[Federal Register Volume 86, Number 243 (Wednesday, December 22, 2021)]
[Rules and Regulations]
[Pages 72517-72520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27771]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AF15


Temporary Regulatory Relief in Response to COVID-19--Extension

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule and temporary final rule; extension.

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SUMMARY: The NCUA Board (Board) is further extending its temporary 
final rule, which modified certain regulatory requirements to help 
ensure that federally insured credit unions (FICUs) remain operational 
and can address economic conditions caused by the COVID-19 pandemic. 
The temporary final rule issued by the Board in April 2020 temporarily 
raised the maximum aggregate amount of loan participations that a FICU 
may purchase from a single originating lender to the greater of 
$5,000,000 or 200 percent of the FICU's net worth. The rule also 
temporarily

[[Page 72518]]

suspended limitations on the eligible obligations that a Federal credit 
union (FCU) may purchase and hold. In addition, given physical 
distancing practices necessitated by COVID-19, the rule also tolled the 
required timeframes for the occupancy or disposition of properties not 
being used for FCU business or that have been abandoned. The temporary 
amendments were originally scheduled to expire on December 31, 2020. 
The Board subsequently extended their effectiveness until December 31, 
2021. Due to the continued impact of COVID-19, the Board has decided it 
is necessary to further extend the effective period of these temporary 
modifications until December 31, 2022.

DATES: This rule is effective December 22, 2021 except for the 
amendment to Sec.  701.23 in instruction 3.b., which is effective April 
1, 2022. The expiration date of the temporary final rule published on 
April 21, 2020 (85 FR 22010), and extended by final rule published on 
December 22, 2020 (85 FR 83405), is further extended through December 
31, 2022.

FOR FURTHER INFORMATION CONTACT: Policy and Analysis: Victoria 
Nahrwold, Office of Examination and Insurance, at (703) 548-2633; 
Legal: Ariel Pereira, Senior Staff Attorney, Office of General Counsel, 
at (703) 518-6540; or by mail at: National Credit Union Administration, 
1775 Duke Street, Alexandria, Virginia 22314.

SUPPLEMENTARY INFORMATION: 

I. Background
II. Legal Authority
III. The Regulatory Amendments
IV. Regulatory Procedures

I. Background

    The COVID-19 pandemic has created uncertainty for FICUs and their 
members. The Board continues to work with federal and state regulatory 
agencies, in addition to FICUs, to assist FICUs in managing their 
operations and to facilitate continued assistance to credit union 
members and communities impacted by the COVID-19 pandemic. In April 
2020, as part of these ongoing efforts, the Board temporarily modified 
certain regulatory requirements to help ensure that FICUs remain 
operational and liquid during the COVID-19 pandemic.\1\ The Board 
concluded that the amendments would provide FICUs necessary additional 
flexibility in a manner consistent with the NCUA's responsibility to 
maintain the safety and soundness of the credit union system. The 
temporary amendments were to remain in place through the end of 
calendar year 2020 unless the Board took action to extend the date. In 
December 2021, the Board concluded that continuing economic uncertainty 
merited a further extension of the amendments until December 31, 
2021.\2\
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    \1\ 85 FR 22010 (Apr. 21, 2020).
    \2\ 85 FR 83405 (Dec. 22, 2020).
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    The economic environment is a key determinant of credit union 
performance. While the recovery in economic activity and labor markets 
is expected to continue, it also poses challenges. The NCUA, like 
credit unions, needs to plan and prepare for a range of economic 
outcomes that could affect credit union performance. This includes 
ensuring a regulatory environment that provides FICUs with the 
flexibility necessary to cope with and address the range of potential 
COVID-19 impacts.
    Due to the continuing impact of the COVID-19 pandemic on FICUs and 
their members, the Board has determined that it is necessary to again 
extend the effectiveness of these temporary provisions. The temporary 
amendments will remain in place through December 31, 2022.

II. Legal Authority

    The Board is issuing this temporary final rule pursuant to its 
authority under the Federal Credit Union Act (Act).\3\ The Act grants 
the Board a broad mandate to issue regulations governing both FCUs and, 
more generally, all FICUs. For example, section 120 of the Act is a 
general grant of regulatory authority and authorizes the Board to 
prescribe rules and regulations for the administration of the Act.\4\ 
Section 209 of the Act is a plenary grant of regulatory authority to 
issue rules and regulations necessary or appropriate for the Board to 
carry out its role as share insurer for all FICUs.\5\ Other provisions 
of the Act confer specific rulemaking authority to address prescribed 
issues or circumstances.\6\ Accordingly, the Act grants the Board broad 
rulemaking authority to ensure that the credit union industry and the 
NCUSIF remain safe and sound.
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    \3\ 12 U.S.C. 1751 et seq.
    \4\ 12 U.S.C. 1766(a).
    \5\ 12 U.S.C. 1789.
    \6\ An example of a provision of the Act that provides the Board 
with specific rulemaking authority is section 207 (12 U.S.C. 1787), 
which is a specific grant of authority over share insurance 
coverage, conservatorships, and liquidations.
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III. The Regulatory Amendments

A. Aggregate Limit on Loan Participation Purchases (Section 
701.22(b)(5)(ii))

    The Board's regulation at Sec.  701.22 limits the aggregate amount 
of loan participations that a FICU may purchase from any one 
originating lender to the greater of $5,000,000 or 100 percent of the 
FICU's net worth.\7\ Under the temporary regulatory amendments, the 
aggregate limit below which a waiver from the appropriate NCUA Regional 
Director is not required is temporarily raised to the greater of 
$5,000,000 or 200 percent of a FICU's net worth.
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    \7\ 12 CFR 701.22(b)(5)(ii).
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    The Board continues to believe that, as currently formulated in 
Sec.  701.22, the limitation may be overly prescriptive during this 
time. Additional regulatory flexibility continues to be especially 
warranted to deal with the economic impact of the COVID-19 pandemic, 
which may result in additional stress on credit union balance sheets, 
potentially requiring robust liquidity management.

B. Purchase, Sale, and Pledge of Eligible Obligations (Section 
701.23(b))

    The Board's regulations in Sec.  701.23 generally require that 
purchased eligible obligations be obligations of a purchasing FCU's 
members and loans the FCU is empowered to grant or the loan is 
refinanced to be one the FCU is empowered to grant. Section 
701.23(b)(2) provides certain limited exceptions to the general 
requirements for well-capitalized FCUs that have composite CAMEL 
ratings of ``1'' or ``2.'' \8\ The regulations authorize these FCUs to 
purchase the eligible obligations of any FICU or of any liquidating 
credit union without regard to whether they are obligations of the 
purchasing FCU's members, provided they are loans the FCU is empowered 
to grant or the loan is refinanced to be one it is empowered to grant.
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    \8\ Section 701.23 also contains exceptions to the membership 
requirement for certain purchases of student loans and real estate 
loans that an FCU purchases to complete a pool for sale. The Board 
established this exception in a 1979 final rule. 44 FR 27068 (May 9, 
1979).
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    In the April 2020 temporary final rule, the Board temporarily 
amended its regulations to authorize FCUs with CAMEL composite ratings 
of 1, 2, or 3 to purchase eligible obligations of FICUs and liquidating 
credit unions irrespective of whether the obligation belongs to the 
purchasing FCU's members and without regard to whether they are loans 
the credit union is empowered to grant or are refinanced to ensure the 
obligations are ones the purchasing credit union is empowered to grant. 
This change did not alter the requirement for a purchasing FCU to be 
well-capitalized under Sec.  701.23(b)(2).\9\

[[Page 72519]]

Due to the ongoing and unforeseeable impact of the COVID-19 pandemic, 
the Board believes it appropriate to extend these temporary provisions 
until the close of December 31, 2022. The Board recognizes that the 
need to support the extension of credit and facilitate the downstream 
loan purchases as a tool to manage liquidity remains, and likely will 
remain for the foreseeable future.
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    \9\ Generally, credit unions with a CAMEL composite rating lower 
than 3 are considered to be in ``troubled condition'' under the 
NCUA's regulations. 12 CFR 700.2.
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    The Board reiterates that this change allows FCUs to continue to 
hold obligations purchased pursuant to this temporary final rule 
subsequent to the rule's expiration. The standard requirements 
applicable to the purchase of obligations under Sec.  701.23 will 
resume after the expiration of the temporary provisions at the close of 
December 31, 2022, unless extended, and will apply to all future 
purchases, including to purchases of obligations previously acquired 
under the provisions of this temporary final rule. The Board also 
reiterates that the restrictions temporarily relieved in Sec.  701.23 
do not apply to state-chartered, federally insured credit unions. Any 
such restrictions applicable to state-chartered credit unions would be 
based on state laws or regulations. This temporary final rule does not 
modify the current authority of FCUs under Sec.  701.23 to purchase the 
obligations of a liquidating credit union without regard to whether the 
obligations belong to the purchasing FCU's members.
    In addition to the regulatory amendments discussed above, this 
final rule makes a technical change to Sec.  703.23(i)(2) to conform 
the terminology used in the provision with that of the Board's final 
rule on the CAMELS rating system, which will become effective on April 
1, 2022.\10\
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    \10\ 86 FR 59282 (Oct. 27, 2021).
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C. FCU Occupancy and Disposal of Acquired Premises (Section 701.36(c))

    The Board's regulation in Sec.  701.36 provides that if an FCU 
acquires premises, including unimproved land or unimproved real 
property, it must partially occupy them ``no later than six years after 
the date of acquisition,'' subject to the NCUA granting a waiver.\11\ 
Further, an FCU must make diligent efforts to dispose of abandoned 
premises and any other real property it does not intend to use in 
transacting business. Additionally, the FCU must advertise for sale 
premises that have been abandoned for four years.\12\ Given the impact 
of physical distancing measures adopted by many states and localities, 
the April 2020 temporary final rule tolls the regulatory mandated 
timeframes in the rule.
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    \11\ 12 CFR 701.36(c)(1).
    \12\ 12 CFR 701.36(c)(2).
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    Due to the ongoing nature of the COVID-19 pandemic and its 
continued impact on FICUs, the Board has decided it is necessary to 
extend the effectiveness of this temporary amendment until the close of 
December 31, 2022. Physical distancing practices continue to be a key 
component of preventing the spread of COVID-19 \13\ and make compliance 
with Sec.  701.36 difficult. This temporary deferral will continue to 
provide FCUs additional flexibility to comply with the prescribed time 
periods, while still complying with the statutory and regulatory goals 
of ensuring that properties acquired or held by FCUs are used for 
credit union business.
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    \13\ See Fabio Motta, Face masks and distancing are most 
effective measures in reducing COVID-19 spread, study finds, as 
experts clamor for U.S. to expand booster program, (November 18, 
2021), (``Wearing a face mask and physically distancing from others 
are the most effective public safety measures against the 
coronavirus-borne illness COVID-19 and have a statistically 
significant impact on reducing the spread, according to a new global 
study.''), https://www.marketwatch.com/story/face-masks-and-distancing-are-most-effective-measures-in-reducing-covid-19-spread-study-finds-as-experts-clamor-for-u-s-to-expand-booster-program-11637251008.
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IV. Regulatory Procedures

A. Administrative Procedure Act

    The Board is issuing the extension of the temporary final rule 
without prior notice and the opportunity for public comment and the 
delayed effective date ordinarily prescribed by the Administrative 
Procedure Act (APA).\14\ Pursuant to the APA, general notice and the 
opportunity for public comment are not required with respect to a 
rulemaking when an ``agency for good cause finds (and incorporates the 
finding and a brief statement of reasons therefor in the rules issued) 
that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \15\
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    \14\ 5 U.S.C. 551 et seq.
    \15\ 5 U.S.C. 553(b)(3).
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    The Board believes that the public interest is best served by 
implementing the extension of the previously issued temporary final 
rule immediately upon publication in the Federal Register. The Board 
notes that the COVID-19 pandemic is unprecedented. It is a continually 
changing situation and difficult to anticipate how the disruptions 
caused by the crisis will manifest themselves within the financial 
system and how individual credit unions may be impacted. Because of the 
widespread impact of a pandemic and the temporary nature of both the 
relief contemplated by the temporary final rule and this extension of 
such relief, the Board believes it is has good cause to determine that 
ordinary notice and public procedure are impracticable and that moving 
expeditiously to extend the temporary final rule is in the best of 
interests of the public and the FICUs that serve that public. The 
extension of these temporary regulatory changes are proactive steps 
that are designed help FICUs cope with the economic impact of the 
COVID-19 pandemic, which may result in additional stress on credit 
union balance sheets, potentially requiring robust liquidity management 
over the course of 2022. The changes are undertaken with expedience to 
ensure the maximum intended effects remain in place.
    The Board values public input in its rulemakings and believes that 
providing the opportunity for comment enhances its regulations. 
Accordingly, the Board often solicits comments on its rules even when 
not required under the APA, such as for the rules it issues on an 
interim-final basis. The Board, however, notes that the provisions 
extended in this rule are temporary in nature, and designed 
specifically to help credit unions affected by the COVID-19 pandemic. 
The extension of the amendments made by this temporary final rule will 
automatically expire at the close of December 31, 2022, and are limited 
in number and scope. For these reasons, the Board finds that there is 
good cause consistent with the public interest to issue the rule 
without advance notice and comment.
    The APA also requires a 30-day delayed effective date, except for: 
(1) Substantive rules which grant or recognize an exemption or relieve 
a restriction; (2) interpretative rules and statements of policy; or 
(3) as otherwise provided by the agency for good cause.\16\ Because the 
rules relieve currently codified limitations and restrictions, the 
extension of the temporary final rule is exempt from the APA's delayed 
effective date requirement. As an alternative basis to make the rule 
effective without the 30-day delayed effective date, the Board finds 
there is good cause to do so for the same reasons set forth above 
regarding advance notice and opportunity for comment.
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    \16\ 5 U.S.C. 553(d).
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B. Congressional Review Act

    For purposes of the Congressional Review Act,\17\ the Office of 
Management and Budget (OMB) makes a determination as to whether a final 
rule

[[Page 72520]]

constitutes a ``major'' rule. If the OMB deems a rule to be a ``major 
rule,'' the Congressional Review Act generally provides that the rule 
may not take effect until at least 60 days following its publication. 
The Congressional Review Act defines a ``major rule'' as any rule that 
the Administrator of the Office of Information and Regulatory Affairs 
of the OMB finds has resulted in or is likely to result in (A) an 
annual effect on the economy of $100,000,000 or more; (B) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies or geographic regions, or 
(C) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.\18\
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    \17\ 5 U.S.C. 801-808.
    \18\ 5 U.S.C. 804(2).
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    For the same reasons set forth above, the Board is adopting the 
extension of the temporary final rule without the delayed effective 
date generally prescribed under the Congressional Review Act. The 
delayed effective date required by the Congressional Review Act does 
not apply to any rule for which an agency for good cause finds (and 
incorporates the finding and a brief statement of reasons therefor in 
the rule issued) that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.\19\ In 
light of current market uncertainty, the Board believes that delaying 
the effective date of the extension of the temporary final rule would 
be contrary to the public interest for the same reasons discussed 
above.
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    \19\ 5 U.S.C. 808.
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    As required by the Congressional Review Act, the Board will submit 
the final rule and other appropriate reports to Congress and the 
Government Accountability Office for review.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.) 
requires that the Office of Management and Budget (OMB) approve all 
collections of information by a Federal agency from the public before 
they can be implemented. Respondents are not required to respond to any 
collection of information unless it displays a valid OMB control 
number.
    In accordance with the PRA, the information collection requirements 
included in this temporary final rule extension have been submitted to 
OMB for approval under control numbers 3133-0141, 3133-0127 and 3133-
0040.

D. Executive Order 13132, on Federalism

    Executive Order 13132 \20\ 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 Executive order to adhere 
to fundamental federalism principles. The extension of the temporary 
final rule will not have substantial direct effects 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. The Board has therefore determined that this rule does 
not constitute a policy that has federalism implications for purposes 
of the Executive order.
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    \20\ Executive Order 13132 on Federalism, was signed by former 
President Clinton on August 4, 1999, and subsequently published in 
the Federal Register on August 10, 1999 (64 FR 43255).
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E. Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that the extension of the temporary final 
rule will not affect family well-being within the meaning of Section 
654 of the Treasury and General Government Appropriations Act, 
1999.\21\
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    \21\ Public Law 105-277, 112 Stat. 2681 (1998).
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F. Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (RFA) generally requires that when 
an agency issues a proposed rule or a final rule pursuant to the APA or 
another law, the agency must prepare a regulatory flexibility analysis 
that meets the requirements of the RFA and publish such analysis in the 
Federal Register. Specifically, the RFA normally requires agencies to 
describe the impact of a rulemaking on small entities by providing a 
regulatory impact analysis. For purposes of the RFA, the Board 
considers credit unions with assets less than $100 million to be small 
entities.
    As discussed previously, consistent with the APA, the Board has 
determined for good cause that general notice and opportunity for 
public comment is unnecessary, and therefore the Board is not issuing a 
notice of proposed rulemaking. Rules that are exempt from notice and 
comment procedures are also exempt from the RFA requirements, including 
conducting a regulatory flexibility analysis, when among other things 
the agency for good cause finds that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest. 
Accordingly, the Board has concluded that the RFA's requirements 
relating to initial and final regulatory flexibility analysis do not 
apply.

List of Subjects in 12 CFR Part 701

    Aged, Civil rights, Credit, Credit unions, Fair housing, 
Individuals with disabilities, Insurance, Mortgages, Reporting and 
recordkeeping requirements.

    By the NCUA Board, this 17th day of December 2021.
Melane Conyers-Ausbrooks,
Secretary of the Board.

    For the reasons discussed in the preamble, the Board amends 12 CFR 
part 701 as follows:

PART 701--ORGANIZATION AND OPERATION OF CREDIT UNIONS

0
1. The authority citation for part 701 continues to read as follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. 
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.


Sec.  701.22  [Amended]

0
2. In Sec.  701.22(e), remove the date ``December 31, 2021'' and add in 
its place the date ``December 31, 2022''.


Sec.  701.23  [Amended]

0
3. Amend Sec.  701.23 as follows:
0
a. In paragraph (i) introductory text, remove the date ``December 31, 
2021'' and add in its place the date ``December 31, 2022''; and
0
b. Effective April 1, 2022, in paragraph (i)(2) remove the term 
``CAMEL'', and add in its place the term ``CAMELS.''


Sec.  701.36  [Amended]

0
4. In Sec.  701.36(c)(3), remove the date ``December 31, 2021'' and add 
in its place the date ``December 31, 2022''.

[FR Doc. 2021-27771 Filed 12-20-21; 4:15 pm]
BILLING CODE 7535-01-P