Temporary Regulatory Relief in Response to COVID-19-Extension
| Published date | 22 December 2021 |
| Citation | 86 FR 72517 |
| Record Number | 2021-27771 |
| Section | Rules and Regulations |
| Court | National Credit Union Administration |
Federal Register, Volume 86 Issue 243 (Wednesday, December 22, 2021)
[Federal Register Volume 86, Number 243 (Wednesday, December 22, 2021)]
[Rules and Regulations]
[Pages 72517-72520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27771]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AF15
Temporary Regulatory Relief in Response to COVID-19--Extension
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule and temporary final rule; extension.
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SUMMARY: The NCUA Board (Board) is further extending its temporary
final rule, which modified certain regulatory requirements to help
ensure that federally insured credit unions (FICUs) remain operational
and can address economic conditions caused by the COVID-19 pandemic.
The temporary final rule issued by the Board in April 2020 temporarily
raised the maximum aggregate amount of loan participations that a FICU
may purchase from a single originating lender to the greater of
$5,000,000 or 200 percent of the FICU's net worth. The rule also
temporarily
[[Page 72518]]
suspended limitations on the eligible obligations that a Federal credit
union (FCU) may purchase and hold. In addition, given physical
distancing practices necessitated by COVID-19, the rule also tolled the
required timeframes for the occupancy or disposition of properties not
being used for FCU business or that have been abandoned. The temporary
amendments were originally scheduled to expire on December 31, 2020.
The Board subsequently extended their effectiveness until December 31,
2021. Due to the continued impact of COVID-19, the Board has decided it
is necessary to further extend the effective period of these temporary
modifications until December 31, 2022.
DATES: This rule is effective December 22, 2021 except for the
amendment to Sec. 701.23 in instruction 3.b., which is effective April
1, 2022. The expiration date of the temporary final rule published on
April 21, 2020 (85 FR 22010), and extended by final rule published on
December 22, 2020 (85 FR 83405), is further extended through December
31, 2022.
FOR FURTHER INFORMATION CONTACT: Policy and Analysis: Victoria
Nahrwold, Office of Examination and Insurance, at (703) 548-2633;
Legal: Ariel Pereira, Senior Staff Attorney, Office of General Counsel,
at (703) 518-6540; or by mail at: National Credit Union Administration,
1775 Duke Street, Alexandria, Virginia 22314.
SUPPLEMENTARY INFORMATION:
I. Background
II. Legal Authority
III. The Regulatory Amendments
IV. Regulatory Procedures
I. Background
The COVID-19 pandemic has created uncertainty for FICUs and their
members. The Board continues to work with federal and state regulatory
agencies, in addition to FICUs, to assist FICUs in managing their
operations and to facilitate continued assistance to credit union
members and communities impacted by the COVID-19 pandemic. In April
2020, as part of these ongoing efforts, the Board temporarily modified
certain regulatory requirements to help ensure that FICUs remain
operational and liquid during the COVID-19 pandemic.\1\ The Board
concluded that the amendments would provide FICUs necessary additional
flexibility in a manner consistent with the NCUA's responsibility to
maintain the safety and soundness of the credit union system. The
temporary amendments were to remain in place through the end of
calendar year 2020 unless the Board took action to extend the date. In
December 2021, the Board concluded that continuing economic uncertainty
merited a further extension of the amendments until December 31,
2021.\2\
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\1\ 85 FR 22010 (Apr. 21, 2020).
\2\ 85 FR 83405 (Dec. 22, 2020).
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The economic environment is a key determinant of credit union
performance. While the recovery in economic activity and labor markets
is expected to continue, it also poses challenges. The NCUA, like
credit unions, needs to plan and prepare for a range of economic
outcomes that could affect credit union performance. This includes
ensuring a regulatory environment that provides FICUs with the
flexibility necessary to cope with and address the range of potential
COVID-19 impacts.
Due to the continuing impact of the COVID-19 pandemic on FICUs and
their members, the Board has determined that it is necessary to again
extend the effectiveness of these temporary provisions. The temporary
amendments will remain in place through December 31, 2022.
II. Legal Authority
The Board is issuing this temporary final rule pursuant to its
authority under the Federal Credit Union Act (Act).\3\ The Act grants
the Board a broad mandate to issue regulations governing both FCUs and,
more generally, all FICUs. For example, section 120 of the Act is a
general grant of regulatory authority and authorizes the Board to
prescribe rules and regulations for the administration of the Act.\4\
Section 209 of the Act is a plenary grant of regulatory authority to
issue rules and regulations necessary or appropriate for the Board to
carry out its role as share insurer for all FICUs.\5\ Other provisions
of the Act confer specific rulemaking authority to address prescribed
issues or circumstances.\6\ Accordingly, the Act grants the Board broad
rulemaking authority to ensure that the credit union industry and the
NCUSIF remain safe and sound.
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\3\ 12 U.S.C. 1751 et seq.
\4\ 12 U.S.C. 1766(a).
\5\ 12 U.S.C. 1789.
\6\ An example of a provision of the Act that provides the Board
with specific rulemaking authority is section 207 (12 U.S.C. 1787),
which is a specific grant of authority over share insurance
coverage, conservatorships, and liquidations.
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III. The Regulatory Amendments
A. Aggregate Limit on Loan Participation Purchases (Section
701.22(b)(5)(ii))
The Board's regulation at Sec. 701.22 limits the aggregate amount
of loan participations that a FICU may purchase from any one
originating lender to the greater of $5,000,000 or 100 percent of the
FICU's net worth.\7\ Under the temporary regulatory amendments, the
aggregate limit below which a waiver from the appropriate NCUA Regional
Director is not required is temporarily raised to the greater of
$5,000,000 or 200 percent of a FICU's net worth.
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\7\ 12 CFR 701.22(b)(5)(ii).
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The Board continues to believe that, as currently formulated in
Sec. 701.22, the limitation may be overly prescriptive during this
time. Additional regulatory flexibility continues to be especially
warranted to deal with the economic impact of the COVID-19 pandemic,
which may result in additional stress on credit union balance sheets,
potentially requiring robust liquidity management.
B. Purchase, Sale, and Pledge of Eligible Obligations (Section
701.23(b))
The Board's regulations in Sec. 701.23 generally require that
purchased eligible obligations be obligations of a purchasing FCU's
members and loans the FCU is empowered to grant or the loan is
refinanced to be one the FCU is empowered to grant. Section
701.23(b)(2) provides certain limited exceptions to the general
requirements for well-capitalized FCUs that have composite CAMEL
ratings of ``1'' or ``2.'' \8\ The regulations authorize these FCUs to
purchase the eligible obligations of any FICU or of any liquidating
credit union without regard to whether they are obligations of the
purchasing FCU's members, provided they are loans the FCU is empowered
to grant or the loan is refinanced to be one it is empowered to grant.
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\8\ Section 701.23 also contains exceptions to the membership
requirement for certain purchases of student loans and real estate
loans that an FCU purchases to complete a pool for sale. The Board
established this exception in a 1979 final rule. 44 FR 27068 (May 9,
1979).
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In the April 2020 temporary final rule, the Board temporarily
amended its regulations to authorize FCUs with CAMEL composite ratings
of 1, 2, or 3 to purchase eligible obligations of FICUs and liquidating
credit unions irrespective of whether the obligation belongs to the
purchasing FCU's members and without regard to whether they are loans
the credit union is empowered to grant or are refinanced to ensure the
obligations are ones the purchasing credit union is empowered to grant.
This change did not alter the requirement for a purchasing FCU to be
well-capitalized under Sec. 701.23(b)(2).\9\
[[Page 72519]]
Due to the ongoing and unforeseeable impact of the COVID-19 pandemic,
the Board believes it appropriate to extend these temporary provisions
until the close of December 31, 2022. The Board recognizes that the
need to support the extension of credit and facilitate the downstream
loan purchases as a tool to manage liquidity remains, and likely will
remain for the foreseeable future.
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\9\ Generally, credit unions with a CAMEL composite rating lower
than 3 are considered to be in ``troubled condition'' under the
NCUA's regulations. 12 CFR 700.2.
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The Board reiterates that this change allows FCUs to continue to
hold obligations purchased pursuant to this temporary final rule
subsequent to the rule's expiration. The standard requirements
applicable to the purchase of obligations under Sec. 701.23 will
resume after the expiration of the temporary provisions at the close of
December 31, 2022, unless extended, and will apply to all future
purchases, including to purchases of obligations previously acquired
under the provisions of this temporary final rule. The Board also
reiterates that the restrictions temporarily relieved in Sec. 701.23
do not apply to state-chartered, federally insured credit unions. Any
such restrictions applicable to state-chartered credit unions would be
based on state laws or regulations. This temporary final rule does not
modify the current authority of FCUs under Sec. 701.23 to purchase the
obligations of a liquidating credit union without regard to whether the
obligations belong to the purchasing FCU's members.
In addition to the regulatory amendments discussed above, this
final rule makes a technical change to Sec. 703.23(i)(2) to conform
the terminology used in the provision with that of the Board's final
rule on the CAMELS rating system, which will become effective on April
1, 2022.\10\
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\10\ 86 FR 59282 (Oct. 27, 2021).
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C. FCU Occupancy and Disposal of Acquired Premises (Section 701.36(c))
The Board's regulation in Sec. 701.36 provides that if an FCU
acquires premises, including unimproved land or unimproved real
property, it must partially occupy them ``no later than six years after
the date of acquisition,'' subject to the NCUA granting a waiver.\11\
Further, an FCU must make diligent efforts to dispose of abandoned
premises and any other real property it does not intend to use in
transacting business. Additionally, the FCU must advertise for sale
premises that have been abandoned for four years.\12\ Given the impact
of physical distancing measures adopted by many states and localities,
the April 2020 temporary final rule tolls the regulatory mandated
timeframes in the rule.
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\11\ 12 CFR 701.36(c)(1).
\12\ 12 CFR 701.36(c)(2).
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Due to the ongoing nature of the COVID-19 pandemic and its
continued impact on FICUs, the Board has decided it is necessary to
extend the effectiveness of this temporary amendment until the close of
December 31, 2022. Physical distancing practices continue to be a key
component of preventing the spread of COVID-19 \13\ and make compliance
with Sec. 701.36 difficult. This temporary deferral will continue to
provide FCUs additional flexibility to comply with the prescribed time
periods, while still complying with the statutory and regulatory goals
of ensuring that properties acquired or held by FCUs are used for
credit union business.
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\13\ See Fabio Motta, Face masks and distancing are most
effective measures in reducing COVID-19 spread, study finds, as
experts clamor for U.S. to expand booster program, (November 18,
2021), (``Wearing a face mask and physically distancing from others
are the most effective public safety measures against the
coronavirus-borne illness COVID-19 and have a statistically
significant impact on reducing the spread, according to a new global
study.''), https://www.marketwatch.com/story/face-masks-and-distancing-are-most-effective-measures-in-reducing-covid-19-spread-study-finds-as-experts-clamor-for-u-s-to-expand-booster-program-11637251008.
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IV. Regulatory Procedures
A. Administrative Procedure Act
The Board is issuing the extension of the temporary final rule
without prior notice and the opportunity for public comment and the
delayed effective date ordinarily prescribed by the Administrative
Procedure Act (APA).\14\ Pursuant to 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.'' \15\
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\14\ 5 U.S.C. 551 et seq.
\15\ 5 U.S.C. 553(b)(3).
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The Board believes that the public interest is best served by
implementing the extension of the previously issued temporary final
rule immediately upon publication in the Federal Register. The Board
notes that the COVID-19 pandemic is unprecedented. It is a continually
changing situation 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 temporary nature of both the
relief contemplated by the temporary final rule and this extension of
such relief, the Board believes it is has good cause to determine that
ordinary notice and public procedure are impracticable and that moving
expeditiously to extend the temporary final rule is in the best of
interests of the public and the FICUs that serve that public. The
extension of these temporary regulatory changes are proactive steps
that are designed help FICUs cope with the economic impact of the
COVID-19 pandemic, which may result in additional stress on credit
union balance sheets, potentially requiring robust liquidity management
over the course of 2022. The changes are undertaken with expedience to
ensure the maximum intended effects remain in place.
The Board values public input in its rulemakings and believes that
providing the opportunity for comment enhances its regulations.
Accordingly, the Board often solicits comments on its rules even when
not required under the APA, such as for the rules it issues on an
interim-final basis. The Board, however, notes that the provisions
extended in this rule are temporary in nature, and designed
specifically to help credit unions affected by the COVID-19 pandemic.
The extension of the amendments made by this temporary final rule will
automatically expire at the close of December 31, 2022, and are limited
in number and scope. 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 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.\16\ Because the
rules relieve currently codified limitations and restrictions, the
extension of the temporary final rule is exempt from the APA's delayed
effective date requirement. As an alternative basis to make the rule
effective without the 30-day delayed effective date, the Board finds
there is good cause to do so for the same reasons set forth above
regarding advance notice and opportunity for comment.
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\16\ 5 U.S.C. 553(d).
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B. Congressional Review Act
For purposes of the Congressional Review Act,\17\ the Office of
Management and Budget (OMB) makes a determination as to whether a final
rule
[[Page 72520]]
constitutes a ``major'' rule. If the OMB deems a rule to be a ``major
rule,'' 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.\18\
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\17\ 5 U.S.C. 801-808.
\18\ 5 U.S.C. 804(2).
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For the same reasons set forth above, the Board is adopting the
extension of the temporary 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.\19\ In
light of current market uncertainty, the Board believes that delaying
the effective date of the extension of the temporary final rule would
be contrary to the public interest for the same reasons discussed
above.
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\19\ 5 U.S.C. 808.
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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) (44 U.S.C. 3501 et seq.)
requires that the Office of Management and Budget (OMB) approve all
collections of information by a Federal agency from the public before
they can be implemented. Respondents are not required to respond to any
collection of information unless it displays a valid OMB control
number.
In accordance with the PRA, the information collection requirements
included in this temporary final rule extension have been submitted to
OMB for approval under control numbers 3133-0141, 3133-0127 and 3133-
0040.
D. Executive Order 13132, on Federalism
Executive Order 13132 \20\ 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. The extension of the temporary
final rule will 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 Board has therefore determined that this rule does
not constitute a policy that has federalism implications for purposes
of the Executive order.
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\20\ Executive Order 13132 on Federalism, was signed by former
President Clinton on August 4, 1999, and subsequently published in
the Federal Register on August 10, 1999 (64 FR 43255).
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E. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that the extension of the temporary final
rule will not affect family well-being within the meaning of Section
654 of the Treasury and General Government Appropriations Act,
1999.\21\
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\21\ Public Law 105-277, 112 Stat. 2681 (1998).
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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 the APA or
another law, the agency must prepare a regulatory flexibility analysis
that meets the requirements of the RFA and publish such analysis in the
Federal Register. Specifically, the RFA normally requires agencies to
describe the impact of a rulemaking on small entities by providing a
regulatory impact analysis. For purposes of the RFA, the Board
considers credit unions with assets less than $100 million to be small
entities.
As discussed previously, consistent with the APA, the Board has
determined for good cause that general notice and opportunity for
public comment is unnecessary, and therefore the Board is not issuing a
notice of proposed rulemaking. Rules that are exempt from notice and
comment procedures 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.
Accordingly, the Board has concluded that the RFA's requirements
relating to initial and final regulatory flexibility analysis do not
apply.
List of Subjects in 12 CFR Part 701
Aged, Civil rights, Credit, Credit unions, Fair housing,
Individuals with disabilities, Insurance, Mortgages, Reporting and
recordkeeping requirements.
By the NCUA Board, this 17th day of December 2021.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed in the preamble, the Board amends 12 CFR
part 701 as follows:
PART 701--ORGANIZATION AND OPERATION OF CREDIT UNIONS
0
1. The authority citation for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
Sec. 701.22 [Amended]
0
2. In Sec. 701.22(e), remove the date ``December 31, 2021'' and add in
its place the date ``December 31, 2022''.
Sec. 701.23 [Amended]
0
3. Amend Sec. 701.23 as follows:
0
a. In paragraph (i) introductory text, remove the date ``December 31,
2021'' and add in its place the date ``December 31, 2022''; and
0
b. Effective April 1, 2022, in paragraph (i)(2) remove the term
``CAMEL'', and add in its place the term ``CAMELS.''
Sec. 701.36 [Amended]
0
4. In Sec. 701.36(c)(3), remove the date ``December 31, 2021'' and add
in its place the date ``December 31, 2022''.
[FR Doc. 2021-27771 Filed 12-20-21; 4:15 pm]
BILLING CODE 7535-01-P
