[Federal Register Volume 69, Number 126 (Thursday, July 1, 2004)]
[Proposed Rules]
[Pages 39871-39873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14764]


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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. 69, No. 126 / Thursday, July 1, 2004 / 
Proposed Rules  

[[Page 39871]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701


Change in Official or Senior Executive Officer in Credit Unions 
That Are Newly Chartered or Are in Troubled Condition

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: NCUA is proposing to revise its rule concerning the 
requirement that federally-insured credit unions that are newly 
chartered or troubled file notice with NCUA before adding or replacing 
a board or committee member or employing or changing the duties of a 
senior executive officer. The proposed amendments will clarify the 
relationship between the prior notice provision and the commencement of 
service provision, so as to eliminate any potential confusion. In 
addition, the amendments reorganize the requirements in the current 
rule to make it easier to understand.

DATES: The NCUA must receive comments on or before August 30, 2004.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on Proposed Rule 701.14, Change in Official in Newly 
Chartered or Troubled Credit Unions'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Becky Baker, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

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

SUPPLEMENTARY INFORMATION:

Background

    Section 212 of the Federal Credit Union Act and Sec.  701.14 of 
NCUA's regulations require newly chartered and troubled credit unions 
to seek NCUA approval before the appointment or employment of directors 
and senior management officials. 12 U.S.C. 1790a; 12 CFR 701.14. 
Section 701.14 sets out the substantive and procedural requirements for 
credit unions seeking approval of an individual. The rule was adopted 
in 1990 and has had one substantive revision since that time. 55 FR 
43084 (October 26, 1990); 64 FR 28715 (May 27, 1999).
    The NCUA Board has a policy of continually reviewing NCUA 
regulations to ``update, clarify and simplify existing regulations and 
eliminate unnecessary and redundant and unnecessary provisions.'' NCUA 
Interpretive Ruling and Policy Statement (IRPS) 87-2, Developing and 
Reviewing Government Regulations. As a result of NCUA's 2003 review, 
the Board determined that the Change in Official or Senior Executive 
Officer rule should be updated.

Summary of Proposed Changes

    The only substantive proposed change to the rule is to Sec.  
701.14(e), the provision dealing with commencement of service. As 
currently written, this provision states a proposed director, committee 
member or senior executive officer may serve temporarily until the 
credit union and the individual are notified in writing of NCUA's 
approval or disapproval. This provision conflicts with the prior notice 
requirement in Sec.  701.14(c).
    Section 701.14(c) requires at least 30 days prior notice to NCUA 
before the addition of a board or committee member or the employment of 
a senior executive officer. There are some exceptions to the prior 
notice requirement but they are addressed in other sections of the 
rule. 12 CFR 701.14(d)(2) and (3). To resolve this inconsistency, the 
Board proposes adopting language in the commencement of service 
provision that is similar to regulations of the Federal Deposit 
Insurance Corporation and the other financial regulators. 12 CFR 
303.103(b).
    The revised provision is redesignated Sec.  701.14(d). It provides 
for commencement of service at the expiration of the 30-day period or 
any additional time under paragraph (c)(3)(iii) of the section, unless 
NCUA disapproves the notice before the end of the period.
    The proposed rule reorganizes the paragraph structure so that it is 
easier to read. All of the notice requirements are moved to current 
paragraph (d) Procedures for Notice of Proposed Change in Official or 
Senior Executive Officer. This paragraph is redesignated paragraph (c) 
and now includes in paragraph (c)(1) the prior notice requirements from 
current paragraph (c). Current paragraph (d)(2) Waiver of prior notice 
requirements is redesignated (c)(2)(i) and (iii). Current paragraph 
(d)(3) Election of directors or credit committee members is retitled 
Automatic waiver and redesignated (c)(2(ii).
    Current paragraph (d)(1) Filing and acceptance is retitled Filing 
Procedures, redesignated (c)(3), and broken into three subparts: (i) 
Where to file; (ii) Contents; and (iii) Processing.
    The final change is the redesignation of paragraph (f) as paragraph 
(e).

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires NCUA to prepare an 
analysis to describe any significant economic impact any proposed 
regulation may have on a substantial number of small entities. NCUA 
considers credit unions having less than ten million in assets to be 
small for purposes of RFA. Interpretive Ruling and Policy Statement 
(IRPS) 87-2 as amended by IRPS 03-2. The proposal clarifies the 
relationship between the waiver of prior notice provision and the 
temporary service provision, so as to eliminate any potential 
confusion. The NCUA has determined and certifies that this proposed 
rule, if adopted, will not have a significant economic impact on a 
substantial number of small credit

[[Page 39872]]

unions. Accordingly, the NCUA has determined that a Regulatory 
Flexibility Analysis is not required.

Paperwork Reduction Act

    NCUA has determined that the proposed rule would not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget (OMB). NCUA 
currently has OMB clearance for Sec.  701.14's collection requirements 
(OMB No. 3133-0121).

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. The proposed rule will apply to all federally 
insured credit unions. NCUA has determined that the proposed amendments 
will not have a substantial direct effect on the states, on the 
connection 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 proposed rule does not 
constitute a policy that has federalism implications for purposes of 
the executive order.

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

    NCUA has determined that this proposed rule would 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).

Agency Regulatory Goal

    NCUA's goal is clear, understandable regulations that impose a 
minimal regulatory burden. We request your comments on whether the 
proposed rule is understandable and minimally intrusive if implemented 
as proposed.

List of Subjects in 12 CFR Part 701

    Credit unions, Senior executive officials.

    By the National Credit Union Administration Board on June 24, 
2004.
Becky Baker,
Secretary of the Board.

    Accordingly, the National Credit Union Administration proposes to 
amend 12 CFR Part 701 as follows:

PART 701--ORGANIZATION AND OPERATIONS 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, 1789.

    2. Amend Sec.  701.14 by removing paragraphs (c) (d) and (e), 
adding new paragraphs (c) and (d), and redesignating paragraph (f) as 
paragraph (e) to read as follows:


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

* * * * *
    (c) Procedures for Notice of Proposed Change in Official or Senior 
Executive Officer--(1) Prior Notice Requirement. An insured credit 
union must give NCUA written notice at least 30 days before the 
effective date of any addition or replacement of a member of the board 
of directors or committee member or the employment or change in 
responsibilities of any individual to a position of senior executive 
officer if:
    (i) The credit union has been chartered for less than two years; or
    (ii) The credit union meets the definition of troubled condition in 
paragraph (b)(3) or (4) of this section.
    (2) Waiver of Prior Notice--(i) Waiver requests. Parties may 
petition the appropriate Regional Director for a waiver of the prior 
notice required under this section. Waiver may be granted if it is 
found that delay could harm the credit union or the public interest.
    (ii) Automatic waiver. In the case of the election of a new member 
of the board of directors or credit committee member at a meeting of 
the members of a federally insured credit union, the prior 30-day 
notice is automatically waived and the individual may immediately begin 
serving, provided that a complete notice is filed with the appropriate 
Regional Director within 48 hours of the election. If NCUA disapproves 
a director or credit committee member, the board of directors of the 
credit union may appoint its own alternate, to serve until the next 
annual meeting, contingent on NCUA approval.
    (iii) Effect on disapproval authority. A waiver does not affect the 
authority of NCUA to issue a Notice of Disapproval within 30 days of 
the waiver or within 30 days of any subsequent required notice.
    (3) Filing procedures--(i) Where to file. Notices will be filed 
with the appropriate Regional Director or, in the case of a corporate 
credit union, with the Director of the Office of Corporate Credit 
Unions. All references to Regional Director will, for corporate credit 
unions, mean the Director of Office of Corporate Credit Unions. State-
chartered federally insured credit unions will also file a copy of the 
notice with their state supervisor.
    (ii) Contents. The notice must contain information about the 
competence, experience, character, or integrity of the individual on 
whose behalf the notice is submitted. The Regional Director or his or 
her designee may require additional information. The information 
submitted must include the identity, personal history, business 
background, and experience of the individual, including material 
business activities and affiliations during the past five years, and a 
description of any material pending legal or administrative proceedings 
in which the individual is a party and any criminal indictment or 
conviction of the individual by a state or federal court. Each 
individual on whose behalf the notice is filed must attest to the 
validity of the information filed. At the option of the individual, the 
information may be forwarded to the Regional Director by the 
individual; however, in such cases, the credit union must file a notice 
to that effect.
    (iii) Processing. 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 the credit union takes 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.
    (d) Commencement of Service. A proposed director, committee member, 
or senior executive officer may begin service after the end of the 30-
day period or any other additional period as provided under paragraph 
(c)(3)(iii) of

[[Page 39873]]

this section, unless the NCUA disapproves the notice before the end of 
the period.
* * * * *
[FR Doc. 04-14764 Filed 6-30-04; 8:45 am]
BILLING CODE 7535-01-P