[Federal Register Volume 68, Number 128 (Thursday, July 3, 2003)]
[Proposed Rules]
[Pages 39863-39866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16795]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Chapter VII


Regulatory Publication and Review Under the Economic Growth and 
Regulatory Paperwork Reduction Act of 1996

AGENCY: National Credit Union Administration.

ACTION: Notice of regulatory review; request for comments.

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SUMMARY: The NCUA Board is beginning a review of its regulations to 
reduce burden imposed on federally-insured credit unions, as required 
by section 2222 of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996. As required by section 2222, NCUA has 
categorized its regulations for the purpose of the review and proposes 
to publish categories of regulations for review between now and 2006.
    The categories, and the regulations that NCUA considers to be part 
of those categories, are detailed below. This review presents a 
significant opportunity to consider the possibilities for burden 
reduction among groups of similar regulations. NCUA welcomes comment on 
the categories, the order of review and all other aspects of the 
project in order to maximize its effectiveness.
    Today, NCUA is publishing its first in a series of public notices, 
comprising two of the categories--``Applications and Reporting,'' and 
``Powers and Activities''--for public comment to identify outdated, 
unnecessary, or burdensome regulatory requirements imposed on 
federally-insured credit unions. Since NCUA will publish a series of 
requests for comment on the remaining categories, it is not recommended 
that burden reduction comments be submitted now for any regulations in 
other categories.

DATES: Comment must be received on or before October 1, 2003.

ADDRESSES: Direct comments to Becky Baker, Secretary of the Board. Mail 
or hand-deliver comments to: National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428. Fax comments to (703) 
518-6319. E-mail comments to [email protected]. Please send comments 
by one method only. Because of the number of regulatory matters for 
which NCUA may be receiving comments during the time this comment 
period is open, we suggest commenters identify comments in response to 
this notice by including ``EGRPRA'' in a subject or reference line in 
their comments.

FOR FURTHER INFORMATION CONTACT: Mary F. Rupp, Staff Attorney, Office 
of General Counsel, at the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Introduction

    Congress enacted section 2222 of the Economic Growth and Regulatory 
Paperwork Reduction Act of 1996 (EGRPRA) (Pub. L. 104-208) as part of 
an effort to minimize unnecessary government regulation consistent with 
safety and soundness, consumer protection, and other public policy 
goals. Under section 2222 (12 U.S.C. 3311), NCUA and the Office of the 
Comptroller of the Currency, Board of Governors of the Federal Reserve 
System, Federal Deposit Insurance Corporation, and Office of Thrift 
Supervision (Agencies) must review their regulations to reduce burden 
on insured depository institutions. We are required, jointly or 
individually, to categorize regulations by type, such as ``consumer 
regulations'' or ``safety and soundness'' regulations. Once we 
establish the categories, we must provide notice and ask for public 
comment on one or more of these regulatory categories. In drafting this 
notice, the NCUA participated as part of the EGRPRA planning process 
with the other Agencies. Because of the unique circumstances of 
federally-insured credit unions and their members, NCUA is issuing a 
separate notice from the Agencies. NCUA's notice is consistent and 
comparable with the Agency's notice, except on issues that are unique 
to credit unions. Section 2222 requires that NCUA ask the public to 
identify areas of the regulations that are outdated, unnecessary, or 
unduly burdensome. NCUA must issue these publications for comment at 
regular intervals such that all of its regulations are published within 
a 10-year cycle. The first publication cycle will end in September 
2006. The EGRPRA review supplements and complements the reviews of 
regulations that NCUA conducts under other laws and its internal 
policies.
    Section 2222 requires a two-part regulatory response. First, NCUA 
must publish in the Federal Register a summary of the comments 
received, identifying the significant issues raised and discussing 
those issues. Second, NCUA must ``eliminate unnecessary regulations to 
the extent that such action is appropriate.'' NCUA and the Agencies may 
prepare the regulatory response individually or jointly.
    Section 2222 further requires the FFIEC to submit a report to the 
Congress within 30 days after NCUA and the Agencies publish the comment 
summary and discussion in the Federal Register. This report must 
summarize any significant issues raised by the public comments and the 
relative merits of those issues. The report also must analyze whether 
the appropriate federal financial regulator involved is able to address 
the regulatory burdens associated with the issues by regulation, or 
whether the burdens must be addressed by legislation.

II. The EGRPRA Review's Special Focus

    The regulatory review required by section 2222 provides a 
significant opportunity for the public and NCUA to step back and look 
at groups of related regulations and identify possibilities for 
streamlining. The EGRPRA review's overall focus on the ``forest'' of 
regulations will offer a new perspective in identifying opportunities 
to reduce

[[Page 39864]]

regulatory burden. Of course, reducing regulatory burden must be 
consistent ensuring the continued safety and soundness of federally-
insured credit unions and appropriate consumer protections.
    EGRPRA also recognizes that burden reduction must be consistent 
with NCUA's statutory mandates, many of which currently require certain 
regulations. One of the significant aspects of the EGRPRA review 
program is the recognition that effective burden reduction in certain 
areas may require legislative change. NCUA will be soliciting comment 
on, and reviewing the comments and regulations carefully for, the 
relationship among burden reduction, regulatory requirements and 
statutory mandates. This will be a key aspect of the report back to 
Congress.\1\
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    \1\ Credit unions are also subject to regulations issued by 
other non-banking agencies, such as rules issued by the Department 
of Housing and Urban Development (under Real Estate Settlement 
Procedures Act of 1974) and by the Department of the Treasury (under 
the Bank Secrecy Act including rules required by the USA Patriot 
Act). The rules of these other agencies are beyond the scope of the 
EGRPRA review and the NCUA's jurisdiction. To the extent the NCUA 
receives comments raising significant issues regarding these related 
rules, however, it intends to identify the issues in the Report to 
Congress and will also notify the related agencies of the substance 
of the relevant comments.
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    The combination of considering the relationship of regulatory and 
statutory change on regulatory burden with the section 2222 requirement 
for grouping regulations by type provides the possibility for 
particularly effective burden reduction. It may be possible to identify 
statutes and regulations that share similar goals or complementary 
methods of compliance monitoring such that the compliance requirements 
could be combined and overlapping requirements could be eliminated. For 
example, it may be possible to combine certain types of applications to 
eliminate duplication.
    The EGRPRA review can also significantly contribute to the NCUA's 
on-going efforts to reduce regulatory burden. For example, since 1987, 
a formally adopted NCUA policy has required the Board to review each of 
its regulations at least once every three years with a view toward 
eliminating, simplifying, or otherwise easing the burden of each 
regulation.\2\
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    \2\ Interpretive Ruling and Policy Statement (IRPS) 87-2, 52 FR 
35231 (September 8, 1987) as amended by IRPS 03-2, 68 FR 32127 (May 
29, 2003).
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    Further, NCUA addresses the issue of regulatory burden every time 
it proposes and adopts a rule. Under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501 et seq.), the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.) and internal agency policies, NCUA examines each 
rulemaking to minimize the burdens it might impose on the industry and 
considers various alternatives.
    NCUA will use both the EGRPRA review and its individual reviews to 
identify and reduce burdens on ``small'' institutions. More than half 
of federally-insured credit unions are small--having $10 million in 
assets or less--as defined by NCUA in IRPS 03-2. We are particularly 
concerned about burden on small institutions. When a new regulation is 
created or an old regulation is changed, small credit unions must 
devote a large percentage of their staffs' time to review the 
regulation to determine if and how it will affect them. Compliance with 
a regulation also can take large amounts of time that cannot be devoted 
to servicing members or business planning. In a large credit union, 
ensuring regulatory compliance can take many more hours; however, those 
hours make up a much smaller percentage of the credit union's 
resources. In situations where a regulation is aimed at an activity 
engaged in primarily by large credit unions, the compliance burden on 
small credit unions can outweigh its benefit.

III. NCUA's Proposed Plan

    NCUA must categorize its regulations by ``type.'' Section 2222 
gives it authority to determine categories, and suggests two possible 
categories: ``consumer regulations'' and ``safety and soundness.'' NCUA 
has regulations on more than 25 subjects covering a wide variety of 
areas from capital maintenance to the privacy of consumer financial 
information. A few of these regulations have been issued jointly with 
the other Agencies and are as uniform as possible. The majority of 
NCUA's regulations are issued independently by NCUA and apply only to 
federally-insured credit unions.
    NCUA proposes to seek comments on 10 categories of its regulations 
which impose burden on federally-insured credit unions, including 
regulations that apply only to federal credit unions, between now and 
2006.\3\ The categories, in alphabetical order, are: Agency Programs; 
Applications and Reporting; Capital; Consumer Protection; Corporate 
Credit Unions; Directors, Officers and Employees; Money Laundering; 
Powers and Activities; Rules of Procedure and Safety and Soundness. 
NCUA believes that these categories are logical groupings that are not 
so broad such that the number of regulations presented in any one 
category would overwhelm potential commenters.
    The categories also reflect recognized areas of industry interest 
and specialization or are particularly critical to the health of the 
credit union system. NCUA recognizes that its regulations could be 
categorized in other ways and welcomes recommendations about the 
categories and the regulations placed within them. The Board notes that 
some regulations, such as lending, pertain to more than one category 
and are included in all applicable categories.
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    \3\ Consistent with section 2222's focus on reducing burden on 
insured institutions, NCUA will not publish its internal 
organizational and operational regulations to the extent that those 
regulations impose no, or minimal, burden on insured credit unions.
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    Joint publication is not required by section 2222. NCUA believes 
that publishing its rules for public comment separately from the 
Agencies is the most effective method for achieving EGRPRA's burden 
reduction goals for federally-insured credit unions. The credit union 
system is quite different than the banking system. For example, credit 
unions deal with issues such as membership, credit union service 
organizations (CUSOs), and corporate credit unions, which are unique to 
credit union operations. The Agencies have listed four categories: 
Banking operations; community reinvestment; international operations; 
and securities, which have limited or no applicability in the credit 
union system. NCUA has included two categories, agency programs and 
corporate credit unions, which have no applicability in the banking 
system. Because of these obvious differences, NCUA is publishing its 
notices separately but maintaining comparability with the Agencies' 
notices to the extent the issues are the same. NCUA is publishing two 
categories of rules for burden reduction comment with this notice and 
plans to publish the remaining eight categories in roughly semiannual 
intervals, with 90-day comment periods for categories under review, 
through September 2006. NCUA welcomes recommendations on grouping the 
remaining categories and the order in which to publish them.
    After the conclusion of the comment period for each EGRPRA review 
notice published in the Federal Register, NCUA will review the comments 
it has received and decide whether further action is appropriate with 
respect to the categories of regulations included in that notice. In 
the case of rules that NCUA has issued jointly with the Agencies, NCUA 
will make that decision jointly with the Agencies. Any rulemaking to 
amend or revise those rules would similarly be undertaken jointly and 
will provide the public with an opportunity to comment on any

[[Page 39865]]

proposed amendment. NCUA will separately determine whether amendments 
to its own rules are appropriate in light of comments submitted during 
the EGRPRA review and, if so, will separately initiate a rulemaking to 
modify its rules.
    NCUA has prepared two charts to assist public understanding of the 
organization of its section 2222 review. The first chart, at V.A., 
presents the two categories of regulations on which NCUA is requesting 
burden reduction recommendations in this notice. The two categories are 
shown in the left column. In the middle column are the subject matters 
that fall within the categories and in the far right column are the 
regulatory citations. The second chart, at V.B., presents the remaining 
eight categories in alphabetical order in a similar format.

IV. Request for Burden Reduction Recommendations About the First Two 
Categories of Regulations: ``Applications and Reporting'' and ``Powers 
and Activities'

    NCUA is asking the public to identify areas of regulations within 
two categories--``Applications and Reporting,'' and ``Powers and 
Activities''--that impose outdated, unnecessary, or unduly burdensome 
regulatory requirements on federally-insured credit unions. It is not 
necessary for the public to provide burden reduction recommendations 
about categories of rules other than these two categories at this time 
since NCUA will publish the remaining categories before the end of the 
first review cycle in 2006. Comments that cite particular provisions or 
language, and provide reasons why such provisions should be changed, 
would be most helpful to NCUA's review efforts. Suggested alternative 
provisions or language, where appropriate, would also be helpful. If 
the implementation of a comment would require modifying a statute that 
underlies the regulation, the comment should, if possible, identify the 
needed statutory change.
    Specific issues for commenters to consider. While all comments 
related to any aspect of section 2222 are welcome, NCUA invites comment 
on the following issues:
    [sbull] Need and purpose of the regulations. Do the regulations in 
these categories fulfill current needs? Have industry or other 
circumstances changed since a regulation was written such that the 
regulation is no longer necessary? Have there been shifts within the 
industry or consumer actions that suggest a re-focus of the underlying 
regulations?
    Do any of the regulations in these categories impose burdens not 
required by their authorizing statutes?
    [sbull] Need for statutory change. Do the statutes impose 
unnecessary requirements? Are any of the statutory requirements 
underlying these categories redundant, conflicting or otherwise unduly 
burdensome?
    [sbull] Overreaching approaches/flexibility of the regulatory 
standards. Generally, is there a different approach to regulating that 
NCUA could use that would achieve statutory goals while imposing less 
burden? Do any of the regulations in these categories or the statutes 
underlying them impose unnecessarily inflexible requirements?
    [sbull] Effect of the regulations on competition. Do any of the 
regulations in these categories or the statutes underlying them create 
competitive disadvantages for credit unions compared to another part of 
the financial services industry?
    [sbull] Reporting, recordkeeping and disclosure requirements. Do 
any of the regulations in these categories or the statutes underlying 
them impose particularly burdensome reporting, recordkeeping or 
disclosure requirements? Are any of these requirements similar enough 
in purpose and use so that they could be consolidated? What, if any, of 
these requirements could be fulfilled electronically to reduce their 
burden?
    [sbull] Consistency and redundancy. Do any of the regulations in 
these categories impose inconsistent or redundant regulatory 
requirements that are not warranted by the circumstances?
    [sbull] Clarity. Are the regulations in these categories and the 
underlying statutes drafted in clear and easily understood language? 
Are there specific regulations or underlying statutes that need 
clarification?
    [sbull] Burden on small insured institutions. NCUA has a particular 
interest in minimizing burden on small insured credit unions (those 
with less than $10 million in assets). NCUA solicits comment on whether 
any regulations within these categories should be continued without 
change, amended or rescinded in order to minimize any significant 
economic impact the regulations may have on a substantial number of 
small federally-insured credit unions.

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                 Category                            Subject                            Reg. Cite
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              V. A. Regulations About Which Burden Reduction Recommendations Are Requested Currently
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1. Applications and Reporting............  Change in Official or        12 CFR 701.14.
                                            Senior Executive Officer
                                            in Credit Unions that are
                                            Newly Chartered or in
                                            Troubled Condition.
                                           Field of Membership/         12 CFR 701.1;
                                            Chartering.                 IRPS 03-1.
                                           Fees Paid by Federal Credit  12 CFR 701.6.
                                            Unions.
                                           Conversion of Insured        12 CFR part 708a.
                                            Credit Unions to Mutual
                                            Savings Banks.
                                           Mergers of Federally-        12 CFR part 708b.
                                            Insured Credit Unions;
                                            Voluntary Termination or
                                            Conversion of Insured
                                            Status.
                                           Applications for Insurance.  12 CFR 741.0; 741.3; 741.4; 741.6.
                                           Conversion to a state-       12 CFR 741.7.
                                            chartered credit union.
                                           Purchase of assets and       12 CFR 741.8.
                                            assumption of liabilities.
2. Powers and Activities:
    a. Lending, Leasing and Borrowing....  Loans to Members and Lines   12 CFR 701.21.
                                            of Credit to Members.
                                           Participation Loans........  12 CFR 701.22.
                                           Borrowed Funds from Natural  12 CFR 701.38.
                                            Persons.
                                           Statutory Lien.............  12 CFR 701.39.
                                           Leasing....................  12 CFR part 714.
                                           Member Business Loans......  12 CFR part 723.

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                                           Maximum Borrowing..........  12 CFR 741.2.
    b. Investment and Deposits...........  Investment and Deposit       12 CFR part 703.
                                            Activities.
                                           Fixed Assets...............  12 CFR 701.36.
                                           Credit union Service         12 CFR part 712.
                                            Organizations (CUSOs).
                                           Payment on Shares by Public  12 CFR 701.32.
                                            Units and Nonmembers.
                                           Designation of low-income    12 CFR 701.34.
                                            status; receipt of
                                            secondary capital accounts
                                            by low-income designated
                                            credit unions.
                                           Share, Share Draft, and      12 CFR 701.35.
                                            Share Certificate Accounts.
                                           Treasury Tax and Loan        12 CFR 701.37.
                                            Depositories; Depositories
                                            and Financial Agents of
                                            the Government.
                                           Refund of Interest.........  12 CFR 701.24.
    c. Miscellaneous Activities..........  Incidental Powers..........  12 CFR part 721.
                                           Charitable Contributions     12 CFR 701.25.
                                            and Donations.
                                           Credit Union Service         12 CFR 701.26.
                                            Contracts.
                                           Purchase, Sale and Pledge    12 CFR 701.23.
                                            of Eligible Obligations.
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                    V. B. Categories and Regulations About Which NCUA Will Seek Comment Later
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1. Agency Programs.......................  Community Development        12 CFR part 705.
                                            Revolving Loan Program.
                                           Central Liquidity Facility.  12 CFR part 725.
                                           Designation of low-income    12 CFR 701.34.
                                            status; receipt of
                                            secondary capital accounts
                                            by low-income designated
                                            credit unions.
                                           Regulatory Flexibility       12 CFR part 742.
                                            Program.
2. Capital...............................  Prompt Corrective Action...  12 CFR part 702.
                                           Adequacy of Reserves.......  12 CFR 741.3(a).
3. Consumer Protection...................  Nondiscrimination            12 CFR 701.31.
                                            Requirement (Fair Housing).
                                           Truth in Savings (TIS).....  12 CFR part 707.
                                           Loans in Areas Having        12 CFR part 760.
                                            Special Flood Hazards.
                                           Privacy of Consumer          12 CFR part 716.
                                            Financial Information.
                                           Share Insurance............  12 CFR part 745.
                                           Advertising................  12 CFR part 740.
                                           Disclosure of Share          12 CFR 741.10.
                                            Insurance.
                                           Notice of termination of     12 CFR 741.5.
                                            Excess Insurance Coverage.
                                           Uninsured Membership Shares  12 CFR 741.9.
4. Corporate Credit Unions...............  Corporate Credit Unions....  12 CFR part 704.
5. Directors, Officers and Employees.....  Loans and Lines of Credit    12 CFR 701.21(d).
                                            to Officials.
                                           Reimbursement, Insurance     12 CFR 701.33.
                                            and Indemnification of
                                            Officials and Employees.
                                           Benefits for Employees of    12 CFR 701.19.
                                            Federal Credit Unions.
                                           Management Official          12 CFR part 711.
                                            Interlocks.
                                           Fidelity Bond and Insurance  12 CFR 713.
                                            Coverage.
6. Money Laundering......................  Report of Crimes or          12 CFR 748.1(c).
                                            Suspected Crimes.
                                           Bank Secrecy Act...........  12 CFR 748.2.
7. Rules of Procedure....................  Liquidation (Involuntary     12 CFR parts 709 and 710.
                                            and Voluntary).
                                           Uniform Rules of Practice    12 CFR part 747 subpart A.
                                            and Procedure.
                                           Local Rules of Practice and  12 CFR part 747 subpart B.
                                            Procedure.
8. Safety & Soundness....................  Lending....................  12 CFR 701.21.
                                           Investments................  12 CFR part 703.
                                           Supervisory Committee        12 CFR part 715.
                                            Audits and Verifications.
                                           Security Programs..........  12 CFR 748.
                                           Guidelines for Safeguarding  12 CFR part 748, Appendix A.
                                            Member Information.
                                           Records Preservation         12 CFR part 749.
                                            Program and Record
                                            Retention Appendix.
                                           Appraisals.................  12 CFR 722.
                                           Examination................  12 CFR 741.1.
                                           Regulations Codified         12 CFR part 741, subpart B.
                                            Elsewhere in NCUA's
                                            Regulations as applying to
                                            Federal Credit Unions that
                                            also apply to Federally
                                            insured state-chartered
                                            credit unions.
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    By the National Credit Union Administration Board on June 26, 
2003.
Becky Baker,
Secretary of the Board.
[FR Doc. 03-16795 Filed 7-2-03; 8:45 am]
BILLING CODE 7535-01-P