[Federal Register Volume 64, Number 102 (Thursday, May 27, 1999)]
[Rules and Regulations]
[Pages 28715-28717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13308]
=======================================================================
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
Organization and Operations of Federal Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final Rule.
-----------------------------------------------------------------------
SUMMARY: NCUA amends its regulation dealing with newly chartered and
troubled credit unions that requires prior notice of the appointment or
employment of directors and senior officers. The amendment clarifies
when the notice period commences and when the new director or senior
officer may begin service.
Also, for corporate credit unions, the amendment clarifies that the
definition of a ``troubled'' credit union will be based on the
Corporate Risk Information System (CRIS), or on CAMEL for those state-
chartered corporate credit unions in states that do not adopt CRIS.
Finally, the amendment reflects that corporate credit unions should
submit notices of changes in officials or senior management to the
Director of the Office of Corporate Credit Unions.
DATES: This rule is effective June 28, 1999.
FOR FURTHER INFORMATION CONTACT: Margaret E. McPartlin, Trial Attorney,
Litigation Division, Office of General Counsel, telephone: (703) 518-
6566 or David A. Shetler, Corporate Program Specialist, Office of
Corporate Credit Unions, telephone: (703) 518-6646.
SUPPLEMENTARY INFORMATION:
Background
NCUA has a policy of periodically reviewing its regulations to
``update, clarify and simplify existing regulations and eliminate
redundant and unnecessary provisions.'' IRPS 87-2, Developing and
Reviewing Government Regulations. 52 FR 35231 (September 18, 1987). As
part of its regulatory review program, NCUA reviewed Sec. 701.14 of its
regulations, 12 CFR 701.14, to determine whether the language of the
regulation was clear and effective. Section 701.14 of NCUA's
regulations requires that federally insured credit unions that have
been
[[Page 28716]]
chartered less than two years or fall within the regulatory definition
of a ``troubled credit union'' file a notice with NCUA prior to adding
or replacing a member of the board of directors or a committee member,
or employing or changing the responsibilities of an individual to a
position as a senior executive officer. As a result of NCUA review and
questions from credit unions, the Board proposed to clarify the
language contained in Sec. 701.14(d)(1) (63 FR 59742, November 8,
1998).
There has been confusion as to when the Regional Director accepts
the notice of a proposed change in an official or senior officer; how
long the Regional Office has to process the notice; and when the
official or senior officer may commence work. The amendment clarifies
the language in Sec. 701.14(d)(1) to provide that the Regional
Director, within 10 calendar days after receiving the notice package,
will notify the credit union in writing either that the notice package
is complete and ready for processing, or that specified additional
information is needed and must be submitted within 30 calendar days. If
the initial notice is complete, the Regional Director will issue a
decision of approval or disapproval within 30 calendar days of receipt
of the notice. If the initial notice is not complete, the Regional
Director's decision period is tolled for the amount of time taken by
the credit union to provide the requested additional information. If
the requested additional information is not submitted within 30
calendar days, the Regional Director may either disapprove the
individual or review the notice based on the information submitted.
Once a notice is complete, if the Regional Director does not issue a
decision within the required period, the individual is approved.
The NCUA Board has adopted the new CRIS rating system for corporate
credit unions. The amendment clarifies that a CRIS rating of 4 or 5 in
either the Financial Risk or Risk Management composite rating will be
one of the conditions that defines a ``troubled'' federal corporate
credit union. As is the case for all federally insured state credit
unions in the present rule, the rating assigned by the state supervisor
is utilized in determining the definition of a ``troubled'' federally
insured, state-chartered corporate credit union.
Language is added to clarify that a 4 or 5 CAMEL composite rating
by the state supervisor will be a condition that defines a ``troubled''
federally insured, state-chartered corporate credit union in states
that have not adopted the CRIS system. If the state has not adopted
either system, NCUA will determine and apply a CRIS rating using the
corporate credit union's core examination workpapers.
Also, the existing language of Section 701.14 does not indicate
that corporate credit unions should submit notices of changes in
officials or senior management to the Director of the Office of
Corporate Credit Unions (OCCU). Language was added to the final rule to
clarify that corporate credit unions will submit notices to the
Director of OCCU and that the Director of OCCU will act on such
notices.
Summary of Comments
The NCUA Board received four (4) comment letters regarding the
proposal: three from national trade associations and one from a state-
chartered credit union. Of the four (4) commenters, three expressed
general support for the proposed language. The three commenters,
however, did not support the time frames set forth in the latter part
of Sec. 701.14 (d)(1). The proposed time frames would have allowed the
Regional Director or Director of OCCU ten business days to determine
whether a credit union or corporate credit union's notice is complete.
The Regional Director or OCCU Director would then have had an
additional 30 days to approve or disapprove the proposed official or
employee. Two commenters suggested that we allow the Regional Director
or Director of OCCU only five (5) business days to determine whether
the notice is complete and ready for processing. The same two
commenters proposed that the 30 calendar day time frame begin on the
day the agency receives the notice of the proposed action and not from
the date that the RD or OCCU Director deems the notice complete. Both
commenters stated that while the suggested change would limit the
amount of time for agency approval, placement of new management would
be expedited.
The fourth commenter urged NCUA to draft separate rules and
regulations for federally insured state chartered credit unions. The
commenter did not make a general or specific objection to the proposed
language of Sec. 701.14(d)(1).
As previously described, the amendment partially incorporates the
suggestions contained in the comment letters. It allows the Regional
Director 30 calendar days from the date the notice is received to
approve or disapprove the official or senior officer. Within the first
10 calendar days, however, the Regional Director will send written
notification that the notice package is complete and ready for
processing. If the notice is incomplete, the Regional Director will
notify the credit union in writing what additional information is
needed and that the information must be submitted within 30 calendar
days. This will prevent unreasonable delays on the part of the
applicant, considering that pre-approved commencement of temporary
service is permitted by Section 701.14(e) of the regulations. The
Regional Director's 30 day time period from the date of receiving the
notice will be tolled when additional information is requested and the
Regional Director will suspend processing of the notice until the
requested information is submitted. If the requested information is not
received within 30 calendar days, the Regional Director may disapprove
the proposed individual or may review the application based on the
information provided.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact any proposed regulation may
have on a substantial number of small entities (primarily those under
$1 million in assets). The NCUA Board has determined and certifies that
the final rule, if adopted, will not have a significant economic impact
on a substantial number of small credit unions. Accordingly, the Board
has determined that a Regulatory Flexibility Analysis is not required.
Paperwork Reduction Act
NCUA has determined that the final rule does not increase paperwork
requirements under the Paperwork Reduction Act of 1995 and regulations
of the Office of Management and Budget.
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. NCUA has determined that the final rule
does not constitute a significant regulatory action for the purposes of
the Executive Order.
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-121) provides generally for congressional review of agency
rules. A reporting requirement is triggered in instances where NCUA
issues a final rule as defined by Section 551 of the Administrative
Procedures Act. 5 U.S.C. 551. The Office of Management and Budget has
reviewed this rule and has determined that for purposes of the Small
Business Regulatory Enforcement
[[Page 28717]]
Fairness Act of 1996 this is not a major rule.
List of Subjects in 12 CFR Part 701
Credit unions, Senior executive officials.
By the National Credit Union Administration Board on May 19,
1999.
Becky Baker,
Secretary of the Board.
For the reasons set forth in the preamble, 12 CFR part 701 is
amended as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, and 1789. Section 701.6 is also
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by
15 U.S.C. 1601 et seq., 42 U.S.C. 1861 and 42 U.S.C. 3601-3610.
Section 701.35 is also authorized by 42 U.S.C 4311-4312.
2. Section 701.14 is amended as follows.
a. Revise the introductory text of paragraph (b)(3) and add
paragraph (b)(4).
b. Revise paragraph (c)(2).
c. Amend paragraph (d)(1) by adding two new sentences after the
first sentence and by removing the last three sentences and adding five
sentences. The revisions and additions to section 701.14 read as
follows:
Sec. 701.14 Change in official or senior executive officer in credit
unions that are newly chartered or are in troubled condition.
* * * * *
(b) * * *
(3) Except as provided in paragraph (b)(4) of this section for
corporate credit unions, ``troubled condition'' means any insured
credit union that has one or a combination of the following conditions:
* * * * *
(4) In the case of a corporate credit union, ``troubled condition''
means any insured corporate credit union that has one or a combination
of the following conditions:
(i) Has been assigned
(A) A 4 or 5 Corporate Risk Information System (CRIS) rating by
NCUA in either the Financial Risk or Risk Management composites, in the
case of a federal corporate credit union, or
(B) An equivalent 4 or 5 CRIS rating in either the Financial Risk
or Risk Management composites by the state supervisor in the case of a
federally insured, state-chartered corporate credit union in a state
that has adopted the CRIS system, or an equivalent 4 or 5 CAMEL
composite rating by the state supervisor in the case of a federally
insured, state-chartered corporate credit union in a state that uses
the CAMEL system, or
(C) A 4 or 5 CRIS rating in either the Financial Risk or Risk
Management composites by NCUA based on core workpapers received from
the state supervisor in the case of a federally insured, state-
chartered credit union in a state that does not use either the CRIS or
CAMEL system. In this case, the state supervisor will be notified in
writing by the Director of the Office of Corporate Credit Unions that
the corporate credit union has been designated by NCUA as a troubled
institution;
(ii) has been granted assistance as outlined under Sections 116 or
208 of the Federal Credit Union Act.
(c) * * *
(2) The credit union meets the definition of troubled condition as
set forth in paragraph 701.14(b)(3) or (4).
* * * * *
(d) Procedures for notice of proposed change in official or senior
executive officer.
(1) Filing and acceptance. * * * In the case of a corporate credit
union, notice shall be filed with the Director of the Office of
Corporate Credit Unions. Additional references herein to Regional
Director will, for corporate credit unions, mean the Director of the
Office of Corporate Credit Unions. * * * Within ten calendar days after
receiving the notice, the Regional Director will inform the credit
union either that the notice is complete or that additional specified
information is needed and must be submitted within 30 calendar days. If
the initial notice is complete, the Regional Director will issue a
written decision of approval or disapproval to the individual and the
credit union within 30 calendar days of receipt of the notice. If the
initial notice is not complete, the Regional Director will issue a
written decision within 30 calendar days of receipt of the original
notice plus the amount of time taken by the credit union to provide the
requested additional information. If the additional information is not
submitted within 30 calendar days of the Regional Director's request,
the Regional Director may either disapprove the proposed individual or
review the notice based on the information provided. If the credit
union and the individual have submitted all requested information and
the Regional Director has not issued a written decision within the
applicable time period, the individual is approved.
* * * * *
[FR Doc. 99-13308 Filed 5-26-99; 8:45 am]
BILLING CODE 7535-01-U
