Delay of Effective Date of the Risk-Based Capital Rules
| Published date | 26 June 2019 |
| Citation | 84 FR 30048 |
| Record Number | 2019-13589 |
| Section | Proposed rules |
| Court | National Credit Union Administration |
Federal Register, Volume 84 Issue 123 (Wednesday, June 26, 2019)
[Federal Register Volume 84, Number 123 (Wednesday, June 26, 2019)]
[Proposed Rules]
[Pages 30048-30050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13589]
=======================================================================
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 702
RIN 3133-AF01
Delay of Effective Date of the Risk-Based Capital Rules
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule, delay effective date of risk-based capital, part
702.
-----------------------------------------------------------------------
SUMMARY: The NCUA Board (Board) is seeking comment on a proposed rule
that would delay the effective date of the NCUA's October 29, 2015
final rule regarding risk-based capital (2015 Final Rule), and the
NCUA's November 6, 2018 supplemental final rule regarding risk-based
capital (2018 Supplemental Rule), moving the effective date of both
rules to January 1, 2022. This proposed delay would allow the NCUA
Board additional time to holistically and comprehensively evaluate
capital standards for federally insured credit unions. The proposed
delay would also provide covered credit unions and the NCUA with
additional time to prepare for the rule's implementation. During the
extended delay period, the NCUA's current Prompt Corrective Action
(PCA) requirements would remain in effect.
DATES: Comments must be received by July 26, 2019.
ADDRESSES: You may submit written comments, identified by RIN 3133-
AF01, 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.
NCUA Website: http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
Email: Address to [email protected]. Include ``[Your
name]--Comments on Proposed Rule: Risk-Based Capital--Delay of
Effective Date'' in the email subject line.
Fax: (703) 518-6319. Use the subject line described above
for email.
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.
You can view all public comments on the NCUA's website at https://www.ncua.gov/regulation-supervision/rules-regulations/proposed-pending-and-recently-final-regulations 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.
You may inspect paper copies of comments in the NCUA's law library at
1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays
between 9:00 a.m. and 3:00 p.m. To make an appointment, call (703) 518-
6546, or send an email to [email protected].
FOR FURTHER INFORMATION CONTACT: Policy and Analysis: Julie Cayse,
Director, Division of Risk Management, Office of Examination and
Insurance, at (703) 548-2142; Kathryn Metzker, Risk Officer, Division
of Risk Management, Office of Examination and Insurance, at (571) 438-
0073; Julie Decker, Risk Officer, Division of Risk Management, Office
of Examination and Insurance, at (703) 518-3684; Legal: John Brolin,
Senior Staff Attorney, Office of General Counsel, at (703) 518-6540; or
by mail at National Credit Union Administration, 1775 Duke Street,
Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION: At its October 2015 meeting, the Board
issued the 2015 Final Rule to amend Part 702 of the NCUA's PCA
regulations to require that credit unions taking certain risks hold
capital commensurate with those risks.\1\ The 2015 Final Rule
restructures the NCUA's PCA regulations and makes various revisions,
including amending the agency's current risk-based net worth
requirement by replacing the risk-based
[[Page 30049]]
net worth ratio with a new risk-based capital ratio for federally
insured, natural-person credit unions (credit unions). The 2015 Final
Rule also eliminates several provisions in the NCUA's current PCA
regulations, including provisions related to the regular reserve
account, risk-mitigation credits, and alternative risk weights. To
provide credit unions and the NCUA sufficient time to make necessary
adjustments, and to reduce the burden on affected credit unions, the
NCUA initially delayed the effective date of the 2015 Final Rule until
January 1, 2019.
---------------------------------------------------------------------------
\1\ 80 FR 66625 (Oct. 29, 2015).
---------------------------------------------------------------------------
At its October 2018 meeting, the Board issued the 2018 Supplemental
Rule to further delay the effective date of the 2015 Final Rule for an
additional year, moving the effective date from January 1, 2019 to
January 1, 2020. The 2018 Supplemental Rule also amended the definition
of ``complex'' credit union adopted in the 2015 Final Rule for risk-
based capital purposes by increasing the threshold level for coverage
from $100 million to $500 million. These changes provided covered
credit unions and the NCUA with additional time to prepare for the
rule's implementation, and exempted an additional 1,026 credit unions
from the risk-based capital requirements of the 2015 Final Rule without
subjecting the National Credit Union Share Insurance Fund (NCUSIF) to
undue risk.\2\
---------------------------------------------------------------------------
\2\ 83 FR 55467 (Nov. 6, 2018).
---------------------------------------------------------------------------
The Board is now proposing to further delay the effective dates of
both the 2015 Final Rule and the 2018 Supplemental Final Rule, moving
the effective dates of both rules to January 1, 2022. This proposed
delay would allow the Board additional time to holistically and
comprehensively evaluate the NCUA's capital standards for federally
insured credit unions. For example, in this additional time, the Board
would examine whether asset securitization, and subordinated debt
should be addressed, and whether a community bank leverage ratio analog
should be integrated into the NCUA's capital standards. These issues,
and additional matters that prompt the need for a further delay, are
discussed further below.
Asset Securitization
Federal credit unions have the authority to issue and sell
securities as a power incidental to their operation,\3\ and, in the
case of Government National Mortgage Association (Ginnie Mae)
securities, as a power expressly authorized under the Federal Credit
Union Act (FCUA).\4\ The extent to which federally insured, state-
chartered credit unions may issue and sell securities depends on state
law and regulation. Accordingly, the NCUA's capital standards should
properly account for any asset securitization conducted by federally
insured credit unions.
---------------------------------------------------------------------------
\3\ See Sec. 1757(17) (An FCU ``shall have the power . . . to
exercise such incidental powers as shall be necessary or requisite
to enable it to carry on effectively the business for which it is
incorporated.''); 12 CFR 721.2 & 721.4; and NCUA Legal Opinion
Letter 17-0670 (June 21, 2017).
\4\ Sec. 1757(7)(E) (Providing in relevant part: ``a federal
credit union may issue and sell securities which are guaranteed
pursuant to section 1721(g) of [title 12 of the United States
Code].'').
---------------------------------------------------------------------------
Subordinated Debt
As indicated in the 2015 Final Rule, the NCUA planned to examine
additional forms of qualifying capital in a separate proposed rule. In
February 2017, the NCUA issued an advanced notice of proposed
rulemaking for alternative capital,\5\ and the NCUA's Regulatory Review
Task Force agenda, published in August 2017, addresses the NCUA's
intent with regard to the 2015 Final Rule.\6\ This proposed delay would
provide the Board additional time to examine proposing and finalizing a
rule to allow certain forms of subordinated debt to qualify as capital
for risk-based capital purposes. The delay would also permit credit
unions subject to the risk-based capital requirement time to consider
the use of any authorized forms of subordinated debt before the risk-
based capital rules go into effect.
---------------------------------------------------------------------------
\5\ 82 FR 9691 (Feb. 8, 2017).
\6\ 82 FR 161 (Aug. 22, 2017).
---------------------------------------------------------------------------
Community Bank Leverage Ratio Analog
The Economic Growth, Regulatory Relief, and Consumer Protection Act
of 2018 \7\ required the Office of the Comptroller of the Currency
(OCC), the Board of Governors of the Federal Reserve System, and the
Federal Deposit Insurance Corporation (collectively, the other banking
agencies), to propose a simplified, alternative measure of capital
adequacy for federally insured banks.\8\ In February 2019, the other
banking agencies issued a proposed rule that would provide qualifying
community banks the option to comply with a simplified measure of
capital adequacy.\9\ Under the proposal, qualifying community banking
organizations that comply with and elect to use the community bank
leverage ratio (CBLR) framework and that maintain a CBLR greater than 9
percent would be considered to have met the capital requirements for
the ``well-capitalized'' capital category under the other banking
agencies' PCA frameworks and would no longer be subject to the
generally applicable capital rule. The NCUA Board believes the delay in
the effective date of risk-based capital is appropriate to examine the
other banking agencies' recent CBLR proposal and consider whether
adopting an equivalent provision for credit unions is appropriate and
consistent with the FCUA.
---------------------------------------------------------------------------
\7\ Public Law 115-174 (May 24, 2018).
\8\ Id. at Sec. 201.
\9\ 84 FR 3062 (Feb. 8, 2019).
---------------------------------------------------------------------------
Additional Time To Prepare for Implementation
The proposed delay would also provide covered credit unions and the
NCUA with additional time to prepare for the rule's implementation. The
NCUA has several initiatives in process to improve and modernize how
the agency conducts examinations and supervision. The goals of these
initiatives are to replace outdated, end-of-life examination systems,
streamline processes, adopt enhanced examination techniques, and
leverage new technology and data to maintain high quality supervision
of federally-insured credit unions with less onsite presence. These
initiatives include the Enterprise Solution Modernization, Call Report
Modernization, and Virtual Examination programs. The proposed delay
would enable the NCUA to direct additional time and resources toward
modernizing examination systems, versus dedicating resources to end-of-
life systems being retired.
This additional time would further benefit credit unions as they
work to implement the Financial Accounting Standards Board's final
current expected credit loss (CECL) standard. The current Board
believes the proposed delay would allow credit unions additional time
to allocate resources to the implementation of CECL.
Under this proposal, the NCUA's current PCA regulation would remain
in effect until the 2015 Final Rule and the 2018 Supplemental Rule's
effective date. The NCUA would continue to enforce the capital
standards currently in place and address any supervisory concerns
through existing regulatory and supervisory mechanisms. The Board
believes, given the facts above, that extending the implementation
period of the 2015 Final Rule and 2018 Supplemental Rule until January
1, 2022, would be reasonable and would not pose undue risk to the
NCUSIF.
[[Page 30050]]
VII. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a notice of proposed rulemaking, an agency prepare and
make available for public comment an initial regulatory flexibility
analysis that describes the impact of a proposed rule on small
entities. A regulatory flexibility analysis is not required, however,
if the agency certifies that the rule will not have a significant
economic impact on a substantial number of small entities (defined for
purposes of the RFA to include credit unions with assets less than $100
million) \10\ and publishes its certification and a short, explanatory
statement in the Federal Register together with the rule.
---------------------------------------------------------------------------
\10\ See 80 FR 57512 (Sept. 24, 2015).
---------------------------------------------------------------------------
The proposed delay of the 2015 Final Rule and 2018 Supplemental
Rule would affect only complex credit unions, which are those with
greater than $500 million in assets under the 2018 Supplemental Rule.
As a result, credit unions with $100 million or less in total assets
would not be affected by this proposal. Accordingly, the NCUA certifies
that this proposal will not have a significant economic impact on a
substantial number of small credit unions.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in
which an agency creates new or amends existing information collection
requirements.\11\ For purposes of the PRA, an information collection
requirement may take the form of a reporting, recordkeeping, or a
third-party disclosure requirement.
---------------------------------------------------------------------------
\11\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------
The information collection requirements prescribed by Sec.
702.101(b) were set-out in the August 8, 2018 (83 FR 38997), proposed
rule and assigned OMB control number 3133-0191. This proposed rule does
not contain any new information collection requirements that require
approval by OMB under the PRA. The proposed rule would only extend the
effective date.
The Board invites comment on (a) whether the collections of
information are necessary for the proper performance of the agency's
function, including practical utility; (b) the accuracy of estimates of
the burden of the information collections, including the validity of
the methodology and assumptions used; (c) ways to enhance the quality,
utility, and clarity of the information being collected; and (d) ways
to minimize the burden of the information collection on respondents,
including through the use of automated collection techniques or other
forms of information technology.
All comments are a matter of public record. Comments regarding the
information collection requirements of this rule should be sent to (1)
Dawn Wolfgang, NCUA PRA Clearance Officer, National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314, or Fax
No. 703-519-8572, or Email at [email protected] and the (2) Office
of Information and Regulatory Affairs, Office of Management and Budget,
Attention: Desk Officer for NCUA, New Executive Office Building, Room
10235, Washington, DC 20503, or email at [email protected].
Submission of comments. The NCUA considers comments by the public
on this proposed collection of information in:
Evaluating whether the proposed collection of information
is necessary for the proper performance of the functions of the NCUA,
including whether the information will have a practical use;
Evaluating the accuracy of the NCUA's estimate of the
burden of the proposed collection of information, including the
validity of the methodology and assumptions used;
Enhancing the quality, usefulness, and clarity of the
information to be collected; and
Minimizing the burden of 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; e.g., permitting
electronic submission of responses.
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 principles of the executive order to
adhere to fundamental federalism principles. This proposed rule reduces
the number of federally insured natural-person credit unions, including
federally insured, state-chartered natural-person credit unions that
would be subject to the 2015 Final Rule. It may have, to some degree, a
direct effect 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. It does not,
however, rise to the level of material impact for purposed of Executive
Order 13132.
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed 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).
By the National Credit Union Administration Board on June 20,
2019.
Gerard Poliquin,
Secretary of the Board.
[FR Doc. 2019-13589 Filed 6-25-19; 8:45 am]
BILLING CODE 7535-01-P
