[Federal Register Volume 84, Number 123 (Wednesday, June 26, 2019)]
[Proposed Rules]
[Pages 30048-30050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13589]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 702

RIN 3133-AF01


Delay of Effective Date of the Risk-Based Capital Rules

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule, delay effective date of risk-based capital, part 
702.

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SUMMARY: The NCUA Board (Board) is seeking comment on a proposed rule 
that would delay the effective date of the NCUA's October 29, 2015 
final rule regarding risk-based capital (2015 Final Rule), and the 
NCUA's November 6, 2018 supplemental final rule regarding risk-based 
capital (2018 Supplemental Rule), moving the effective date of both 
rules to January 1, 2022. This proposed delay would allow the NCUA 
Board additional time to holistically and comprehensively evaluate 
capital standards for federally insured credit unions. The proposed 
delay would also provide covered credit unions and the NCUA with 
additional time to prepare for the rule's implementation. During the 
extended delay period, the NCUA's current Prompt Corrective Action 
(PCA) requirements would remain in effect.

DATES: Comments must be received by July 26, 2019.

ADDRESSES: You may submit written comments, identified by RIN 3133-
AF01, 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 Website: http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
     Email: Address to [email protected]. Include ``[Your 
name]--Comments on Proposed Rule: Risk-Based Capital--Delay of 
Effective Date'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerard Poliquin, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    You can view all public comments on the NCUA's website at https://www.ncua.gov/regulation-supervision/rules-regulations/proposed-pending-and-recently-final-regulations as submitted, except for those we cannot 
post for technical reasons. The NCUA will not edit or remove any 
identifying or contact information from the public comments submitted. 
You may inspect paper copies of comments in the NCUA's law library at 
1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays 
between 9:00 a.m. and 3:00 p.m. To make an appointment, call (703) 518-
6546, or send an email to [email protected].

FOR FURTHER INFORMATION CONTACT: Policy and Analysis: Julie Cayse, 
Director, Division of Risk Management, Office of Examination and 
Insurance, at (703) 548-2142; Kathryn Metzker, Risk Officer, Division 
of Risk Management, Office of Examination and Insurance, at (571) 438-
0073; Julie Decker, Risk Officer, Division of Risk Management, Office 
of Examination and Insurance, at (703) 518-3684; Legal: John Brolin, 
Senior Staff Attorney, Office of General Counsel, at (703) 518-6540; or 
by mail at National Credit Union Administration, 1775 Duke Street, 
Alexandria, VA 22314.

SUPPLEMENTARY INFORMATION: At its October 2015 meeting, the Board 
issued the 2015 Final Rule to amend Part 702 of the NCUA's PCA 
regulations to require that credit unions taking certain risks hold 
capital commensurate with those risks.\1\ The 2015 Final Rule 
restructures the NCUA's PCA regulations and makes various revisions, 
including amending the agency's current risk-based net worth 
requirement by replacing the risk-based

[[Page 30049]]

net worth ratio with a new risk-based capital ratio for federally 
insured, natural-person credit unions (credit unions). The 2015 Final 
Rule also eliminates several provisions in the NCUA's current PCA 
regulations, including provisions related to the regular reserve 
account, risk-mitigation credits, and alternative risk weights. To 
provide credit unions and the NCUA sufficient time to make necessary 
adjustments, and to reduce the burden on affected credit unions, the 
NCUA initially delayed the effective date of the 2015 Final Rule until 
January 1, 2019.
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    \1\ 80 FR 66625 (Oct. 29, 2015).
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    At its October 2018 meeting, the Board issued the 2018 Supplemental 
Rule to further delay the effective date of the 2015 Final Rule for an 
additional year, moving the effective date from January 1, 2019 to 
January 1, 2020. The 2018 Supplemental Rule also amended the definition 
of ``complex'' credit union adopted in the 2015 Final Rule for risk-
based capital purposes by increasing the threshold level for coverage 
from $100 million to $500 million. These changes provided covered 
credit unions and the NCUA with additional time to prepare for the 
rule's implementation, and exempted an additional 1,026 credit unions 
from the risk-based capital requirements of the 2015 Final Rule without 
subjecting the National Credit Union Share Insurance Fund (NCUSIF) to 
undue risk.\2\
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    \2\ 83 FR 55467 (Nov. 6, 2018).
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    The Board is now proposing to further delay the effective dates of 
both the 2015 Final Rule and the 2018 Supplemental Final Rule, moving 
the effective dates of both rules to January 1, 2022. This proposed 
delay would allow the Board additional time to holistically and 
comprehensively evaluate the NCUA's capital standards for federally 
insured credit unions. For example, in this additional time, the Board 
would examine whether asset securitization, and subordinated debt 
should be addressed, and whether a community bank leverage ratio analog 
should be integrated into the NCUA's capital standards. These issues, 
and additional matters that prompt the need for a further delay, are 
discussed further below.

Asset Securitization

    Federal credit unions have the authority to issue and sell 
securities as a power incidental to their operation,\3\ and, in the 
case of Government National Mortgage Association (Ginnie Mae) 
securities, as a power expressly authorized under the Federal Credit 
Union Act (FCUA).\4\ The extent to which federally insured, state-
chartered credit unions may issue and sell securities depends on state 
law and regulation. Accordingly, the NCUA's capital standards should 
properly account for any asset securitization conducted by federally 
insured credit unions.
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    \3\ See Sec.  1757(17) (An FCU ``shall have the power . . . to 
exercise such incidental powers as shall be necessary or requisite 
to enable it to carry on effectively the business for which it is 
incorporated.''); 12 CFR 721.2 & 721.4; and NCUA Legal Opinion 
Letter 17-0670 (June 21, 2017).
    \4\ Sec.  1757(7)(E) (Providing in relevant part: ``a federal 
credit union may issue and sell securities which are guaranteed 
pursuant to section 1721(g) of [title 12 of the United States 
Code].'').
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Subordinated Debt

    As indicated in the 2015 Final Rule, the NCUA planned to examine 
additional forms of qualifying capital in a separate proposed rule. In 
February 2017, the NCUA issued an advanced notice of proposed 
rulemaking for alternative capital,\5\ and the NCUA's Regulatory Review 
Task Force agenda, published in August 2017, addresses the NCUA's 
intent with regard to the 2015 Final Rule.\6\ This proposed delay would 
provide the Board additional time to examine proposing and finalizing a 
rule to allow certain forms of subordinated debt to qualify as capital 
for risk-based capital purposes. The delay would also permit credit 
unions subject to the risk-based capital requirement time to consider 
the use of any authorized forms of subordinated debt before the risk-
based capital rules go into effect.
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    \5\ 82 FR 9691 (Feb. 8, 2017).
    \6\ 82 FR 161 (Aug. 22, 2017).
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Community Bank Leverage Ratio Analog

    The Economic Growth, Regulatory Relief, and Consumer Protection Act 
of 2018 \7\ required the Office of the Comptroller of the Currency 
(OCC), the Board of Governors of the Federal Reserve System, and the 
Federal Deposit Insurance Corporation (collectively, the other banking 
agencies), to propose a simplified, alternative measure of capital 
adequacy for federally insured banks.\8\ In February 2019, the other 
banking agencies issued a proposed rule that would provide qualifying 
community banks the option to comply with a simplified measure of 
capital adequacy.\9\ Under the proposal, qualifying community banking 
organizations that comply with and elect to use the community bank 
leverage ratio (CBLR) framework and that maintain a CBLR greater than 9 
percent would be considered to have met the capital requirements for 
the ``well-capitalized'' capital category under the other banking 
agencies' PCA frameworks and would no longer be subject to the 
generally applicable capital rule. The NCUA Board believes the delay in 
the effective date of risk-based capital is appropriate to examine the 
other banking agencies' recent CBLR proposal and consider whether 
adopting an equivalent provision for credit unions is appropriate and 
consistent with the FCUA.
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    \7\ Public Law 115-174 (May 24, 2018).
    \8\ Id. at Sec.  201.
    \9\ 84 FR 3062 (Feb. 8, 2019).
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Additional Time To Prepare for Implementation

    The proposed delay would also provide covered credit unions and the 
NCUA with additional time to prepare for the rule's implementation. The 
NCUA has several initiatives in process to improve and modernize how 
the agency conducts examinations and supervision. The goals of these 
initiatives are to replace outdated, end-of-life examination systems, 
streamline processes, adopt enhanced examination techniques, and 
leverage new technology and data to maintain high quality supervision 
of federally-insured credit unions with less onsite presence. These 
initiatives include the Enterprise Solution Modernization, Call Report 
Modernization, and Virtual Examination programs. The proposed delay 
would enable the NCUA to direct additional time and resources toward 
modernizing examination systems, versus dedicating resources to end-of-
life systems being retired.
    This additional time would further benefit credit unions as they 
work to implement the Financial Accounting Standards Board's final 
current expected credit loss (CECL) standard. The current Board 
believes the proposed delay would allow credit unions additional time 
to allocate resources to the implementation of CECL.
    Under this proposal, the NCUA's current PCA regulation would remain 
in effect until the 2015 Final Rule and the 2018 Supplemental Rule's 
effective date. The NCUA would continue to enforce the capital 
standards currently in place and address any supervisory concerns 
through existing regulatory and supervisory mechanisms. The Board 
believes, given the facts above, that extending the implementation 
period of the 2015 Final Rule and 2018 Supplemental Rule until January 
1, 2022, would be reasonable and would not pose undue risk to the 
NCUSIF.

[[Page 30050]]

VII. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a notice of proposed rulemaking, an agency prepare and 
make available for public comment an initial regulatory flexibility 
analysis that describes the impact of a proposed rule on small 
entities. A regulatory flexibility analysis is not required, however, 
if the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA to include credit unions with assets less than $100 
million) \10\ and publishes its certification and a short, explanatory 
statement in the Federal Register together with the rule.
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    \10\ See 80 FR 57512 (Sept. 24, 2015).
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    The proposed delay of the 2015 Final Rule and 2018 Supplemental 
Rule would affect only complex credit unions, which are those with 
greater than $500 million in assets under the 2018 Supplemental Rule. 
As a result, credit unions with $100 million or less in total assets 
would not be affected by this proposal. Accordingly, the NCUA certifies 
that this proposal will not have a significant economic impact on a 
substantial number of small credit unions.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency creates new or amends existing information collection 
requirements.\11\ For purposes of the PRA, an information collection 
requirement may take the form of a reporting, recordkeeping, or a 
third-party disclosure requirement.
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    \11\ 44 U.S.C. 3507(d).
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    The information collection requirements prescribed by Sec.  
702.101(b) were set-out in the August 8, 2018 (83 FR 38997), proposed 
rule and assigned OMB control number 3133-0191. This proposed rule does 
not contain any new information collection requirements that require 
approval by OMB under the PRA. The proposed rule would only extend the 
effective date.
    The Board invites comment on (a) whether the collections of 
information are necessary for the proper performance of the agency's 
function, including practical utility; (b) the accuracy of estimates of 
the burden of the information collections, including the validity of 
the methodology and assumptions used; (c) ways to enhance the quality, 
utility, and clarity of the information being collected; and (d) ways 
to minimize the burden of the information collection on respondents, 
including through the use of automated collection techniques or other 
forms of information technology.
    All comments are a matter of public record. Comments regarding the 
information collection requirements of this rule should be sent to (1) 
Dawn Wolfgang, NCUA PRA Clearance Officer, National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia 22314, or Fax 
No. 703-519-8572, or Email at [email protected] and the (2) Office 
of Information and Regulatory Affairs, Office of Management and Budget, 
Attention: Desk Officer for NCUA, New Executive Office Building, Room 
10235, Washington, DC 20503, or email at [email protected].
    Submission of comments. The NCUA considers comments by the public 
on this proposed collection of information in:
     Evaluating whether the proposed collection of information 
is necessary for the proper performance of the functions of the NCUA, 
including whether the information will have a practical use;
     Evaluating the accuracy of the NCUA's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology; e.g., permitting 
electronic submission of responses.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. The 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the principles of the executive order to 
adhere to fundamental federalism principles. This proposed rule reduces 
the number of federally insured natural-person credit unions, including 
federally insured, state-chartered natural-person credit unions that 
would be subject to the 2015 Final Rule. It may have, to some degree, a 
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. It does not, 
however, rise to the level of material impact for purposed of Executive 
Order 13132.

Assessment of Federal Regulations and Policies on Families

    The 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).

    By the National Credit Union Administration Board on June 20, 
2019.
Gerard Poliquin,
Secretary of the Board.
[FR Doc. 2019-13589 Filed 6-25-19; 8:45 am]
BILLING CODE 7535-01-P