Size Threshold for Small Credit Unions

    The eleven commenters who supported a ten million dollar threshold 
generally noted it was consistent with current statutory definitions of 
small credit union and with the effects of inflationary changes since 
1981 and would result in a reasonable percentage of all credit unions 
(about 52%) being considered small. One commenter supported the ten 
million dollar threshold but stated it should not be greater than ten 
million.
    Five commenters thought the asset threshold should be greater than 
ten million dollars. Of these commenters, two thought the threshold 
should be 20 million dollars, one thought it should be 25 million 
dollars, one thought it should be at least 50 million dollars, and 
another thought it should be 100 million dollars.
    The commenters supporting thresholds of 20 and 25 million dollars 
note that the percentage of credit unions under one million dollars in 
assets in 1981, when the current definition of small credit union was 
established, was roughly 63% of all credit unions, and that the 
percentages of credit unions today under 20 million and 25 million 
dollars (66% and 70%, respectively) are close to 63%. One of these 
commenters also states that ``credit unions with 20 million dollars in 
assets, although slightly larger than those with ten million dollars in 
assets, typically still do not have the resources to devote staff time 
solely to compliance issues.''
    The commenter who supported a 50 million dollar threshold stated 
that: (1) only 10% of credit unions under 20 million dollars in assets 
have ``paid compliance directors,'' (2) only 16% of credit unions under 
50 million dollars in assets have such directors, and (3) only 31% of 
credit unions between 50 million and 100 million dollars in assets have 
such directors. This commenter also noted that the federal banking 
regulators and the U.S. Small Business Administration generally set the 
RFA's small entity threshold for their regulated financial entities at 
150 million dollars in assets. The commenter who supported a 100 
million dollar threshold also made similar comments.
    The Board appreciates the comments of those who supported a more 
expansive definition of small credit union but notes that a majority of 
the commenters supported the proposed definition. Further, the proposed 
is consistent with other statutory uses of the term small credit union 
while more expansive definitions would not be. In addition, while 
credit unions with ten million dollars or more in assets may not have 
staff devoted exclusively to compliance issues, the Board concludes, as 
noted in the NPRM, they are likely to have some staff that can devote 
time to compliance. This analysis is appropriate in light of the 
legislative history of the RFA discussed in the NPRM. Accordingly, the 
Board has decided to adopt the definition of small credit union from 
the proposed rule.

Miscellaneous Comments on the Definition of Small Credit Union and 
Applicability of the RFA

    A few commenters thought the asset threshold for small credit 
unions should be adjusted periodically: one suggested revisiting the 
threshold each year; two suggested tying it to inflation; and another 
suggested that NCUA should reset the threshold yearly by declaring as 
small that group of the smallest credit unions whose combined assets 
equal 10% of the aggregate assets of all credit unions. The Board 
believes that annual adjustment is unnecessary and might have 
undesirable consequences. For example, with inflation levels likely to 
remain low for the foreseeable future, the Board does not think the 
threshold needs to be revisited each year. In addition, the rulemaking 
process for particular rules often spans more than one calendar year, 
and it would be difficult and confusing to change the definition for 
rules in progress every year. Finally, the use of a fixed, round

[[Page 31951]]

number makes it easier to assess which credit unions are small and to 
explain how NCUA is applying the RFA analysis in a particular 
rulemaking. The Board will revisit the definition of small credit union 
as necessary in the future.
    One commenter thought that, for rules in which the NCUA determines 
the RFA does not apply, the NCUA should publish details of its 
determination. As discussed above, this final rule amends IRPS 87-2 to 
reflect the SBREFA requirement that NCUA publish the factual basis for 
each certification in the Federal Register.
    Two commenters thought the NCUA should go beyond the requirements 
of the RFA and should undertake and publish a detailed analysis of the 
economic impact of each rule on all credit unions, regardless of asset 
size. The Board does not believe an RFA-type analysis is needed for 
every rulemaking, but notes that it is NCUA's longstanding policy, as 
stated in IRPS 87-2, that it will impose only minimum required burdens 
on credit unions.

Miscellaneous Comments About Public Notice of Regulations Under NCUA 
Review

    One commenter suggested that each year at its December meeting the 
Board announce which regulations would be reviewed by the NCUA Office 
of General Counsel in the coming year and which provisions in those 
regulations were specifically under consideration for change. The 
commenter thought this notice should be published both on the agency's 
website and in the Federal Register. Another commenter wanted the 
notice of regulations under review published twice a year and a 
designated contact point at NCUA for all questions and comments about a 
regulation under review.
    The Board will publish notice of the regulations under rolling 
review in a particular year far enough in advance of the review to give 
interested parties a meaningful opportunity for input. The notice may 
be published on NCUA's website, in the Federal Register, or in other 
appropriate media as determined by NCUA. NCUA also publishes a semi-
annual regulatory agenda in the Federal Register as part of the federal 
government's Unified Agenda of Federal Regulatory and Deregulatory 
Actions. That agenda, generally published each November and May, 
includes contact information and a description of rules that are in 
process or on which regulatory action is anticipated for the next 12 
months.
    One commenter thought that NCUA should add the following statement 
to IRPS 87-2: ``Nothing in the Office of General Counsel's rolling 
review schedule prohibits the review of existing regulations ahead of 
schedule.'' While the Board believes that this is a true statement, the 
Board does not believe it need be added to IRPS 87-2.

Other Miscellaneous Comments

    Two commenters thought the definition of small credit union in the 
Small Credit Union Program (SCUP) should be changed to correlate with 
the RFA definition. Another commenter stated the NCUA should also 
provide a definition of large credit unions. Since this rule applies 
only to NCUA rulemaking and the requirements of the RFA and does not 
affect the SCUP or large credit unions, these two issues are not 
addressed in the final rule.

Regulatory Procedures

Regulatory Flexibility Act

    The RFA 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. This final rule, when effective, will change 
the definition of small credit union to increase the number of credit 
unions receiving the procedural benefits of the RFA and will provide 
notice to the public and opportunity to comment on regulations under 
internal review. This final rule is procedural in nature and will not 
have any ascertainable economic impact on credit unions. Accordingly, 
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. No regulatory flexibility analysis is 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 final rule 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 rule does not constitute a policy that has 
federalism implications for purposes of the executive order.

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.

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

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

Small Business Regulatory Enforcement Fairness Act

    The SBREFA provides for congressional review of agency rules. A 
reporting requirement is generally triggered in instances where NCUA 
issues a final rule as defined by Section 551 of the Administrative 
Procedure Act. 5 U.S.C. 551. Rules relating to management, personnel, 
or agency procedure or practice that do not substantially affect the 
rights or obligations of non-agency parties are exempt from 
congressional review. 5 U.S.C. 804(3). The NCUA Board has determined 
that this final rule, which deals with agency procedures and does not 
substantially affect the rights or obligations of non-agency parties, 
is exempt from congressional review.

List of Subjects in 12 CFR Part 790

    Organization and functions (government agencies).

    By the National Credit Union Administration Board on May 22, 
2003.
Becky Baker,
Secretary of the Board.

Interpretative Ruling and Policy Statement 03-2, Developing and 
Reviewing Government Regulations

    For the reasons stated above, IRPS 03-2 amends IRPS 87-2 (52 FR 
35231, September 18, 1987) by revising the second sentence in Section 
II, paragraph 2.; adding a sentence to the end of Section II, paragraph 
2; revising the fourth sentence in Section II, paragraph 4; 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. * * * In addition, NCUA 
staff will consult

[[Page 31952]]

applicable U.S. Small Business Administration guidance, including The 
Regulatory Flexibility Act: An Implementation Guide for Federal 
Agencies, when interpreting and implementing the requirements of the 
Regulatory Flexibility Act.
* * * * *
    4. * * * The certification will be published in the Federal 
Register with the final rule, along with a statement providing the 
factual basis for such certification. * * *
* * * * *
    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

0
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

0
1. The authority for part 791 continues to read as follows:

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


0
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 03-2.
* * * * *
[FR Doc. 03-13342 Filed 5-28-03; 8:45 am]
BILLING CODE 7535-01-P