[Federal Register Volume 73, Number 191 (Wednesday, October 1, 2008)]
[Proposed Rules]
[Pages 57013-57014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23039]


 ========================================================================
 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. 73, No. 191 / Wednesday, October 1, 2008 / 
Proposed Rules  

[[Page 57013]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 701 and 742

RIN 3133-AD53


Regulatory Flexibility Regarding Ownership of Fixed Assets

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: NCUA proposes to amend its Regulatory Flexibility (RegFlex) 
Program to provide additional flexibility to qualifying federal credit 
unions (FCUs) when acquiring unimproved land for future expansion. 
Currently, when an FCU acquires unimproved land for future expansion 
and does not fully occupy the completed premises within one year, it 
must partially occupy the completed premises within three years or 
obtain a waiver. The proposed amendment would increase the three years 
to six years for RegFlex FCUs without a waiver. NCUA also proposes to 
make conforming amendments to its fixed asset rule to be consistent 
with the RegFlex changes.

DATES: Comments must be received on or before December 1, 2008.

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 742, Regulatory Flexibility Program'' 
in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: All public comments are available on the 
agency's Web site at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical 
reasons. Public comments will not be edited to remove any identifying 
or contact information. Paper copies of comments may be inspected in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an e-mail to [email protected].

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

SUPPLEMENTARY INFORMATION:

A. Background

1. Fixed Assets

    The Federal Credit Union Act authorizes an FCU to purchase, hold, 
and dispose of property necessary or incidental to its operations. 12 
U.S.C. 1757(4). Generally, the fixed asset rule provides limits on 
fixed asset investments, establishes occupancy and other requirements 
for acquired and abandoned premises, and prohibits certain 
transactions. 12 CFR 701.36. Fixed assets are defined in Sec.  
701.36(e) as premises, furniture, fixtures, and equipment and includes 
any office, branch office, suboffice, service center, parking lot, 
facility, real estate where a credit union transacts or will transact 
business, office furnishings, office machines, computer hardware and 
software, automated terminals, and heating and cooling equipment.
    Section 701.36 prohibits an FCU with $1 million or more in assets 
from investing in fixed assets the aggregate of which exceeds five 
percent of the FCU's shares and retained earnings, although this 
prohibition is waivable. 12 CFR 701.36(a)(1), (2). If an FCU acquires 
premises, as broadly defined in Sec.  701.36(e), for future expansion 
and does not fully occupy the space within one year, its board must 
have a resolution in place by the end of that year with plans for full 
occupation and make those plans available to NCUA upon request. 12 CFR 
701.36(b)(1). Additionally, the FCU must partially occupy the premises 
within a reasonable period, not to exceed three years, without a 
waiver. 12 CFR 701.36(b)(2). In this proposal, NCUA is only addressing 
the circumstance where an FCU is acquiring unimproved land but no other 
kind of premises.

2. Regulatory Flexibility Program

    The RegFlex Program exempts from certain regulatory restrictions 
and grants additional powers to those FCUs that have demonstrated 
sustained superior performance as measured by CAMEL ratings and net 
worth classifications. 12 CFR 742.1. An FCU may qualify for RegFlex 
treatment automatically or by application to the appropriate regional 
director. 12 CFR 742.2. Also, an FCU's RegFlex authority can be lost or 
revoked. 12 CFR 742.3.

B. Discussion

    Although a RegFlex eligible FCU is exempt from the five percent 
aggregate limit on fixed asset investments, it is not exempt from the 
requirement to partially occupy premises acquired for future expansion 
within three years or request a waiver of this requirement. 12 CFR 
701.36(a), 701.36(b)(2), 701.36(d), 742.4(a)(3). Where an FCU is 
acquiring unimproved land, the partial occupancy requirement is more 
difficult to satisfy than if the FCU were purchasing premises with an 
existing branch building. The Board is aware that some FCUs take the 
position that the fixed asset rule's three-year partial occupancy 
requirement, even with a waiver option, is burdensome and an 
unnecessary level of oversight for RegFlex FCUs that have demonstrated 
sustained superior performance.
    Although the NCUA Board believes additional regulatory relief can 
and should be granted, the time limit for an FCU to fulfill the partial 
occupancy requirement cannot be unlimited. That would be the equivalent 
of an FCU making an impermissible real estate investment and also could 
cause serious safety and soundness concerns. NCUA recognizes, however, 
that many real estate transactions are complex, time consuming, and can 
involve a host of wide ranging issues that must be worked through 
before an FCU is ready to occupy the premises. This is especially true 
in the unimproved land context considering the addition of

[[Page 57014]]

construction related issues. Accordingly, NCUA proposes to extend the 
three-year time period to six years for RegFlex FCUs but only with 
respect to the acquisition of unimproved land. NCUA believes six years 
is a sufficiently long time period to provide RegFlex FCUs with the 
flexibility they need to manage their fixed asset portfolios, in any 
context, free of unnecessary regulation and consistent with safe and 
sound credit union operations. All other substantive aspects of the 
fixed asset rule remain unchanged, including an FCU's ability to 
request a waiver of the partial occupancy requirement.

C. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a proposed rule may have on 
a substantial number of small entities (primarily those under ten 
million dollars in assets). This rule provides additional flexibility 
and reduces regulatory burden. Accordingly, this proposed rule will not 
have a significant economic impact on a substantial number of small 
credit unions, and therefore, no regulatory flexibility analysis is 
required.

Paperwork Reduction Act

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

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 would not have a 
substantial direct effect 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 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 will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

Agency Regulatory Goal

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

List of Subjects

12 CFR Part 701

    Credit unions.

12 CFR Part 742

    Credit unions, reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on September 
25, 2008.
Mary Rupp,
Secretary of the Board.
    For the reasons discussed above, NCUA proposes to amend 12 CFR 
parts 701 and 742 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, 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 701.36(d) introductory text is amended by adding a new 
second sentence to read as follows:


Sec.  701.36  FCU Ownership of fixed assets.

* * * * *
    (d) * * * Those federal credit unions are also exempt from the 
three-year partial occupancy requirement described in paragraph (b) of 
this section when acquiring unimproved land for future expansion 
pursuant to the terms of section 742.4(a)(3) of this chapter. * * *
* * * * *

PART 742--REGULATORY FLEXIBILITY PROGRAM

    3. The authority citation for part 742 continues to read as 
follows:

    Authority: 12 U.S.C. 1756, 1766.

    4. Section 742.4(a)(3) is amended by adding two sentences at the 
end to read as follows:


Sec.  742.4  RegFlex Relief.

    (a) * * *
    (3) * * * Section 701.36(b)(2) of this chapter concerning the 
three-year partial occupancy requirement when acquiring unimproved land 
for future expansion; RegFlex credit unions are instead subject to a 
six-year partial occupancy requirement when acquiring unimproved land 
but remain subject to all other provisions of that section including 
the waiver provision;
* * * * *
[FR Doc. E8-23039 Filed 9-30-08; 8:45 am]
BILLING CODE 7535-01-P