[Federal Register Volume 89, Number 80 (Wednesday, April 24, 2024)]
[Proposed Rules]
[Pages 31117-31119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08680]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 749
[NCUA-2024-0026]
RIN 3133-AF61
Records Preservation Program and Appendices--Record Retention
Guidelines; Catastrophic Act Preparedness Guidelines
AGENCY: National Credit Union Administration (NCUA).
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The NCUA Board (Board) is issuing this advance notice of
proposed rulemaking (ANPR) to solicit comments on ways the agency can
improve and update its records preservation program regulation and
accompanying guidelines in the NCUA regulations. The Board is
particularly interested in obtaining stakeholder input on the content
of the regulation, which has not been updated in 15 years and may be
outdated or at odds with current best practices. The Board is also
interested in feedback on the structure of the part which may be
confusing as it currently contains a combination of regulatory
requirements and guidance.
DATES: Comments must be received on or before June 24, 2024.
ADDRESSES: You may submit written comments by any of the following
methods identified by RIN (Please send comments by one method only):
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments for Docket Number NCUA-
2024-0026.
Mail: Address to Melane Conyers-Ausbrooks, Secretary of
the Board, National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
Public Inspection: All public comments are available on the Federal
eRulemaking Portal at https://www.regulations.gov as submitted, except
when impossible for technical reasons. Public comments will not be
edited to remove any identifying or contact information. If you are
unable to access public comments on the internet, you may contact the
NCUA for alternative access by calling (703) 518-6540 or emailing
[email protected].
FOR FURTHER INFORMATION CONTACT: Policy: Matt Huston, Policy Officer,
Office of Examination and Insurance, at (571) 309-7684 or
[email protected]; Legal: Gira Bose, Senior Staff Attorney, Office of
General Counsel, at (703) 518-6562 or [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
II. Current Standards and Request for Comment
III. Legal Authority
I. Background
In 2023, the NCUA received feedback that part 749 and its
appendices are burdensome and unclear. Based on this feedback and other
factors described below, the NCUA has identified the need to review
part 749 to see if any changes or improvements are necessary. The Board
recognizes the NCUA's regulations in this area, which were last updated
many years ago, may be outdated or unclear for some credit unions,
which ultimately may have adverse effects on their members. Thus, the
Board is seeking advance comment on whether there is a need to update
[[Page 31118]]
part 749, and if so, what should be updated and how, to ensure that
credit unions continue to properly preserve records vital to their
business operations, the NCUA's supervisory needs, and the needs of
their members.
II. Current Standards and Request for Comment
Part 749 requires all federally insured credit unions (credit
unions) to maintain a records preservation program to identify, store,
and reconstruct vital records in the event that a credit union's
records are destroyed.\1\
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\1\ 12 CFR 749.0.
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Part 749 requires a vital records preservation program to be in
writing and contain certain procedures for maintaining duplicate vital
records at an offsite vital records center.\2\ The regulation defines
the term `vital records' as: (a) a list of share, deposit, and loan
balances for each member's account as of the close of the most recent
business day that shows each balance individually identified by a name
or number; lists multiple loans of one account separately; and contains
information sufficient to enable the credit union to locate each
member, such as address and telephone number; (b) a financial report,
which lists all of the credit union's asset and liability accounts and
bank reconcilements, current as of the most recent month-end; (c) a
list of the credit union's accounts at financial institutions,
insurance policies, and investments along with related contact
information, current as of the most recent month-end; and (d) emergency
contact information for employees, officials, regulatory offices, and
vendors used to support vital records.\3\
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\2\ 12 CFR 749.2 and 749.3.
\3\ 12 CFR 749.1.
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At the same time, appendix A--which is included in part 749 as
suggested guidelines for record retention--advises that the following
additional sets of records should be retained permanently: 1. Official
records of the credit union: (a) Charter, bylaws, and amendments; (b)
Certificates or licenses to operate under programs of various
government agencies, such as a certificate to act as issuing agent for
the sale of U.S. savings bonds. 2. Key operational records: (a) Minutes
of meetings of the membership, board of directors, credit committee,
and supervisory committee; (b) One copy of each financial report, NCUA
Form 5300 or 5310, or their equivalent, and the Credit Union Profile
report, NCUA Form 4501, or its equivalent as submitted to the NCUA at
the end of each quarter; (c) One copy of each supervisory committee
comprehensive annual audit report and attachments; (d) Supervisory
committee records of account verification; (e) Applications for
membership and joint share account agreements; (f) Journal and cash
record; (g) General ledger; (h) Copies of the periodic statements of
members, or the individual share and loan ledger; (i) Bank
reconcilements; and (j) Listing of records destroyed.\4\
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\4\ 12 CFR part 749, appendix A.
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Credit unions have expressed confusion regarding the interaction
between part 749's requirements and appendix A, and between part 749
and other parts of the NCUA's regulations that have record retention
requirements not referenced in part 749. Under part 749, certain
supervisory committee documents are not vital records and are subject
to periodic destruction; yet under Sec. 715.8 the supervisory
committee must retain the records of each verification of members'
passbooks and accounts until the completion of the next member account
verification.\5\
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\5\ 12 CFR 715.8(c).
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The Board seeks comment on all aspects of part 749 and the
appendices, including how they can be modernized, streamlined, and
clarified, and other provisions in the NCUA's regulations that contain
record retention requirements. The Board also encourages credit unions
and other stakeholders that have developed well-functioning records
preservation programs to comment on what works for them and share their
best practices in response to this document. In addition, the Board
specifically requests feedback addressing the following areas: \6\
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\6\ In responding to the questions below, the NCUA recommends
respondents consider the totality of their vital records, including
any such records a credit union has acquired, come into possession
of, or retained through operational or organizational changes, such
as a merger.
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A. Part 749 Definitions
Questions:
(1) Does the definition of vital records in 12 CFR 749.1 contain
all, and only those, records you would consider to be vital for credit
unions?
(2) Are there additional types of documents not listed as a ``vital
record'' that you think should be as they are critical for business
operations and to properly serve members?
(3) Are there other industry standards or methodologies outside of
part 749 that the agency should consider for preserving vital records,
for defining what vital records are, and for determining minimum
retention periods?
(4) The primary focus of the records retention guidance in appendix
B relates specifically to catastrophic act preparedness. Are there any
terms, definitions, or standards that the Board should consider
updating in appendix B?
(5) Are there any other changes to appendix B that you would
recommend?
B. Records Retention Practices
Understanding current credit union retention practices would be
helpful in determining whether part 749 is properly serving its purpose
which is for a credit union to identify, store, and reconstruct vital
records in the event that the credit union's records are destroyed.\7\
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\7\ 12 CFR 749.0(a).
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Questions:
(6) How long, and in what format, does your credit union store its
vital records?
(7) Does your credit union maintain and store any vital records in
a physical format due to a regulatory requirement or supervisory
expectation?
(8) What impediments, including estimated costs, does your credit
union encounter with storing vital records?
(9) What records do you deem vital for business operations that a
credit union should be required to keep permanently for the purpose of
restoring vital member services?
(10) Other than for records that must be kept permanently, are
there specific timeframes you would recommend that other vital records
be retained?
(11) What are the pros and cons of storing vital records
physically, electronically, or in other formats, such as cloud
computing storage?
(12) Does your credit union rely on third-party vendors to
accurately maintain vital records, and if so, what are some of the
challenges that these arrangements present?
(13) How would you suggest the agency create a more effective
framework for credit unions to preserve vital records?
(14) What are some challenges for smaller credit unions, defined as
credit unions with total assets of $100 million or less, in maintaining
vital records, and what has worked? \8\
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\8\ See NCUA Interpretive Ruling and Policy Statement 15-1,
available at https://ncua.gov/files/publications/regulations/IRPS2015-1.pdf.
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(15) What additional support, training, or technical assistance
could the NCUA provide, if any, to assist credit unions with both
understanding and implementing records retention requirements?
[[Page 31119]]
C. Additional Guidance
The issuance of guidance in this area has been a long-standing
agency practice to assist credit unions with their record preservation
obligations. As noted in an earlier rulemaking on part 749, ``there is
a need for guidance in the area of record retention based on the
frequency of requests for assistance from credit unions.'' \9\
Additionally, clearer guidance in this area would also allow NCUA to
better execute its supervisory duties. As part of meeting this need,
the agency has taken steps over the years to clearly state the
difference between regulations and guidance. In a prior rulemaking on
part 749, the Board attempted to clarify this issue by stating, ``The
Board has weighed the fact that guidance is available from other
sources and the potential for confusion regarding enforceability of a
regulation versus guidance. The Board believes the benefit to credit
unions in having the guidance in the appendix to the regulatory
requirement will enhance access to the guidance and will facilitate
compliance.'' \10\ In the part 749 rulemaking, the Board further noted
that ``including specific words like `recommended' and `guidance'
means, as a legal matter, that the guidance is just that--guidance--and
is not enforceable as a regulation. These words clarify and minimize,
to the extent linguistically possible, the potential for
misinterpretation.'' \11\ The NCUA recently codified this position in
an interagency rulemaking clarifying the distinction between a rule and
guidance whereby the former creates binding legal obligations, and the
latter does not.\12\
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\9\ 66 FR 11239 (Feb. 23, 2001).
\10\ 72 FR 42271 (Aug. 2, 2007).
\11\ 12 U.S.C. 1766(e).
\12\ 12 U.S.C. 1766(e).
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Questions:
(16) What provisions of appendix A or appendix B do not align with
the requirements of part 749, or are otherwise outdated or unclear
examples of the types of records that should be retained? For records
you consider outdated, please explain why.
(17) In terms of the content of any future guidance, what guidance
would be helpful to better reflect the types of records that must be
retained under part 749?
(18) What guidance would be helpful for catastrophic act or other
disaster preparedness?
(19) Is there confusion among stakeholders regarding the
enforceability of regulation versus guidance concerning part 749? If
so, what should be revised?
D. Other NCUA Regulations
Questions:
(20) Are there other provisions in the NCUA's regulations that
contain record retention requirements that should be incorporated into
part 749?
III. Legal Authority
The Board issues this ANPR pursuant to its authority under the
Federal Credit Union Act (FCUA) to prescribe rules and regulations as
it deems appropriate for administering the FCUA, including its
recordkeeping requirements for Federal credit unions.\13\ Maintaining
vital records is central to a credit union's ability to properly
service its members and to the NCUA's ability to fulfill its
supervisory and enforcement duties. Section 209 of the FCUA is a
plenary grant of regulatory authority to the Board to examine and
require information and reports from credit unions as well as issue
rules and regulations necessary or appropriate to carry out its roles
as regulator and share insurer.\14\ Section 206 of the FCUA requires
the agency to impose corrective measures whenever, in the opinion of
the Board, any credit union is engaged in or has engaged in unsafe or
unsound practices in conducting its business.\15\ Accordingly, the FCUA
grants the Board broad rulemaking authority to ensure that credit
unions, their member owners, and the National Credit Union Share
Insurance Fund remain safe, sound and protected.
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\13\ 12 U.S.C. 1766(e).
\14\ 12 U.S.C. 1789(a)(8) and (11).
\15\ 12 U.S.C. 1786(b)(1). There are several references to
``safety and soundness'' in the FCUA. See 12 U.S.C.
1757(5)(A)(vi)(I), 1759(d & f), 1781(c)(2), 1782(a)(6)(B), 1786(b),
1786(e), 1786(f), 1786(g), 1786(k)(2), 1786(r), 1786(s), and
1790d(h).
By the National Credit Union Administration Board.
Melane Conyers-Ausbrooks,
Secretary of the Board.
[FR Doc. 2024-08680 Filed 4-23-24; 8:45 am]
BILLING CODE 7535-01-P