Central Liquidity Facility
| Citation | 85 FR 23731 |
| Record Number | 2020-08101 |
| Published date | 29 April 2020 |
| Section | Rules and Regulations |
| Court | National Credit Union Administration |
Federal Register, Volume 85 Issue 83 (Wednesday, April 29, 2020)
[Federal Register Volume 85, Number 83 (Wednesday, April 29, 2020)]
[Rules and Regulations]
[Pages 23731-23736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08101]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 85, No. 83 / Wednesday, April 29, 2020 /
Rules and Regulations
[[Page 23731]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 725
RIN 3133-AF18
Central Liquidity Facility
AGENCY: National Credit Union Administration (NCUA).
ACTION: Interim final rule with request for comments.
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SUMMARY: In response to the COVID-19 pandemic, the NCUA Board (Board)
is issuing this interim final rule to provide credit unions with
greater access to liquidity to help ensure they remain operational
throughout the crisis. This rule will make it easier and more
attractive for credit unions to join the NCUA's Central Liquidity
Facility (Facility). In addition, this rule makes several amendments to
conform to the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act).
DATES: This rule is effective on April 29, 2020, except for the
amendment to Sec. 725.6 in amendatory instruction 5, which is
effective April 29, 2020 until January 1, 2022. Comments must be
received on or before June 29, 2020.
ADDRESSES: You may submit written comments, identified by RIN 3133-
AF15, 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.
Fax: (703) 518-6319. Include ``[Your Name]--Comments on
Interim Final Rule: CLF'' in the transmittal.
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.
Public inspection: You may view all public comments on the Federal
eRulemaking Portal at http://www.regulations.gov, 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.
FOR FURTHER INFORMATION CONTACT: Owen Cole, Associate Director of the
Office of Examination and Insurance; or Justin M. Anderson, Senior
Staff Attorney, Office of General Counsel, 1775 Duke Street,
Alexandria, VA 22314-3428. Owen Cole can also be reached at (703) 518-
6621, and Justin Anderson can be reached at (703) 518-6556.
SUPPLEMENTARY INFORMATION:
I. Background
The Facility, a mixed-ownership government corporation within the
NCUA, established in 1979, serves as a liquidity source for its member
credit unions.\1\ Its purpose is to improve general financial stability
by meeting the liquidity needs of credit unions and thereby encouraging
savings, supporting consumer and mortgage lending, and providing basic
financial resources to all segments of the economy.
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\1\ Public Law 95-630, 92 Stat 3641 (Nov.10, 1978), codified at
12 U.S.C. 1795, et seq.
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Section 1795f of the Federal Credit Union Act (the FCU Act), among
other things, gives the Board the authority to prescribe the manner in
which the general business of the Facility shall be conducted and
prescribe rules and regulations to carry out the Facility-related
provisions of the FCU Act.\2\ Under this authority, the Board is
issuing this interim final rule to enhance liquidity for credit unions
during the COVID-19 pandemic and to make regulatory changes that cohere
to the CARES Act.\3\
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\2\ 12 U.S.C. 1795f.
\3\ Coronavirus Aid, Relief, and Economic Security Act, Public
Law 116-136, 134 Stat 281 (March 27, 2020).
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The Board emphasizes that while some of the amendments in this rule
are temporary, they will afford significant liquidity support to the
entire credit union system. However, action is needed on the part of
credit unions that are not already members of the Facility in order for
this liquidity solution to reach its greatest potential. The Board
urges all natural person and corporate credit unions that do not
already belong to the Facility to join.
The Board underscores that growing the Facility's membership in
turn enhances its ability to borrow increasingly greater amounts of
funds to provide liquidity to the credit union system. By significantly
increasing access to external funding, the Facility can better fulfill
its central purpose to improve general financial stability by meeting
the liquidity needs of credit unions. The Facility is able to borrow
from the U.S. Treasury. The Facility's ability to borrow from the U.S.
Treasury's Federal Financing Bank was an essential element of the
NCUA's and the credit union system's ability to work through the last
economic crisis.
The Board notes that several of the changes in this interim final
rule are conforming changes based on the recently enacted CARES Act,
which temporarily amends the FCU Act. The CARES Act specifically
sunsets these changes to the FCU Act. As such, the changes in this rule
that correspond to the CARES Act will also sunset in accordance with
the CARES Act on December 31, 2020. To provide clarity and
transparency, the Board has included these temporary changes in this
rule and explains what will occur upon the sunset of the aforementioned
amendments.
The specific amendments made by this interim final rule are
detailed in the next section.
II. Amendments
The following is a section-by-section analysis of the changes in
this interim final rule.
Part 725
A. Definitions
In accordance with the CARES Act, the Board is amending the
definition of ``Liquidity needs'' to remove the words ``primarily
serving natural persons.'' This change is intended to mirror the
statutory change in the CARES Act, and clarifies that liquidity needs
are not limited to only natural person credit unions, but may also
include those of corporate credit unions or a corporate credit union
group. This will allow corporate credit unions to obtain loans for
their own liquidity needs. The Board notes that this amendment will
sunset in accordance with the CARES Act on December 31, 2020.
[[Page 23732]]
B. Regular Membership Requirements
The Board is eliminating the six-month waiting period on obtaining
Facility advances for a credit union that becomes a regular member.
Currently Sec. 725.3 provides that, with limited exception, any credit
union that becomes a regular member of the Facility may not receive
Facility advances, without approval of the NCUA Board, for a period of
six months after becoming a member.
The Board believes it is important to remove this restriction in
light of the overarching need to make such liquidity assistance timely.
The advantages of accelerating liquidity-need loans to new members
outweigh the practical reasons that having the waiting period affords
to the Facility's operations.
C. Agent Membership
In accordance with the CARES Act, the Board is amending the nature
of the requirement for a corporate credit union or group of corporate
credit unions to subscribe to the capital stock of the Facility in an
amount equal to one-half of 1 percent of the paid-in an unimpaired
capital and surplus of all of the corporate credit union's or corporate
credit union group's natural person credit union members. This change,
which mirrors the statutory change in the CARES Act, allows the Board,
in its sole discretion, to determine which grouping of natural person
member credit unions of the applying corporate credit union or
corporate credit union group are considered covered by the Agent's
membership in the Facility. In turn, this approved group is the basis
for calculating the amount of Facility capital stock the corporate
credit union or corporate credit union group is required to purchase.
This will provide a corporate credit union with the flexibility to
subscribe to the capital stock of the Facility up to the maximum extent
it can afford to do so.
The Board notes that this amendment will sunset in accordance with
the CARES Act on December 31, 2020. Upon the sunset of this amendment,
any corporate credit union or corporate credit union group that became
an agent member under this provision must, within one-year from the
sunset date, either:
1. Purchase Facility stock in accordance with the terms of the
regulation as written post sunset of the CARES Act amendments; or
2. terminate its membership in the facility.
The Board believes that these two options take into account the
temporary nature of the CARES Act amendments, while not causing undue
disruption to the operations of a corporate credit union or corporate
credit union group that joined the Facility under the CARES Act
amendments. The Board, however, invites comments on the one-year time
frame to complete the aforementioned actions. The Board requests
specific comment on determining if this timeframe should be shorter or
longer.
D. Agent Member Borrowing
To effectuate the intent of the CARES Act in a safe and sound
manner, the Board is including a clarifying amendment to Sec. 725.4.
Such amendment clarifies that an agent member may borrow from the
Facility for its own liquidity needs, but, to do so, such agent must
first subscribe to the capital stock of the Facility in an amount equal
to one-half of 1 percent of the Agent's own paid-in and unimpaired
capital and surplus.\4\ The Board believes this requirement will ensure
that Facility advances for an agent's own needs are consistent with the
design and intent of how the Facility grants extensions of credit to
its natural person credit union members. The Board notes that agents
have total discretion as to whether to subscribe to the capital stock
and borrow for their own needs. This is a business decision for an
agent to make and not doing so will not affect it's standing with the
Facility or impact its ordinary duties and responsibilities in
fulfilling the needs of its agent group. The Board believes expanding
the liquidity resources of corporate credit unions, even for a
temporary period, is an added measure of liquidity strength for the
system as a whole.
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\4\ A credit union is required to pay into the Facility one-half
of the amount required by the regulations and to hold the other one-
half in liquid assets on its balance sheet.
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In addition, the Board is amending Sec. 725.17(b)(2) to clarify
that an agent may apply for a Facility advance based on its own
liquidity needs.
Finally, the Board notes that the foregoing amendments will sunset
in accordance with requirements of the CARES Act on December 31, 2020.
As such, the Board is including language to clarify the ramifications
of the sunset of this provision. Specifically, this interim final rule
provides that upon sunset of this provision, an agent must:
(1) Not request any additional Facility advances for its own
liquidity needs; and
(2) continue to follow the terms of the Facility advance agreement
entered into between the agent and the Facility.
The Board believes the inclusion of this provision appropriately
accounts for the temporary nature of this provision, while assuring
agents that loan agreements made during this period will not also be
subject to a sunset provision or be terminated before maturity. The
Board believes this strikes the appropriate balance between
Congressional intent and the tenets of contract law.
In addition to the aforementioned changes, the Board is also making
cohering changes to Sec. Sec. 725.18(a) and 725.19(b) to clarify the
requirements applicable to a Facility advance to an agent for such
agent's own needs. The Board notes that such changes apply to these
agent loans the same creditworthiness and collateral requirements that
currently apply to Facility advances to regular members. The Board
believes these changes are necessary because a Facility advance to an
agent for its own needs will be similar to a facility advance to a
regular member, and, therefore, should be subject to the same terms and
conditions.
E. Termination of Membership
The Board is amending the waiting periods for a credit union to
terminate its membership in the Facility between April 29, 2020 and
January 1, 2022. Under the FCU Act and current Sec. 725.6 of the
NCUA's regulations, a credit union member may terminate its membership
after a specified amount of time based on that credit union's stock
subscription in the Facility. Currently, a member of the Facility may
terminate its membership:
1. Six months after notifying the NCUA Board in writing of its
intention to do so, if the member's stock subscription constitutes less
than 5 percent of total subscribed Facility stock; or
2. Twenty-four months after notifying the NCUA Board in writing of
its intention to do so, if the member's stock subscription constitutes
5 percent or more of total subscribed Facility stock.\5\
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\5\ 12 CFR 725.6.
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The Board is amending this section of part 725 to temporarily
permit a credit union, regardless of its percentage amount of stock
subscription, to withdraw from membership in the Facility after
notifying the NCUA Board in writing on the sooner of:
(A) Six months from the date of its written notice to the NCUA
Board; or
(B) December 31, 2020.
Further, any credit union, that remains a member after December 31,
2020, may, under this rule, withdraw
[[Page 23733]]
from membership immediately upon notifying the Board in writing of its
intent to do so. The Board notes that such immediate withdrawal period
will expire on December 31, 2021. After December 31, 2021, the
termination requirements of current paragraphs (a) and (b) of this
section shall be reinstated and apply to all members. The Board
believes that this flexibility is necessary to encourage the greatest
number of eligible credit unions to join the Facility.
The Board notes that having waiting periods for stock redemptions
is a provision that is designed to prevent unpredictable disruptions in
the balance sheet and operations of the Facility. Ordinarily, such
waiting periods provide flexibility to the Facility to manage
transitions of membership in a way that makes its balance sheet and pro
forma financial information more stable and predictable. These are
important factors for any financial entity to have so that it can plan
its needs and capacity with adequate reliability for its stakeholders.
The Board is providing the above redemption flexibilities only during
the current COVID-19 pandemic. Given the anticipated temporary nature
of this pandemic and the need for increased liquidity during this
event, the Board is comfortable that expediting membership termination
is both manageable and necessary.
F. Collateral Requirements
The Board is reducing the amount of collateral required for certain
assets used to secure each Facility advance and each agent loan.
Currently, this section of the NCUA's regulations requires that each
Facility advance and each agent loan be secured by a first priority
security interest in collateral of the credit union with a net book
value at least equal to 110% of all amounts due under the applicable
Facility advance or agent loan, or by guarantee of the NCUSIF. For the
reasons described below, the Board is replacing the 110% requirement
with a requirement that a credit union collateralize a Facility advance
or Agent loan in accordance with the Facility collateral table posted
on the NCUA's website, www.NCUA.gov. The collateral table varies the
required collateral percentages based upon different types of assets,
and in some cases requires less than 110%. Depending on the types of
assets a member has available to secure an advance request, this may
ease the collateral requirements somewhat and permit a greater amount
of borrowing overall.
G. CARES Act Changes Not Included in This Interim Final Rule
The Board notes that the CARES Act includes two additional
amendments to the FCU Act that are not reflected in this rule.
Specifically, those changes are as follows.
It considerably increases the Facility's borrowing capacity. The
FCU Act normally provides the Facility with the authority to borrow,
provided that these obligations do not exceed twelve times the
subscribed capital stock and surplus of the Facility (that is, the sum
of its retained earnings and capital stock).\6\ The CARES Act
temporarily increases the multiplier from ``twelve times'' to ``sixteen
times.'' This means that for every $1 of capital and surplus, the
Facility may now borrow $16. As credit unions that join the Facility
only have to pay in one-half of the capital stock subscription amount,
this means that for every new dollar paid in of the capital stock
subscription amount, the Facility can now borrow $32.\7\ As there is
currently no corresponding provision in the NCUA's regulations, the
Board is not including any related regulatory change in this interim
final rule.
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\6\ See. 12 U.S.C. 1795f(a)(4)(A).
\7\ Credit unions have to subscribe to the Facility capital
stock in the amount of one half of one percent of the credit union's
six month average of paid-in and unimpaired capital and surplus
(that is, the total of shares/deposits and undivided earnings).
Credit unions only have to remit to the Facility one-half of the
subscription amount--that is one-quarter of one-percent of paid-in
and unimpaired capital and surplus. The other half may be held by
the credit union on call of the NCUA Board.
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Further, the legislation provides more clarity about the purposes
for which the NCUA Board can approve liquidity-need requests by
removing the phrase ``the Board shall not approve an application for
credit the intent of which is to expand credit union portfolios.'' \8\
The NCUA Board now has more flexibility and discretion to approve
applications for Facility members that have made a reasonable effort to
first utilize primary sources of funding. This change increases the
transparency and efficiency of the loan-approval process by removing
doubt about whether a credit union's portfolio is allowed to expand if
it borrows from the Facility to meet liquidity needs. The Board notes
that part 725 does not use the ``expand credit union portfolios''
language. Further, the Board believes the current construction of part
725 is flexible enough to encompass this change in the CARES Act
without a corresponding regulatory change. However, the Board is
including this discussion to alert the public of this additional
flexibility provided by Congress.
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\8\ See. 12 U.S.C. 1795e(a)(1).
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III. Regulatory Procedures
A. Administrative Procedure Act
The Board is issuing this interim final rule without prior notice
and the opportunity for public comment and the delayed effective date
ordinarily prescribed by the Administrative Procedure Act (APA).
Pursuant to section 553(b)(B) of 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.''
The Board believes that the public interest is best served by
implementing the interim final rule immediately upon publication in the
Federal Register. As discussed above, the Board notes that the COVID-19
crisis is unprecedented. It is a rapidly changing 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
speed with which disruptions have transmitted throughout the United
States, the Board believes it is has good cause to determine that
ordinary notice and public procedure are impracticable and that moving
expeditiously in the form of an interim final rule is in the best of
interests of the public and the federally insured credit unions that
serve that public.
The Board views this crisis as one which has the potential to
disrupt liquidity within the system. Liquidity needs are of a nature
that if not addressed swiftly and decisively, can translate into rapid
financial distress for individual institutions or even the broader
system. These actions are proactive steps that are designed to
alleviate potential liquidity strains and are undertaken with
expedience to ensure the maximum intended effects are in place at the
earliest opportunity.
In addition, the Board notes that the provisions in this rule are
temporary in nature, and designed specifically to help credit unions
affected by the COVID-19 pandemic. 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
[[Page 23734]]
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. Because the rules relieve a restriction, the
interim final rule is exempt from the APA's delayed effective date
requirement.
While the Board believes that there is good cause to issue the rule
without advance notice and comment and with an immediate effective
date, the Board is interested in the views of the public and requests
comment on all aspects of the interim final rule.
B. Congressional Review Act
For purposes of the Congressional Review Act, the OMB makes a
determination as to whether a final rule constitutes a ``major'' rule.
If a rule is deemed a ``major rule'' by the Office of Management and
Budget (OMB), 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.
For the same reasons set forth above, the Board is adopting the
interim 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. In light of current
market uncertainty, the Board believes that delaying the effective date
of the rule would be contrary to the public interest for the same
reasons discussed above.
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) applies to rulemakings in
which an agency by rule creates a new paperwork burden on regulated
entities or modifies an existing burden (44 U.S.C. 3507(d)). For
purposes of the PRA, a paperwork burden may take the form of a
reporting, recordkeeping, or a third-party disclosure requirement,
referred to as an information collection.
The NCUA is amending part 725 to eliminate the six-month waiting
period on Facility advances for a credit union that becomes a new
regular member. By removing this restriction, the NCUA can provide
needed liquidity assistance in an expedited manner. The NCUA is also
modifying the waiting period for a credit union to terminate its
membership in the Facility with the intent of providing added
flexibility to encourage the greatest number of eligible credit unions
to join the Facility immediately to help the Agency and the system at
large leverage these temporary measures and secure an adequate amount
of external liquidity resources. By significantly increasing access to
external funding, the Facility can better fulfill its central purpose
to improve general financial stability by meeting the liquidity needs
of credit unions.
The information collection requirements of part 725 are currently
covered by OMB control number 3133-0061. These temporary amendments are
estimated to increase the number of respondents from its current
estimate of 5 annually to 269 during this period; with a total
information collection burden of 691 hours.
NCUA has obtained emergency approval from the Office of Management
and Budget for a 6-month period. During this time the Agency will
accept public comments on the information collection requirements and
take appropriate action in the final request for PRA approval.
OMB Control Number: 3133-0061.
Title of information collection: Central Liquidity Facility, 12 CFR
part 725.
Estimated number of respondents: 269.
Estimated number of responses per respondent: 4.26.
Estimated total annual responses: 1,146.
Estimated burden per response: 0.60.
Estimated total annual burden: 691.
The NCUA invites comments on: (a) Whether the proposed collection
of information is necessary for the proper performance of the functions
of the agency, including whether the information will have practical
utility; (b) the accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (c) ways to enhance the quality,
utility and clarity of the information to be collected; and (d) ways to
minimize the burden of the 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; and (e) estimates of capital or
start-up costs and cost of operation, maintenance, and purchase of
services to provide information.
All comments are a matter of public records. Comments regarding the
information collection requirements of this rule should be sent to Dawn
Wolfgang, National Credit Union Administration, 1775 Duke Street, Suite
6018, Alexandria, Virginia 22314; Fax No. 703-519-8579; or Email at
[email protected]. Given the limited in-house staff because of the
COVID-19 pandemic, email comments are preferred.
D. 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 executive order to adhere to fundamental
federalism principles.
This interim final rule does 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 NCUA has therefore determined that
this rule does not constitute a policy that has federalism implications
for purposes of the executive order.
E. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this 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).
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 section
553(b) of the APA or another law, the agency must prepare a regulatory
flexibility analysis that meets the requirements of the RFA and
[[Page 23735]]
publish such analysis in the Federal Register. 5 U.S.C. 603, 604.
Specifically, the RFA normally requires agencies to describe the impact
of a rulemaking on small entities by providing a regulatory impact
analysis. Such analysis must address the consideration of regulatory
options that would lessen the economic effect of the rule on small
entities. The RFA defines a ``small entity'' as (1) a proprietary firm
meeting the size standards of the Small Business Administration (SBA);
(2) a nonprofit organization that is not dominant in its field; or (3)
a small government jurisdiction with a population of less than 50,000.
5 U.S.C. 601(3)-(6). Except for such small government jurisdictions,
neither State nor local governments are ``small entities.'' Similarly,
for purposes of the RFA, individual persons are not small entities.
Rules that are exempt from notice and comment 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.\9\ Accordingly, the NCUA is not required to
conduct a regulatory flexibility analysis for the reasons stated above
relating to the good cause exemption.
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\9\ 5 U.S.C. 553(a).
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List of Subjects in 12 CFR Part 725
Credit unions, Reporting and recordkeeping requirements.
By the NCUA Board on April 13, 2020.
Gerard Poliquin,
Secretary of the Board.
For the reasons discussed above, the NCUA Board is amending 12 CFR
part 725 as follows:
PART 725--NATIONAL CREDIT UNION ADMINISTRATION CENTRAL LIQUIDITY
FACILITY
0
1. The authority citation for part 725 continues to read as follows:
Authority: 12 U.S.C. 1795f(a)(2).
0
2. In Sec. 725.2, revise paragraph (i) introductory text to read as
follows:
Sec. 725.2 Definitions.
* * * * *
(i) Liquidity needs means the needs of credit unions for:
* * * * *
Sec. 725.3 [Amended]
0
3. In Sec. 725.3, remove and reserve paragraph (b).
0
4. In Sec. 725.4, revise paragraph (a)(2) to read as follows:
Sec. 725.4 Agent membership.
(a) * * *
(2) Subscribing to the capital stock of the Facility in an amount
equal to:
(i) One-half of 1 percent of the paid-in and unimpaired capital and
surplus (as determined in accordance with Sec. 725.5(b) of this part)
of all the corporate credit union's or corporate credit union group's
member natural person credit unions, except those which are Regular
members of the Facility or which have access to the Facility through,
and are included in the stock subscription of, another Agent (a natural
person credit union which is a member of more than one Agent member of
the Facility must designate through which Agent it will deal with the
Facility, and the designated Agent will be responsible for including
the capital and surplus of such credit union in the calculation of its
stock subscription). Upon approval of the application, the Agent shall
forward funds equal to one-half of this initial stock subscription to
the Facility;
(ii) From April 29, 2020 until December 31, 2020, one-half of 1
percent of the paid-in and unimpaired capital and surplus (as
determined in accordance with Sec. 725.5(b) of this part) of such
credit union members of the corporate credit union or corporate credit
union group as the Board may determine in its sole discretion, except
those which are Regular members of the Facility or which have access to
the Facility through, and are included in the stock subscription of,
another Agent (a natural person credit union which is a member of more
than one Agent member of the Facility must designate through which
Agent it will deal with the Facility, and the designated Agent will be
responsible for including the capital and surplus of such credit union
in the calculation of its stock subscription). Upon approval of the
application, the Agent shall forward funds equal to one-half of this
initial stock subscription to the Facility. A corporate credit union or
corporate credit union group that became an Agent member of the
Facility under this paragraph shall, after December 31, 2020, but
before January 1, 2022, either:
(A) Purchase Facility stock in accordance with the terms of
paragraph (a)(2)(i) of this section or
(B) Terminate its membership in the facility.
(iii) From April 29, 2020 until December 31, 2020, if borrowing for
its own liquidity needs, one-half of 1 percent of the Agent's own paid-
in and unimpaired capital and surplus. Upon approval of the
application, the Agent shall forward funds equal to one-half of this
stock subscription to the Facility. This amount shall be in addition to
the amounts required by paragraph (a)(2)(i) or (ii) of this section, if
a corporate credit union or corporate credit union group joined the
facility as an Agent and intends to borrow for its own liquidity needs.
Any corporate credit union or corporate credit union group that
received a Facility advance for its own liquidity need under the
temporary requirements set forth in this paragraph must, as of January
1, 2021 and thereafter:
(A) Not request any additional Facility advances for its own
liquidity needs; and
(B) Continue to follow the terms of the Facility advance agreement
entered into between the Agent and the Facility.
* * * * *
0
5. In Sec. 725.6, effective April 29, 2020 until January 1, 2022,
paragraphs (a) and (b) are stayed and paragraph (e) is added.
The addition reads as follows:
Sec. 725.6 Termination of membership.
* * * * *
(e) The following requirements apply to a credit union's
termination of membership in the Facility:
(1) A member, regardless of its amount of stock subscription, may
withdraw from membership in the Facility after notifying the NCUA Board
in writing on the sooner of:
(i) Six months from the date of its written notice to the NCUA
Board; or
(ii) December 31, 2020.
(2) Any credit union that does not elect to withdraw from
membership in the Facility during the time periods prescribed in
paragraph (e)(1) of this section, may immediately withdraw from
membership in the Facility after notifying the NCUA Board in writing of
its intention to do so from January 1, 2021, to January 1, 2022. As of
January 1, 2022, the requirements of paragraphs (a) and (b) of this
section, as in effect on March 1, 2020, shall apply.
(3) The Facility will process requests under this paragraph (e)
upon demand and deliver funds as soon as practicable, allowing for the
time necessary for settlement and transfer of funds in these
transactions.
0
6. In Sec. 725.17, revise paragraph (b)(2) to read as follows:
Sec. 725.17 Applications for extensions of credit.
* * * * *
(b) * * *
[[Page 23736]]
(2) The Agent's application shall be based on the following:
(i) Approved applications to the Agent by its member natural person
credit unions for pending loans to meet liquidity needs; or
(ii) Outstanding loans previously made by the Agent to meet
liquidity needs of its member natural person credit unions; or
(iii) Such other demonstrable liquidity needs as the NCUA Board may
specify; or
(iv) The applicant Agent's own liquidity needs.
0
7. In Sec. 725.18, revise paragraphs (a) and (d) to read as follows:
Sec. 725.18 Creditworthiness.
(a) Prior to Facility approval of each application of a Regular
member for a Facility advance or an Agent member for a Facility advance
for such Agent member's own need, the Facility shall consider the
creditworthiness of such member.
* * * * *
(d) A credit union (whether a Regular member of the Facility, Agent
member, or a member natural person credit union) which does not meet
the Facility's creditworthiness standards may be limited in or denied
the use of advances for its liquidity needs.
0
8. In Sec. 725.19, revise paragraphs (a) and (b) to read as follows:
Sec. 725.19 Collateral requirements.
(a) Each Facility advance and each Agent loan shall be secured by a
first priority security interest in collateral of the credit union with
a net book value at least equal to an amount as required by the
Facility's collateral table, published at www.NCUA.gov, or by guarantee
of the National Credit Union Share Insurance Fund.
(b) The Facility may accept as collateral for each Facility advance
to a Regular member or to an Agent member, for such Agent member's own
needs, a security interest in all assets of the member; provided
however, that the value of any assets in which any third party has a
perfected security interest that is superior to the security interest
of the Facility shall be excluded for purposes of complying with the
requirements of paragraph (a) of this section.
* * * * *
[FR Doc. 2020-08101 Filed 4-28-20; 8:45 am]
BILLING CODE 7535-01-P
