Temporary Regulatory Relief in Response to COVID-19-Extension

CourtNational Credit Union Administration
Citation86 FR 72517
Publication Date22 December 2021
Record Number2021-27771
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]
                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.
                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
                [[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.
                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,
                 \1\ 85 FR 22010 (Apr. 21, 2020).
                 \2\ 85 FR 83405 (Dec. 22, 2020).
                 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.
                 \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.
                III. The Regulatory Amendments
                A. Aggregate Limit on Loan Participation Purchases (Section
                 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.
                 \7\ 12 CFR 701.22(b)(5)(ii).
                 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
                 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.
                 \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,
                 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.
                 \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.
                 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\
                 \10\ 86 FR 59282 (Oct. 27, 2021).
                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.
                 \11\ 12 CFR 701.36(c)(1).
                 \12\ 12 CFR 701.36(c)(2).
                 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.
                 \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.
                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\
                 \14\ 5 U.S.C. 551 et seq.
                 \15\ 5 U.S.C. 553(b)(3).
                 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.
                 \16\ 5 U.S.C. 553(d).
                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
                [[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\
                 \17\ 5 U.S.C. 801-808.
                 \18\ 5 U.S.C. 804(2).
                 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
                 \19\ 5 U.S.C. 808.
                 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
                 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-
                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.
                 \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).
                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,
                 \21\ 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 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
                 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
                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:
                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]
                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]
                3. Amend Sec. 701.23 as follows:
                a. In paragraph (i) introductory text, remove the date ``December 31,
                2021'' and add in its place the date ``December 31, 2022''; and
                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]
                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

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT