[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)]
[Notices]
[Pages 36356-36363]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15515]


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NATIONAL CREDIT UNION ADMINISTRATION

RIN 3133-AE16


Minority Depository Institution Preservation Program

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final Interpretive Ruling and Policy Statement 13-1.

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SUMMARY: The NCUA Board is issuing a final Interpretive Ruling and 
Policy Statement to establish a Minority Depository Institution 
Preservation Program for federally insured credit unions.

DATES: This final Interpretive Ruling and Policy Statement is effective 
July 24, 2015.

FOR FURTHER INFORMATION CONTACT: Wendy A. Angus, Acting Director, 
Office of Minority and Women Inclusion, at (703) 518-1650; or Cynthia 
Vaughn, Diversity Outreach Program Analyst, Office of Minority and 
Women Inclusion, at (703) 518-1650.

SUPPLEMENTARY INFORMATION: 

I. Background

    In 1989, Congress enacted the Financial Institutions Reform, 
Recovery and Enforcement Act (FIRREA) \1\ in response to the failure of 
the Federal Savings and Loan Insurance Corporation (FSLIC), which 
insured the deposits of insolvent savings & loan institutions. Section 
308 of FIRREA established goals for preserving and promoting minority 
depository institutions.\2\ When enacted, FIRREA Sec.  308 applied only 
to the Office of Thrift Supervision (OTS) and Federal Deposit Insurance 
Corporation (FDIC), successor to FSLIC.\3\ Those agencies developed 
various initiatives, such as training, technical assistance and 
educational programs, aimed at preserving federally insured banks and 
savings institutions that meet FIRREA's definition of a minority 
depository institution (MDI).\4\
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    \1\ Public Law 101-73, 103 Stat. 183 (Aug. 9, 1989).
    \2\ Id. Title III, Sec.  308, 103 Stat. 353 note re ``Preserving 
Minority Ownership of Minority Financial Institutions,'' 12 U.S.C. 
1463 note.
    \3\ Id. Sec.  1463 note (a). OCC and the Fed also initiated MDI 
programs to comply with the spirit of FIRREA Sec.  308, even though 
neither was originally required to do so. OTS became part of OCC on 
July 21, 2011. OCC now administers the OTS MDI Program.
    \4\ 12 U.S.C. 1463 note (b).
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    In 2010, Congress enacted the Dodd Frank Wall Street Reform and 
Consumer Protection Act (Dodd Frank Act).\5\ Section 367(4)(A) of the 
Dodd Frank Act amended FIRREA Sec.  308 to require the National Credit 
Union Administration (NCUA), the Office of the Comptroller of the 
Currency (OCC) and the Board of Governors of the Federal Reserve System 
(Fed) to take steps to preserve existing MDIs and encourage the 
establishment of new ones.\6\ In addition, Dodd Frank Act Sec.  
367(4)(B) requires these agencies, along with FDIC, to each submit an 
annual report to Congress describing actions it has taken to carry out 
FIRREA Sec.  308.\7\
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    \5\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010); 12 
U.S.C. 5301 et seq.
    \6\ 12 U.S.C. 1463 note (a).
    \7\ Id. Sec.  1463 note (c).
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    In 2013, the NCUA Board proposed an Interpretive Ruling and Policy 
Statement 13-1 (proposed IRPS) to establish a Minority Depository 
Institution Preservation Program (Program) to encourage the 
preservation of MDIs.\8\ As proposed, the MDI program would be 
administered by NCUA's Office of Minority and Women Inclusion (OMWI) 
and would consist of outreach efforts, various forms of technical 
assistance and educational opportunities to benefit eligible credit 
unions.
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    \8\ 78 FR 46374 (July 31, 2013).

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[[Page 36357]]

    NCUA received a total of nine comments on the proposed IRPS--eight 
from credit union trade associations and one from a community advocacy 
group. Seven commenters expressly supported the proposal; none opposed 
it.

II. Summary of Comments on Proposed IRPS

1. ``Minority Depository Institution'' Definition

    Three commenters recommended defining MDIs by minority 
representation solely among current or potential members, without 
considering minority representation among credit union management 
officials. Two commenters believe extending the definition beyond 
minority representation among the membership would exceed the statutory 
mandate, and questioned whether including management officials within 
the scope of minority representation is necessary or would undermine 
the Program's goals. Another commenter opposed extending the minority 
representation requirement to management officials, contending that, if 
it were to encompass credit union staff, it would be burdensome for 
nearly one-half of the nation's federally insured credit unions that 
operate with five or fewer employees. This commenter also opposed 
requiring minority representation among members of the board of 
directors, supervisory and credit committee members because they are 
volunteers elected from and by the membership, and who should have the 
education, experience, and knowledge to manage a credit union 
regardless of minority status.
    In contrast, a commenter applauded NCUA for measuring minority 
representation among these officials to ensure that credit union 
leadership reflects the diversity of the communities and members an MDI 
serves. In addition, the same commenter wanted to limit the MDI 
definition to current members only, contending that having potential 
members who reside in an area having a mostly minority population is no 
assurance that an MDI would actually serve and invest in consumers of 
color within that community. Finally, the commenter suggested that 
minority representation should also encompass persons that identify as 
multi-racial/multi-ethnic, estimated at 9 million Americans by the U.S. 
Census Bureau.
    In the final Interpretive Ruling and Policy Statement 13-1 (final 
IRPS), the NCUA Board retains the proposed MDI definition with three 
significant modifications to ensure complete conformity with the 
statutory MDI definition of a mutual institution. Under that 
definition, a credit union qualifies as an MDI when ``the majority of 
the Board of Directors, account holders, and the community which it 
services is predominantly minority.'' \9\ (Hereinafter, when minority 
representation is required to be ``predominant'' or to consist of a 
``majority,'' i.e., greater than 50 percent in either case, it will be 
referred to as ``>50%'').
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    \9\ 12 U.S.C. 1463 note (b)(1)(C).
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    First, the proposed MDI definition combined both current and 
``eligible potential'' credit union members to assess minority 
representation among a credit union's ``account holders.'' Recognizing 
that a potential member does not hold a credit union account nor enjoy 
the rights and benefits of membership, the final IRPS limits to current 
members the assessment of >50% minority representation among credit 
union ``account holders.''
    Second, as several commenters contended, the proposed MDI 
definition assessed minority representation not only among a credit 
union's board of directors (BOD) as required, but more generally among 
its ``current management officials,'' consisting of members of the 
supervisory and credit committees and of the senior executive 
staff.\10\ Despite the NCUA Board's wish to emphasize the importance of 
minority representation within the leadership ranks of MDIs, the final 
IRPS limits to the BOD exclusively the assessment of >50% minority 
representation, consistent with the letter of the applicable statutory 
definition.
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    \10\ E.g., Chief executive officer, assistant chief executive 
officer, chief financial officer and branch managers. 78 FR 46374, 
46375 (July 31, 2013)
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    Third, the final IRPS clarifies that the MDI criterion requiring 
the community of a would-be MDI to be ``predominantly minority'' is not 
an alternative criterion for credit unions unable to meet the MDI 
criteria requiring >50% minority representation within its membership 
and on its BOD; it is an additional MDI criterion in and of itself.\11\ 
To assess whether the community of a would-be MDI is ``predominantly 
minority,'' the final IRPS designates a credit union's community 
according to its charter. To make this assessment, the final IRPS also 
permits credit unions to rely on the same methods and supporting data 
the proposed IRPS prescribed for use by credit unions to self-certify 
as an MDI (e.g., U.S. Census and Home Mortgage Disclosure Act 
data).\12\
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    \11\ 12 U.S.C. 1463 note (b)(1)(C). In contrast to NCUA, the 
fact that FDIC oversees publicly-owned, privately-owned and mutual 
institutions may account for its policy permitting an institution 
that is unable to meet the 51 percent minority ownership criterion 
to instead rely on two of the mutual MDI >50% criteria, yielding a 
hybrid definition: ``In addition to the institutions that meet the 
[51 percent] ownership test, for purposes of this Policy Statement, 
institutions will be considered [MDIs] if a majority of the [BOD] is 
minority and the community that the institution serves is 
predominantly minority.'' 67 FR 18 618, 18620 (April 16, 2002). See 
also 67 FR 77, 79 (January 2, 2002).
    \12\ 78 FR at 46376 and n. 14. In many cases the methods and 
data that establish >50% minority representation among a credit 
union's membership also will establish >50% minority representation 
within the community it services. The Board acknowledges this 
redundancy as necessary to conform this third criterion to the 
letter of the statutory MDI definition.
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    In addition to the above modifications, the MDI definition in the 
final IRPS counts a person of multiple ethnicities who falls into at 
least one of the four minority categories designated by law,\13\ (or is 
multi-racial as defined in Table 1) as a single minority individual for 
purposes of minority representation.
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    \13\ 12 U.S.C. 1463 note (b)(2).
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2. Documentation To Support MDI Designation

    In order to receive the MDI designation, one commenter advocated 
requiring the majority of a credit union's members' deposits and/or 
loan products to be held by racial minorities. While striving to 
maximize flexibility and the options to determine and support an MDI 
designation, the NCUA Board is concerned that it would be too 
burdensome and restrictive to identify the race and/or ethnicity of all 
members with deposits and/or loan products. The final IRPS therefore 
does not adopt this suggestion as an MDI criterion.
    One commenter recommended that NCUA clarify which U.S. Census 
demographic data to rely upon to measure minority representation among 
members for purposes of MDI determination. The final IRPS clarifies 
that U.S. Census data includes the American Fact Finder's most recent 
census population data (e.g., 2010) for a particular geographic area, 
such as within members' zip codes or census tracts; and that minority 
composition \14\ by census tracts, according to U.S. Census population 
data, can be found on the U.S. Census Bureau and the Federal Financial 
Institutions Examination Council (FFIEC) Web sites.
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    \14\ The minority composition represents the percentage of 
minorities divided by the entire referred population (e.g., total 
membership or within a geographic area such as a census tract or a 
Metropolitan Statistical Area).
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    One commenter suggested providing a portal on NCUA's Web site for 
credit unions to access the sources of data relevant to self-certifying 
as an MDI,

[[Page 36358]]

such as links to U.S. Census and Home Mortgage Disclosure Act (HMDA) 
data. NCUA currently provides links to access U.S. Census and FFIEC 
data on OMWI's Web page. To identify the ethnicity of its mortgage 
applicants, a credit union may rely on the home mortgage data it 
submits to comply with HMDA.
    One commenter opposed the notion of collecting data by any method 
that relies on members voluntarily identifying themselves as a 
minority, for two reasons. First, the practice may conflict with anti-
discrimination laws; and second, maintaining the collected ethnicity 
data may expose credit unions to criticism that the practice is 
intrusive, and to the risk of legal action. The final IRPS permits 
collection of volunteered ethnicity data as an option, but not a 
requirement, for credit unions to determine and to support self-
certification of MDI eligibility. Organizations that already collect 
volunteered ethnicity data from customers and members must take care to 
maintain the confidentiality of the collected data. Credit unions that 
elect this option to support self-certification should maintain the 
collected data separately from members' personal account files, and 
without personal identifiers (e.g., name, account or social security 
number, etc.).
    One commenter disagreed with the proposed requirement to annually 
review and update credit unions' MDI status, suggesting that NCUA 
require credit unions to follow a data review schedule that is 
consistent with the data each credit union relied upon to document its 
MDI certification. For example, when MDI eligibility is based on U.S. 
Census population data, the review and update would occur every 10 
years. Due to frequent changes in a credit union's field of membership, 
and the composition of its board of directors due to annual elections, 
the final IRPS retains an annual schedule for the review and update of 
MDI self-certifications.

3. MDI Program Costs, Resources & Funding

    Three commenters asked NCUA to perform a cost/benefit analysis of 
the new Program, detailing the new resources or processes that will be 
essential to realize NCUA's commitment to preserve MDIs, and how the 
Program will be funded. Another commenter sought further explanation of 
Program mechanics, funding details, the number of staff dedicated to 
Program implementation, the geographic distribution of Program 
beneficiaries, and the frequency of OMWI staff interaction with 
participating MDIs.
    The NCUA Board anticipates no additional costs or new resources 
attributable to the Program, due to reliance on existing agency 
programs and resources offered through NCUA's Office of Small Credit 
Union Initiatives (OSCUI), regional offices, and Office of Consumer 
Protection (OCP), thus avoiding overlaps with existing supervision, 
chartering, training, technical assistance, and educational programs. 
About 92 percent of MDIs already are eligible for OSCUI services that 
assist and educate credit unions designated either as low-income or as 
small. Examiners provide additional guidance to MDIs in between 
examinations to assist them in resolving substantial examination or 
viability concerns. OCP provides guidance to assist and educate MDIs 
and interested minority groups in chartering and in field of membership 
expansions. One OMWI staff member is responsible for managing the 
Program. OMWI's initial interaction and communications with MDIs will 
include OMWI's participation at events attended by MDIs, and OMWI's 
assistance provided upon request from MDIs.

4. MDI Program Benefits

    One commenter favored an expansion of financial support to enable 
the Program to provide direct financial support to MDIs. Financial 
support to eligible MDIs will be offered through the existing grant and 
loan programs funded by NCUA's Community Development Revolving Loan 
Fund (CDRLF).
    Two commenters encouraged NCUA to provide technical assistance to 
MDIs to avoid insolvency. One suggested two ways to strengthen the net 
worth of MDIs in response to unusual losses related to economic 
conditions outside the credit union's control: (1) Develop criteria and 
goals for access to assistance under section 208 of the Federal Credit 
Union Act (Sec.  208 assistance); \15\ and (2) make CDRLF funding a 
source of secondary capital for low-income designated credit unions, 
especially MDIs.
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    \15\ 12 U.S.C. 1788(a). See also 12 U.S.C. 1790d(o)(2)(B).
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    The NCUA Board emphasizes that the agency's role in preserving MDIs 
and providing technical support not only is to help MDIs survive, but 
to help them thrive as ongoing concerns. Section 208 assistance is 
available to all credit unions under at least one of three conditions: 
(1) To assist in the voluntary liquidation of a solvent credit union; 
(2) to avert the liquidation of a credit union that NCUA determines is 
in danger of insolvency; or (3) when NCUA determines it is needed to 
reduce the risk, or avert the threat, of a loss to the National Credit 
Union Share Insurance Fund.\16\
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    \16\ 12 U.S.C. 1788(a)(1)-(2).
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    NCUA typically provides Sec.  208 assistance to facilitate a sound 
merger or consolidation of an insured credit union in order to avert 
the liquidation of a credit union. Other than to avert the liquidation 
of a credit union that NCUA determines on a case-by-case basis is in 
danger of insolvency, regardless whether it is an MDI, Sec.  208 
assistance is not used solely to improve a credit union's capital 
position. The NCUA Board reserves the use of Sec.  208 assistance for 
credit unions under the above three conditions. However, the agency 
plans to enhance its guidance to examiners to sensitize them about the 
availability of Sec.  208 assistance for MDIs, as well as about the 
``General Preference Guidelines'' for mergers, addressed below. In 
contrast, the purpose of CDRLF grants and loans is to support enhanced 
service to underserved communities, including those served by MDIs. 
Unlike Sec.  208 assistance, CDRLF grants and loans generally are not 
provided solely for the purpose of improving capital to avoid 
insolvency.
    One commenter suggested making technical assistance and educational 
programs available on a variety of topics critical to preserving MDIs, 
including aid in achieving satisfactory levels of operations and 
regulatory performance. OSCUI currently provides technical guidance and 
educational programs to assist MDIs, as well as small credit unions, in 
achieving these objectives regardless of low-income designation and 
asset size. These programs include NCUA-sponsored videos, webinars, 
consulting services, newsletters, and other publications, including a 
Credit Union Leadership Resource Manual.
    One commenter advocated adopting a plan that combines targeted 
resources with supervisory authority in an effort to resolve material 
safety and soundness concerns among troubled MDIs. NCUA has no plans to 
make MDI preservation a part of the examination and/or supervision 
processes, although examiners are encouraged to provide additional 
guidance to MDIs in resolving material safety and soundness concerns 
whenever feasible. Also, OSCUI will continue to provide MDIs with 
technical assistance and educational and consulting services to assist 
them in resolving these concerns, thus improving their viability. OMWI 
will aid MDIs by facilitating and monitoring the assistance they 
receive, will report to Congress annually on

[[Page 36359]]

these efforts to preserve MDIs and to create new MDIs, and will 
reevaluate and enhance the Program as it matures.

5. MDI Program Partnerships

    Two commenters suggested collaborating with interested stakeholders 
(e.g., trade associations) to increase the likelihood of preserving 
MDIs, as well as to participate with NCUA's OMWI as a resource partner. 
One of the two commenters advocated expanding the Program's outreach to 
include a webinar on the application process for would-be MDIs, 
workshop sessions at trade conferences, and a comprehensive marketing 
program to increase awareness. NCUA's Office of Consumer Protection 
(OCP) recently published the Federal Credit Union Charter Application 
Guide, which provides detailed step-by-step instructions for chartering 
a new federal credit union. Additionally, NCUA is building 
relationships and plans to collaborate with credit union trade 
associations, credit unions, and other organizations to provide 
mentoring and educational opportunities for MDIs, including workshops 
and webinars. Interested organizations and credit unions should contact 
OMWI and suggest ideas for possible partnerships.
    One commenter encouraged NCUA's OMWI to collaborate with the 
original FIRREA-designated agencies, and the two agencies that joined 
them, to implement their ideas and suggestions. To develop and enhance 
NCUA's Program, OMWI continues to consult with its counterparts at the 
FDIC, the OCC and the Fed, to review their MDI programs, and to attend 
their interagency MDI and Community Development Financial Institution 
Banks' Conferences. NCUA will continue to work with its counterparts, 
whenever feasible, to obtain additional ideas to enhance its Program.

6. General Preference Guidelines for MDI Mergers

    One commenter supported the FIRREA-prescribed ``General Preference 
Guidelines'' for mergers (Guidelines),\17\ which give MDIs preference 
as a merger partner, provided that other relevant factors are given 
appropriate weight and consideration (e.g., the acquiring MDI's 
capacity to offer the same and/or improved financial services and 
access to the acquired members).
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    \17\ 12 U.S.C. 1463 note (a)(2).
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    To implement the Program, another commenter encouraged NCUA to work 
closely with state regulators to apply the Guidelines seamlessly and 
fairly when comparing potential MDI versus non-MDI merger partners for 
a troubled state-chartered credit union; to make the Program respond 
expeditiously and effectively to a troubled institution; and to ensure 
that supervisory oversight remains the focus of the Program--all 
without delaying the resolution of a troubled institution through 
merger or acquisition.
    Under the final IRPS, NCUA regional offices will continue to 
process the mergers of troubled MDIs, working closely with state 
regulators to apply the Guidelines, and to ensure that the Guidelines 
do not conflict with safety and soundness considerations. In processing 
MDI mergers and purchase-and-assumption transactions, the need to 
respond expeditiously and effectively to troubled MDIs will continue to 
be the primary focus of NCUA's supervisory oversight. The Guidelines 
provide interested MDIs an opportunity to participate in the merger 
bidding process for an insolvent or troubled MDI, enabling the minority 
character of the MDI to be preserved.

7. Attention to Troubled MDIs

    One commenter recommended establishing a clear supervisory 
framework and strategy to establish a sufficient period of time to 
permit a more aggressive workout strategy for troubled MDIs. The 
commenter contended that such a framework and strategy would be an 
important preservation step between the identification of a troubled 
credit union and its dissolution. The commenter suggested addressing 
steps that may be taken through NCUA's supervisory examinations and 
oversight; and recommending an aggressive strategy for intervention 
using supervisory authorities combined with its targeted workout teams 
and resources.
    In addition, this commenter advocated adopting a system of triage 
for prioritizing attention to MDIs, based on financial health, to best 
support those that are financially sound in building and expanding 
their work, while intervening sooner with those on a less secure 
footing in order to preserve service to their communities. Furthermore, 
this commenter advocated adopting a plan to provide resources and 
support to struggling MDIs identified as in danger of failing either 
through agency enforcement action or an inability to address issues 
identified in a Document of Resolution (DOR) and/or Letter of 
Understanding and Agreement (LUA). The period between a DOR and an LUA 
may present a critical moment where additional help and support can be 
sought. This commenter suggested steps NCUA could implement to work an 
MDI out of distress or troubled status. The commenter suggested using 
NCUA's Vendor Registration process to identify an appropriate resource 
team to participate in workout situations and to put additional 
resources and technical assistance at its disposal in working to 
resolve sound operations in a troubled MDI. The commenter envisioned 
the resource team effecting a significant turnaround in 6-12 months 
with the intention of preserving and building the institution. If the 
situation is not viable, the commenter suggested the resource team 
would be able to assist in identifying appropriate merger partners 
interested in serving the minority community.
    NCUA cannot adopt the commenter's suggestions regarding attention 
to troubled MDIs because they would involve internal agency processes 
beyond the scope of this final IRPS. The final IPRS is a policy 
statement that generally prescribes actions to preserve MDIs, such as 
technical assistance, training, and educational opportunities to 
strengthen management and/or operations, as well as to assist in 
resolving examination and compliance concerns. The Program will not 
interfere with supervisory enforcement actions duly undertaken by the 
other offices within the agency.
    Also, due to confidentiality, NCUA cannot disclose information 
about troubled MDIs to resource teams involving third parties (e.g., 
trade associations or vendors). Credit union examination results 
constitute confidential information; public disclosure is prohibited by 
law. NCUA regulations specifically prohibit the release of such 
information by officers, employees or agents of NCUA or any federally 
insured credit union.\18\ Such disclosure risks harming the financial 
stability of credit unions or interfering in the relationship between 
NCUA and credit unions.
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    \18\ 12 CFR 792.11(a)(8),
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    The final IRPS addresses the posting of a list of MDIs on the 
agency's Web site (www.ncua.gov) and the use of a Vendor Registration 
Form to provide an opportunity for qualified minorities or minority-
owned firms to apply for the position of interim manager of an MDI 
placed in conservatorship. Other uses of the form may be considered. 
With the posting of an MDI list on the agency Web site, interested 
parties (e.g., trade associations or vendors) may monitor the financial 
trends of all MDIs to identify troubled MDIs and offer a program to 
restore them to financial soundness.

[[Page 36360]]

8. Commenters' Other Suggestions

    Rather than holding to a static number of MDIs to measure 
preservation, one commenter advocated chartering new MDIs in 
communities that would benefit from MDI service. NCUA's goals are to 
implement efforts not only to preserve existing MDIs, but to encourage 
the chartering of new MDIs, as FIRREA Sec.  308(a) (1)-(5) 
prescribes.\19\ NCUA's OCP and OSCUI will continue to work with groups 
seeking to charter new MDIs and with MDIs seeking a common bond 
conversion or a charter expansion, and they will assist them in the 
application process.
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    \19\ 12 U.S.C. 1463 note (a)(1)-(5).
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    One commenter advocated publicizing information to credit unions, 
leagues and state agencies about NCUA's efforts to preserve MDIs and 
about the Program's benefits. Information pertaining to MDI 
preservation efforts is provided in NCUA's annual reports to 
Congress.\20\ NCUA's MDI Reports to Congress for 2013 and 2014 are 
available on OMWI's Web page.\21\
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    \20\ Id. Sec.  1463 note (c).
    \21\ Available at: http://www.ncua.gov/Legal/RptsPlans/Pages/OMWI.aspx.
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    Another commenter suggested limiting the regulatory burden on 
credit unions as a step in support of the survival of MDIs. The NCUA 
Board agrees with this recommendation, and is aggressively working 
toward this goal. In January 2013, the NCUA Board reviewed the 
threshold it uses to identify which credit unions qualify as small 
entities and thus receive special consideration regarding regulatory 
burden and alternatives under the Regulatory Flexibility Act 
(``RFA'').\22\ Based on industry percentages carried forward from the 
last update in 2003, and corresponding risks to the Share Insurance 
Fund, the NCUA Board determined that credit unions with less than $50 
million in assets, up from the prior $10 million threshold, were small 
and non-complex for purposes of the RFA.\23\ These credit unions 
receive exemptions from certain NCUA rules, and heightened 
consideration of regulatory burden. Approximately 82 percent of the 655 
self-identified MDIs under the proposed definition had assets of less 
than $50 million as of March 31, 2015. In February of 2015, the NCUA 
Board proposed increasing the asset threshold to define small credit 
unions under the RFA to $100 million.\24\ The proposed rule is intended 
to provide regulatory relief for a greater percentage of credit unions 
(including MDIs) in future rulemakings. Approximately 89 percent of the 
655 self-identified MDIs under the proposed definition had assets of 
less than $100 million as of March 31, 2015.
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    \22\ 5 U.S.C. 601.
    \23\ 78 FR 4032 (January 18, 2013).
    \24\ 80 FR 11954 (March 15, 2015).
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    One commenter proposed that NCUA establish an advisory committee to 
assist in developing, designing, and testing strategies and approaches 
on how to best preserve MDIs. Rather than rely on a permanent advisory 
committee, NCUA may consider informal focus groups comprised of MDIs of 
all asset sizes and levels of complexity to accomplish the suggested 
goals.
    Revised as explained above, the final IRPS follows.

III. Final Interpretive Ruling and Policy Statement 13-1 (Final IRPS)

1. Why is the NCUA Board issuing this final IRPS?

    The NCUA Board is issuing this final IRPS to establish a Minority 
Depository Institution Preservation Program (Program) to achieve the 
goals of preserving and encouraging Minority Depository Institutions 
(MDIs), as section 308 of the Financial Institutions Reform, Recovery 
and Enforcement Act (FIRREA Sec.  308) directs.\25\ Recognizing the 
important role of MDIs in minority communities, the NCUA Board 
envisions a program of proactive steps and outreach efforts to promote 
and preserve minority ownership in the credit union system. To achieve 
these goals, the final IRPS prescribes the Program eligibility criteria 
and Program elements.
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    \25\ Public Law 101-73, 103 Stat. 183 (Aug. 9, 1989).
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2. What are the goals and objectives of the MDI Program?

    The Program embraces goals and objectives that relate to NCUA's 
mission and goal to ensure a safe, sound, and sustainable credit union 
system as envisioned in NCUA's current strategic plan.
    The Program also reflects the preservation goals of FIRREA Sec.  
308,\26\ namely:
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    \26\ 12 U.S.C. 1463 note (a) & (c).
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     To preserve the present number of MDIs;
     To preserve the minority character of MDIs that are 
involuntarily merged, or are acquired, by following the prescribed 
``general preference guidelines'' to identify a merger or acquisition 
partner; \27\
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    \27\ In priority, the General Preference Guidelines for 
identifying an involuntary merger/acquisition partner are: (a) Same 
type of MDI in the same city; (b) Same type of MDI in the same 
state; (c) Same type of MDI nationwide; (d) Any type of MDI in the 
same city; (e) Any type of MDI in the same state; (f) Any type of 
MDI nationwide; and (g) Any other bidders (for merger/acquisition 
partners). 12 U.S.C. 1463 note (a)(2). Rules concerning field of 
membership, least cost to NCUSIF, and safety and soundness still 
apply to all mergers. Regional office staff will continue to process 
mergers and work with management and state regulators. OMWI will 
monitor MDI mergers and report about them to Congress annually.
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     To provide technical assistance to prevent insolvency of 
MDIs that are not now insolvent;
     To promote and encourage the creation of new MDIs; and
     To provide for training, technical assistance, and 
educational programs.

3. Who is eligible to participate in the MDI Program?

    A credit union that meets the definition of an MDI is eligible to 
participate in the Program. The Program adopts the MDI definition set 
forth in FIRREA Sec.  308 that applies to a mutual institution.\28\ 
Accordingly, this final IRPS defines an MDI as a federally insured 
credit union in which a majority of its current members, a majority of 
its board of directors (BOD), and a majority of the community it 
services, as designated in its charter, falls within any of the 
eligible minority groups described below. (Hereinafter, when minority 
representation is required to be ``predominant'' or to consist of a 
``majority,'' i.e., greater than 50 percent in either case, it will be 
referred to as ``>50%''.)
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    \28\ 12 U.S.C. 1463 note (b)(1)(C).
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    NCUA relies on FIRREA Sec.  308's ``minority'' definition to 
identify an eligible minority exclusively as any Black American, Asian 
American, Hispanic American, or Native American.\29\ Also, for the 
purpose of minority representation under the MDI definition, anyone of 
multiple ethnicities who falls into more than one of the minority 
categories depicted below is a single minority individual.
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    \29\ Id. Sec.  1463 note (b)(2). Compare 12 U.S.C. 5452(g)(3) 
incorporating 12 U.S.C. 1811 note(c)(3).

[[Page 36361]]



                 Table 1--Minority Category Definitions
------------------------------------------------------------------------
                                                    Equal Employment
              Minority category                  Opportunity Commission
                                                         (EEOC)
------------------------------------------------------------------------
Black American...............................  Black or African American
                                                (Not Hispanic or
                                                Latino)--A person having
                                                origins in any of the
                                                black racial groups of
                                                Africa.
Native American..............................  American Indian or Alaska
                                                Native (Not Hispanic or
                                                Latino)--A person having
                                                origins in any of the
                                                original peoples of
                                                North and South America
                                                (including Central
                                                America), and who
                                                maintain tribal
                                                affiliation or community
                                                attachment.
Hispanic American............................  Hispanic or Latino--A
                                                person of Cuban,
                                                Mexican, Puerto Rican,
                                                South or Central
                                                American, or other
                                                Spanish culture or
                                                origin regardless of
                                                race.
Asian American...............................  Asian (Not Hispanic or
                                                Latino)--A person having
                                                origins in any of the
                                                original peoples of the
                                                Far East, Southeast
                                                Asia, or the Indian
                                                Subcontinent, including,
                                                for example, Cambodia,
                                                China, India, Japan,
                                                Korea, Malaysia,
                                                Pakistan, the Philippine
                                                Islands, Thailand, and
                                                Vietnam; or
                                               Native Hawaiian or Other
                                                Pacific Islander (Not
                                                Hispanic or Latino)--A
                                                person having origins in
                                                any of the peoples of
                                                Hawaii, Guam, Samoa, or
                                                other Pacific Islands.
Multi-Racial American........................  Two or More Races \30\
                                                (Not Hispanic or
                                                Latino)--A person who
                                                identifies with more
                                                than one of the above
                                                races.
------------------------------------------------------------------------

4. How will the MDI Program function?

    NCUA's Office of Minority and Women Inclusion (OMWI) administers 
the Program. A federally insured credit union can self-certify as an 
MDI by affirmatively answering the following questions within NCUA's 
Credit Union Online Profile (CU Online System), accessible from the 
NCUA Web site,\31\ or when submitting a Call Report: (1) Are more than 
50 percent of your credit union's current and eligible potential 
members Black American, Native American, Hispanic American or Asian 
American?; \32\ and (2) Is more than 50 percent of your credit union's 
current board of directors Black American, Native American, Hispanic 
American or Asian American?
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    \30\ U.S. Equal Employment Opportunity Commission's EEO-1 
Report-Race/Ethnicity Categories.
    \31\ www.ncua.gov.
    \32\ The community serviced by a multiple common bond credit 
union consists of both its current members and the eligible non-
members within the select groups designated by its charter. For 
example, the current members and eligible non-members may all reside 
in one city, county, or MSA. The community serviced by a community 
credit union consists of both its current members and the eligible 
non-members who reside within the well-defined local community 
designated by its charter.
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    If both questions are answered ``yes'', the credit union may self-
certify via NCUA's Credit Union Online Profile system that it meets the 
>50% minority criteria, as the case may be. A credit union defined as a 
small entity under the Regulatory Flexibility Act (RFA) may self-
certify >50% representation among its current members, and within the 
community it services (current and potential members combined), based 
solely on knowledge of those members. A credit union not defined as a 
small entity under the RFA may rely on one of the following methods, as 
applicable, to determine the minority composition of its current 
membership exclusively, and of the community it services, consisting of 
the combined current and potential membership:
    (A) Ascertain the minority representation using demographic data 
from the U.S. Census Bureau (using the U.S. Census Bureau or FFIEC Web 
site) based on the area(s) where the combined current and potential 
membership resides, such as a township, borough, city, county, or 
Metropolitan Statistical Area (MSA). If the U.S. Census data (e.g., 
census tracts, zip codes, townships, boroughs, cities, counties, etc.) 
shows that the area's population is comprised mostly of eligible 
minorities, the credit union may assume that its current membership and 
the community it services both have the same minority composition as 
the U.S. Census data indicates.
    (B) Use Home Mortgage Disclosure Act (HMDA) data to calculate the 
reported number of minority mortgage applicants divided by the total 
number of mortgage applicants within the credit union's membership. 
HMDA data can be obtained from the FFIEC Web site. If the share of 
minority representation among applicants is >50%, the minority 
membership and the predominantly community criteria may be met. If a 
credit union grants a majority of its mortgage loans to minorities, it 
is most likely the majority of the community the credit union services 
(its current and potential members) will consist of minorities.
    (C) Elect to collect data from members who voluntarily choose to 
self-identify as an eligible minority and use the data to determine 
minority representation among the credit union's membership. The credit 
union may wish to consider using an unbiased third party to conduct 
such a collection process. For example, data can be collected through a 
survey of members assessing the services they desire, or by mailed 
electoral ballots for official positions. Once collected, it is 
essential to maintain the confidentiality of the data; it should not be 
retained in the members' file or with any personal identifiers (e.g., 
name, account or social security numbers, etc.) If a majority of its 
current members are minorities, it is most likely the majority of the 
community the credit union services (its current and potential members) 
will consist of minorities.
    (D) Use any other reasonable form of data, such as membership 
address list analyses, or an employer's demographic analysis of 
employees.
    A credit union defined as a small entity under the RFA that self-
identifies as an MDI should maintain some form of the documentation 
that it relied upon to determine that, as explained above, it meets the 
minimum minority representation among its membership. This 
documentation may consist of demographic data obtained from the U.S. 
Census Bureau,\33\ from a credit union's HMDA report, or from any other 
reasonable source and form of data (e.g., member survey, sponsor's 
employee demographic or members' zip code analysis).
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    \33\ www.census.gov or www.FFIEC.gov.
---------------------------------------------------------------------------

    Regardless of asset size and the method a credit union uses to 
self-certify as an MDI, the validity of the self-certification (and the 
supporting data) is subject to verification by NCUA based on minority 
representation where the credit union's members reside.
    If NCUA questions a credit union's certification or the data 
supporting it (e.g., members' addresses) is found to be at odds with a 
credit union's self-certification of >50% minority representation among 
either its current membership, the community it services (consisting of 
current and potential

[[Page 36362]]

members) or its board of directors, NCUA's OWMI will:
    (1) Notify the credit union in writing about its reasons for 
invalidating the certification.
    (2) Provide the credit union an opportunity to submit documentation 
and/or a rationale to support its MDI self-identification within 60 
days of receiving OMWI's notification.
    (3) Review the documentation and/or rationale the credit union 
submits and inform the credit union whether, as a result, it meets the 
>50% minority criterion.
    (4) Deny the MDI designation if the credit union either provides no 
documentation and/or rationale, or provides documentation and/or 
rationale that, in NCUA's discretion, is insufficient to support a 
certification based upon >50% minority representation under all 
criteria.
    NCUA will periodically review and determine whether an MDI 
continues to meet the MDI definition. A credit union may no longer meet 
the MDI definition as a result of FOM expansions (e.g., mergers, 
purchase and assumptions, new groups added to the FOM, or charter 
conversions) and changes resulting from board of directors elections. 
NCUA, at its discretion, may continue to treat a credit union as an MDI 
under this final IRPS in the event its board of directors no longer 
meets the minority criteria, provided there is >50% minority 
representation among both the credit union's current members and the 
community it serves.
    Once it qualifies as an MDI, a credit union should annually assess 
whether it continues to meet the MDI definition (e.g., December 31st 
Call Report cycle), and update its status on NCUA's Credit Union Online 
Profile system as necessary.
    Participation in the MDI Program is voluntary. An MDI may 
discontinue its participation at any time by updating its status on 
NCUA's Credit Union Online system. In that event, the credit union 
would no longer be eligible to participate in any MDI Program 
initiatives (e.g., MDI merger/acquisition preference consideration or 
MDI partnerships).

5. What are the elements of the MDI Program?

    NCUA seeks to provide MDI Program participants a variety of 
initiatives to assist in preserving the economic viability of their 
institutions. The initiatives include technical assistance and 
educational opportunities for MDIs through NCUA's Office of Small 
Credit Union Initiatives (OSCUI).\34\ This technical assistance may 
include participation in:
---------------------------------------------------------------------------

    \34\ OSCUI's services are generally offered to credit unions 
that have less than $50 million in assets or are low-income 
designated. By statute, grants and loans from the CDRLF are 
available only to low-income designated credit unions. The webinars 
and training programs are open to all credit unions. The MDI Program 
expands consulting services to all MDIs.
---------------------------------------------------------------------------

    (1) OSCUI's Consulting Program;
    (2) NCUA-sponsored training, webinars, etc.; and
    (3) Grant or loan programs of NCUA's Community Development 
Revolving Loan Fund (CDRLF).
    The technical assistance may also include examiner guidance in 
resolving examination concerns; in locating new sponsors, mentors, or 
merger partners; in expanding the field of membership; and in setting 
up new programs and services. Additionally, the NCUA Board will 
consider providing Section 208 assistance to avert the liquidation of a 
credit union that it determines on a case-by-case basis is in danger of 
insolvency, regardless whether the credit union is an MDI.\35\
---------------------------------------------------------------------------

    \35\ 12 U.S.C. 1788(a)(1)-(2).
---------------------------------------------------------------------------

    NCUA may aid in coordinating partnerships between MDIs and other 
organizations (e.g., other MDIs, and/or trade associations) as a means 
of providing technical or operational assistance to MDIs. This 
assistance may include training for officials and staff, expertise in 
technical areas (e.g., marketing, FOM expansion guidance, bidding on 
merger proposals), equipment, and assistance for specific projects or 
to achieve specific goals.
    NCUA will publish a list of federally insured MDIs on its Web site 
(www.ncua.gov) to enable organizations (e.g., banks, other MDIs, trade 
associations or other third parties) to identify MDIs that would 
benefit from partnering, mentoring, additional resources, and/or 
business relationships. Banks can obtain Community Reinvestment Act 
(CRA) credit for investing in MDIs. For example, if a bank were to have 
an unused building, the bank could lease that space to an MDI at no 
charge or at a low cost, and receive a corresponding CRA credit.
    NCUA will monitor MDIs and will report to Congress annually on the 
number and overall financial condition of MDIs, along with actions 
taken by the agency to preserve and strengthen them and to encourage 
the chartering of new ones.
    NCUA will use FIRREA's prescribed General Preference Guidelines 
(see Sec.  II.6. above) to attempt to preserve the minority character 
of failing MDIs that are involuntarily merged or acquired. In the event 
of an involuntary merger/acquisition of a troubled MDI,\36\ NCUA will 
invite bids from MDIs that are qualified to partner with a failing MDI, 
along with non-MDI credit unions. OMWI also will assist in locating an 
MDI partner for MDIs wishing to voluntarily merge their operations. To 
be considered as an acquirer, an MDI is strongly encouraged to document 
its desire to acquire another MDI by registering itself on NCUA's 
Merger Registry via the CU Online System.
---------------------------------------------------------------------------

    \36\ A merger is involuntary whenever the credit union is 
insolvent. 12 U.S.C. 1787(a) (1). A credit union is insolvent when 
the total amount of the credit union's shares exceeds the present 
cash value of its assets after providing for liabilities unless: (i) 
It is determined by the NCUA Board that the facts that caused the 
deficient share-asset ratio no longer exist; and (ii) The likelihood 
of further depreciation of the share asset ratio is not probable; 
and (iii) The return of the share-asset ratio to its normal limits 
within a reasonable time for the credit union concerned is probable; 
and (iv) The probability of a further potential loss to the 
insurance fund is negligible. 12 CFR 700.2(e)(1)
---------------------------------------------------------------------------

    Additionally, any organization or person seeking to be a candidate 
for managing the conservatorship of an MDI should complete an NCUA 
Vendor Registration Form (NCUA 1772) \37\ and OSCUI's Credit Union 
Service Provider (CUSP) Database Registration Form.\38\ OMWI can 
provide NCUA regional offices with a list of diverse candidates who 
have requested consideration for the position of interim Chief 
Executive Officer/Manager of a conserved MDI, upon request.
---------------------------------------------------------------------------

    \37\ The Vendor Registration Form can be accessed, completed and 
submitted on NCUA's Web site via the following link: http://www.ncua.gov/about/Documents/Procurement/VendorRegistration.pdf.
    \38\ The CUSP Registration Form and Instructions can be accessed 
on NCUA's Web site at: http://www.ncua.gov/Resources/OSCUI/Pages/CUSP.aspx.
---------------------------------------------------------------------------

    Finally, the Office of Consumer Protection and OSCUI will be 
available to provide assistance, and guidance in the application 
process, to groups that may be interested in chartering a new MDI, and 
to MDIs wishing to apply to change their charter or field of 
membership. For detailed step-by-step instructions on chartering a 
federal credit union, please refer to the Federal Credit Union Charter 
Application Guide.\39\
---------------------------------------------------------------------------

    \39\ www.FCU-Charter-Application-Guide.
---------------------------------------------------------------------------

IV. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires NCUA to prepare an 
analysis to describe any significant economic impact the IRPS may have 
on a substantial number of small entities.

[[Page 36363]]

The final IRPS permits a credit union defined as small under the RFA to 
self-certify that it meets the MDI definition based solely on its 
knowledge of its current membership and the community it services 
(e.g., potential membership identified in its charter), without any 
supporting documentation. The Program will have a significantly 
beneficial economic impact on small entities because it offers eligible 
credit unions, including small entities, various forms of technical 
assistance and educational opportunities at no cost. NCUA therefore 
certifies that the final IRPS will not have a significant adverse 
economic impact on a substantial number of small credit unions. 
Accordingly, no regulatory flexibility analysis is required.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency creates a new paperwork burden on regulated entities or 
modifies an existing burden. For purposes of the PRA, a paperwork 
burden may take the form of either a reporting or a recordkeeping 
requirement, each referred to as an information collection. The 2013 
proposed IRPS identified a new information collection consisting of the 
procedure for a credit union to document its self-certification of 
eligibility to participate in the Program.\40\
---------------------------------------------------------------------------

    \40\ 78 FR 46374 (July 31, 2013)
---------------------------------------------------------------------------

    The proposed IRPS invited interested persons to submit comments on 
the prescribed information collection requirement to the Office of 
Management and Budget (OMB), with a copy to NCUA, at the address 
provided in the preamble to the proposed IRPS. NCUA received the 
following comments on the information collection requirement prescribed 
in the proposed IRPS, encouraging the agency to:
     Remove the minority representation requirement among 
management officials in the MDI definition;
     restrict the collection of data by any method that allows 
members to voluntarily identify themselves as a minority;
     require the majority of a credit union's members' deposits 
and/or loan products to be held by racial minorities;
     conform the annual review and update of the minority self-
certification to the updating frequency of the data supporting a self-
certification (e.g., every ten years if using U.S. Census data); and
     provide a portal on NCUA's Web site for credit unions to 
access the sources of data relevant to self-certifying as an MDI, such 
as links to U.S. Census and HDMA data.
    Section II of this final IRPS addresses these comments. In 
response, NCUA has narrowed the scope of the minority representation 
requirement among a credit union's management to its board of 
directors, thus reducing the paperwork burden of assessing minority 
representation among senior management officials. Also, NCUA has 
displayed on the agency's Web site links to sources of data for self-
certifying as an MDI; thus reducing the burden on potential MDIs to 
locate the Web sites for assessing source information to document their 
self-certification. NCUA will apply to OMB for approval of the final 
IRPS.

Executive Order 13132

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

Treasury and General Government Appropriations Act, 1999

    NCUA has determined that this final IRPS 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

    The Board's goal is to promulgate clear and understandable 
regulations that impose minimal regulatory burden. We request your 
comments on whether this final IRPS is understandable and minimally 
intrusive if implemented as proposed.

    By the National Credit Union Administration Board on June 18, 
2015.
Gerard S. Poliquin,
Secretary of the Board.
[FR Doc. 2015-15515 Filed 6-23-15; 8:45 am]
 BILLING CODE 7535-01-P