[Federal Register Volume 64, Number 102 (Thursday, May 27, 1999)]
[Rules and Regulations]
[Pages 28733-28735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13307]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 708a
Conversion of Insured Credit Unions to Mutual Savings Banks
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: The NCUA is issuing a final rule that revises its rules
governing the conversion of insured credit unions to mutual savings
banks or mutual savings associations. These revisions simplify the
charter conversion process and reduce regulatory burden for insured
credit unions that choose to convert. NCUA is making these revisions in
compliance with federal legislation that mandates such revisions.
DATES: This rule is effective June 28, 1999.
FOR FURTHER INFORMATION CONTACT: Frank S. Kressman, Staff Attorney,
Division of Operations, Office of General Counsel, (703) 518-6540.
SUPPLEMENTARY INFORMATION:
Background
The Credit Union Membership Access Act (CUMAA) was enacted into law
on August 7, 1998. Public Law 105-21. Section 202 of CUMAA amends the
provisions of the Federal Credit Union (FCU) Act concerning conversion
of insured credit unions to mutual savings banks or mutual savings
associations. 12 U.S.C. 1785(b). CUMAA requires the NCUA to promulgate
final rules regarding charter conversions within six months of that
date that are: (1) consistent with CUMAA; (2) consistent with the
charter conversion rules promulgated by other financial regulators; and
(3) no more or less restrictive than rules applicable to charter
conversions of other financial institutions. Accordingly, NCUA issued
an interim final rule with request for comments that was effective
November 27, 1998. 63 FR 65532 (November 27, 1998).
Final Rule
With the benefit of having considered public comments on part 708a,
NCUA issues this final rule and amends the interim final rule. As
discussed more fully below, the changes from the interim final rule to
the final rule consist of providing more flexibility to credit unions
in choosing methods for delivering member notices, correcting an
inadvertent, inconsistent use of language in the notice provision in
Sec. 708a.5(c), and clarifying the purpose and scope of the
certification provision in Sec. 708a.9(b). These amendments further
reduce regulatory burden on converting credit unions, simplify the
conversion process and provide continued consistent treatment of
proposals to convert. NCUA finds it appropriate to allow credit unions
to act immediately under this revised, less restrictive rule.
Accordingly, pursuant to 5 U.S.C. 553(d)(1) and (3), the rule will be
effective immediately and without 30 days advance notice of
publication.
Summary of Comments
The NCUA Board received eleven comment letters regarding the
interim final rule: three from banking trade associations, three from
credit union trade associations, one from an association of state
credit union supervisors, three from FCUs and one from a law firm. They
offered the following comments.
General Comments
Three commenters approve of the interim rule as written and believe
the rule is consistent with the provisions of CUMAA. As of the date of
preparation of this final rule, three converting FCUs have opted to
request NCUA review of their notice and other materials they intend to
send to members in advance of the time frame required by part 708a.
NCUA has reviewed these materials, had minor revisions, and the review
has not delayed or unduly burdened the conversion process. The
revisions incorporated into this final rule will further enhance part
708a.
One commenter contended generally that the rule is inconsistent
with the charter conversion rules of other financial regulators. NCUA
has reviewed the charter conversion rules of other financial regulators
and has drafted this rule to be consistent with them. In contrast to
the statutory and regulatory provisions governing conversions under the
jurisdiction of other financial regulators, CUMAA imposes specific time
frames and particular responsibilities on NCUA in the conversion
process. Accordingly, because of this significant difference, this rule
is not identical to those of the other financial regulators, but is
nonetheless consistent with them.
One commenter noted that in the preamble to the interim final rule,
NCUA stated that it ``does not interpret the [Credit Union] Membership
Access Act to preclude state regulatory authorities from imposing more
restrictive charter conversion rules on federally insured state-
chartered credit unions.'' That commenter suggested the
[[Page 28734]]
following alternative language to make this point: ``NCUA does not
interpret the [Credit Union] Membership Access Act to preempt state
laws prohibiting conversions to thrift charter or imposing more
restrictive requirements on the conversion of federally insured state
chartered credit unions.'' This alternative language also reflects
NCUA's interpretation of CUMAA.
Comments to Sec. 708a.4--Voting Procedures
Two commenters recommended that NCUA permit methods of delivering
member notices in addition to the United States Postal Service,
including overnight couriers and in-hand delivery. One of these
commenters stated that credit unions should be permitted to include the
notices with other credit union mailings to reduce the cost of postage.
NCUA agrees that credit unions should have more flexibility in choosing
a method for delivering member notices than is provided in the interim
final rule. The final rule provides that additional flexibility. Notice
to members may not, however, be included with other credit union
mailings. By requiring three separate deliveries of the notice to
members 90, 60 and 30 days before the membership vote, NCUA believes
that Congress indicated its intent for these notices to receive special
attention. That level of attention would be lost if these notices were
included with other mailings.
One commenter stated that it would be appropriate for a credit
union to address the conversion proposal at a regularly scheduled
annual meeting and noted that this would save the cost of convening a
special meeting for this purpose. The requirement of having a special
meeting to consider the conversion proposal tracks the provisions of
CUMAA and is consistent with the voting procedures of other financial
regulators.
Comments to Sec. 708a.5--Notice to NCUA
Two commenters acknowledged that CUMAA gives NCUA the statutory
authority to require a converting credit union to provide notice of
that intent to NCUA. These commenters suggest, however, that NCUA has
overstepped this authority by requiring notice be in the form of a
letter that states the material features of the conversion or a copy of
the application filing made with another financial regulator. These
alternative methods of providing notice are borrowed directly from the
Office of Thrift Supervision regulations. 12 CFR 563.22(h). They are
practical and reasonable and are not overly burdensome to credit
unions.
One commenter acknowledged that CUMAA specifically mandates NCUA to
administer the member vote on conversion and review the methods by
which the vote is taken and the procedures applicable to the membership
vote. This commenter suggested, however, that NCUA has gone beyond this
mandate by requiring a credit union to provide NCUA with copies of the
written materials it has sent or intends to send to its members in
connection with the conversion. This same commenter stated that NCUA
has also gone beyond its statutory authority by reviewing whether
notices to members are inaccurate or misleading and whether they are
sent to members timely. NCUA believes a practical and unintrusive way
to review the methods and procedures is to review the notice and other
materials a converting credit union gives to its members. NCUA further
believes it has the responsibility to ensure compliance with statutory
time frames and the factual and legal accuracy of statements in those
materials.
One commenter noted that CUMAA provides that a converting credit
union is to submit its notice to NCUA during the 90-day period
preceding the date of the ``completion of the conversion,'' but the
regulation requires notice during the 90-day period preceding the date
of the ``membership vote on the conversion.'' NCUA purposefully used
this language in the regulation. The date of completion of the
conversion is not a date certain. Numerous events must occur throughout
the conversion process that involve action by the converting credit
union, NCUA, and the regulator that will supervise the credit union
after conversion. The timing of these events can vary from conversion
to conversion and cannot be predicted with any degree of certainty.
Therefore, it is not practically feasible to calculate the notice
period in relation to the date of completion of the conversion. In
other sections of CUMAA, notice periods have been stated in relation to
the date of the membership vote which is fixed in time. Accordingly,
NCUA calculates the notice period provided in this section in relation
to the fixed date of the membership vote. This enables practical
application of the rule and is consistent with the other notice
provisions in CUMAA.
Three commenters noted that throughout the rule, notice periods are
stated in relation to the date of the ``membership vote on the
conversion,'' but in Sec. 708a.5(c), the notice period is stated in
relation to the date of the ``completion of the conversion''. This
inconsistency is inadvertent and is revised in the final rule so that
all notice periods are stated in relation to the date of the
``membership vote on the conversion.''
Comments to Sec. 708a.6--Certification of the Membership Vote
One commenter suggested deleting the requirement that a converting
credit union certify that the written materials sent to members are
identical to those sent to NCUA for its review. Another commenter
stated that converting credit unions should neither be required to
provide copies to NCUA of new or revised materials sent to members that
were not previously sent to NCUA, nor required to provide an
explanation of the reasons for using new or revised documents. As noted
above, reviewing the information that is provided to members by their
credit union is central to administering the member vote on conversion
and reviewing the methods by which the vote was taken and the
procedures applicable to the member vote. Accordingly, the requirements
of this section are necessary for NCUA to fulfill these statutory
responsibilities.
Comments to Sec. 708a.9--Completion of Conversion
Two commenters stated that NCUA does not have the authority to
require the board of directors of the newly chartered mutual savings
bank or mutual savings association to certify to NCUA that the
conversion transaction has been completed. NCUA agrees. The purpose of
this provision is to obtain notice of the completion of the conversion
transaction so that NCUA may cancel the former credit union's insurance
certificate, provide for the return of its 1% insurance deposit in
accordance with 12 CFR 741.4(j), and if applicable, cancel its federal
charter. The final rule reflects this change.
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 has determined and certifies that this
final rule will not have a significant economic impact on a substantial
number of small credit unions. Accordingly, the NCUA has determined
that a Regulatory Flexibility Analysis is not required.
Paperwork Reduction Act
The NCUA Board has determined that the notice and disclosure
requirements
[[Page 28735]]
in part 708a constitute a collection of information under the Paperwork
Reduction Act. NCUA submitted a copy of this rule to the Office of
Management and Budget (OMB) for its review. OMB has assigned control
number 3133-0153 to this information collection.
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. This rule applies to all federally insured
credit unions, including federally insured state chartered credit
unions. However, since the final rule reduces regulatory burden, NCUA
has determined that the final rule does not constitute a ``significant
regulatory action'' for 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 it is not major for purposes
of the Small Business Regulatory Enforcement Fairness Act of 1996.
List of Subjects in 12 CFR Part 708a
Charter conversions, Credit unions.
By the National Credit Union Administration Board on May 19,
1999.
Becky Baker,
Secretary of the Board.
For the reasons set forth above, 12 CFR part 708a is amended as
follows:
PART 708a--CONVERSION OF INSURED CREDIT UNIONS TO MUTUAL SAVINGS
BANKS
1. The authority citation for part 708a continues to read as
follows:
Authority: 12 U.S.C. 1766, 12 U.S.C. 1785(b).
2. Section 708a.4 is amended by revising the last sentence of
paragraph (b) to read as follows:
Sec. 708a.4 Voting procedures.
* * * * *
(b) * * * The notice to members must be submitted 90 calendar days,
60 calendar days, and 30 calendar days before the date of the
membership vote on the conversion and a ballot must be submitted not
less than 30 calendar days before the date of the vote.
* * * * *
3. Section 708a.5 is amended by revising the first sentence of
paragraph (c) to read as follows:
Sec. 708a.5 Notice to NCUA.
* * * * *
(c) If it chooses, the credit union may provide the Regional
Director notice of its intent to convert prior to the 90 calendar day
period preceding the date of the membership vote on the conversion. * *
*
4. Section 708a.9 is amended by revising paragraph (b) to read as
follows:
Sec. 708a.9 Completion of conversion.
* * * * *
(b) Upon notification by the board of directors of the mutual
savings bank or mutual savings association that the conversion
transaction has been completed, the NCUA will cancel the insurance
certificate of the credit union and, if applicable, the charter of the
federal credit union.
[FR Doc. 99-13307 Filed 5-26-99; 8:45 am]
BILLING CODE 7535-01-U
