[Federal Register Volume 75, Number 190 (Friday, October 1, 2010)]
[Proposed Rules]
[Pages 60651-60655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24659]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 704
RIN 3133-AD80
Corporate Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed Interpretive Ruling and Policy Statement 10-XX.
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SUMMARY: The NCUA Board is proposing to adopt an Interpretive Ruling
and Policy Statement (IRPS) setting forth the requirements and process
for chartering corporate federal credit unions.
DATES: Comments must be received on or before November 1, 2010.
ADDRESSES: You may submit comments 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 Web site: http://www.ncua.gov/Resources/RegulationsOpinionsLaws/ProposedRegulations.aspx. Follow the
instructions for submitting comments.
E-mail: Address to [email protected]. Include ``[Your
[[Page 60652]]
name] Comments on ``Notice of Proposed Rulemaking for Corporate FCU
Chartering'' in the e-mail subject line.
Fax: (703) 518-6319. Use the subject line described above
for e-mail.
Mail: Address to Mary Rupp, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
Public Inspection: All public comments are available on the
agency's Web site at http://www.ncua.gov/Resources/RegulationsOpinionsLaws/ProposedRegulations.aspx as submitted, except
as may not be possible for technical reasons. Public comments will not
be edited to remove any identifying or contact information. Paper
copies of comments may be inspected in NCUA's law library at 1775 Duke
Street, Alexandria, Virginia 22314, by appointment weekdays between 9
a.m. and 3 p.m. To make an appointment, call (703) 518-6546 or send an
e-mail to [email protected].
FOR FURTHER INFORMATION CONTACT: Lisa Henderson, Staff Attorney, Office
of General Counsel, at the address above or telephone: (703) 518-6540;
or Dave Shetler, Deputy Director, Office of Corporate Credit Unions, at
the address above or telephone: (703) 518-6640.
SUPPLEMENTARY INFORMATION:
A. Background
NCUA recently finalized changes to its Corporate Credit Union Rule,
12 CFR part 704. These changes, as well as NCUA's other efforts to
resolve the problems created by the legacy assets remaining in the
corporate credit union system, are likely to result in a fundamental
restructuring of the corporate credit union system. As part of this
restructuring, NCUA believes that some groups of natural person credit
unions may wish to form new corporate credit unions.
NCUA first issued guidance on chartering corporate federal credit
unions (corporate FCUs) in 1982, but withdrew this guidance and never
reissued it. See NCUA Interpretive Ruling and Policy Statement (IRPS)
82-6. In light of the impending changes to the corporate system, NCUA
is now reissuing chartering guidance in the form of a new proposed
IRPS. The proposed IRPS explains the requirements for prospective new
corporate FCUs and NCUA's standards for evaluating applications and
will assist credit union officials in assessing the feasibility of a
new corporate charter. The proposed IRPS also lists timeframes for NCUA
action on corporate charter applications.
The proposal requires charter applicants submit various information
to NCUA, including:
A detailed business plan;
NCUA Form 4001, the Federal Credit Union Organization
Report;
NCUA Forms 9500 and 9501, regarding federal share
insurance for member accounts;
NCUA Form 4012, containing key biographical information
and authorization of a background check and credit check for each
prospective board member, credit and supervisory committee member, and
senior management employee; and
NCUA Form 4008, the credit union's organization
certificate.
The proposed IRPS also includes detailed timelines for processing a
charter application.
B. Comment Period and Charter Applications Submitted Before IRPS Is
Finalized
The Board is proposing this IRPS with a 30-day comment period
rather than NCUA's standard 60-day comment period. The Board believes
that this proposal is neither novel nor complex, and that 30 days
should be sufficient for all parties interested in commenting. Any
charter application submitted before this IRPS is finalized should
conform to the requirements of the proposed IRPS, and NCUA will process
applications under the terms of the proposed IRPS until the IRPS is
finalized. The possibility of impending charter applications further
supports the Board's perceived need for a shorter comment period and a
quicker finalization of the IRPS.
C. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact any proposed regulation may
have on a substantial number of small entities (those under $10 million
in assets). The proposed IRPS only applies to corporate credit unions,
all of which have assets well in excess of $10 million. Accordingly,
the proposed IRPS will not have a significant economic impact on a
substantial number of small credit unions and, therefore, a regulatory
flexibility analysis is not required.
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); 5 CFR part
1320. For purposes of the PRA, a paperwork burden may take the form of
either a reporting or a recordkeeping requirement, both referred to as
information collections. The Office of Management and Budget (OMB) has
approved the current information collection requirements in part 704
and assigned them control number 3133-0129.
The proposed IRPS contains an additional information collection in
the form of an application requirement. Any group of persons creating a
new federally chartered corporate credit union must apply for NCUA's
approval. As required by the PRA, NCUA is submitting a copy of this
proposed IRPS to OMB for its review and approval. Persons interested in
submitting comments with respect to the information collection aspects
of the proposed IRPS should submit them to OMB at the address noted
below.
1. Estimated PRA Burden
The following describes the application requirements in the
proposed IRPS that create manhour burdens:
a. Form 4001 and Business Plan
The proposed IRPS requires applicants for a corporate FCU charter
to submit Form 4001, which lists the prospective credit union's
officers, directors and basic information about proposed operations.
Form 4001 also requires applicants to submit a business plan. For
corporate credit union charter applications, the business plan must
address the following items:
Mission statement;
Analysis of market conditions (i.e., economic prospects
for the corporate credit union and availability of proposed financial
services from alternative depository institutions);
Summary of survey results and/or customer base analysis;
Proposed financial services to be offered;
How and when services are to be implemented;
Anticipated corporate credit union staffing and
credentials of key employees;
Physical facility--office and equipment;
Proposed recordkeeping, data processing, and
communications systems and/or vendors;
Budget for the first three years;
Semiannual pro-forma financial statements for the first
three years,
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including a listing of the assumptions used to develop the financial
statements;
Goals for the number of members and shares under various
scenarios;
Projected break-even or date of achieving independent
operations;
Source of funds to pay expenses during the initial setup
and early months of operation;
Written policies for shares, lending, investments, funds
management, capital accumulation as required by part 704, payment
systems, and EDP;
Plan for continuity--directors, committee members, and
senior management;
Evidence of commitment (i.e., letters and/or contracts
used to substantiate projections); and
Services and marketing strategies for financial and
correspondent services, including the ability of the proposed corporate
credit union to efficiently deliver these products.
While the precise time necessary to prepare the business plan will
vary with the intended complexity and activities of the proposed
corporate credit union, NCUA estimates that on average, preparation of
Form 4001 and an acceptable business plan will require 300 hours.
b. Form 4012, Report of Official or Employee
NCUA requires each prospective board member, members of key
committees, and senior management employees to submit this form
providing basic biographical information and authorizing NCUA to
conduct a background and credit check. Because the form is
straightforward and applicants are likely to have most of the
information requested in other formats, such as resumes, NCUA estimates
completion of the form will take no more than one hour for each
individual required to submit the form.
c. Forms 9500 and 9501, Insurance Forms
NCUA requires the prospective chief executive officer and recording
officer to submit Form 9500 to certify that the prospective board has
adopted a resolution that the prospective FCU will apply for federal
share insurance. NCUA requires the chair and the chief financial
officer to submit Form 9501 to apply for federal share insurance. NCUA
estimates completion of both these forms will require no more than one
hour per charter applicant.
d. Form 4008, Organization Certificate
Prospective organizers must also submit an organization certificate
listing the credit union's name and names and contact information of
the initial subscribers. NCUA estimates that collection of the required
information and completion of this form should require no more than two
hours per charter applicant.
2. Summary of Collection Burden
NCUA estimates the total information collection burden represented
by the proposal, as follows:
Estimated annual number of respondents: 1 corporate FCU charter
applicant.
Preparation of Form 4001 and business plan: 1 charter applicant x
300 hours = 300 hours.
Preparation of NCUA Form 4012: 1 charter applicant x 25 individual
officials, committee members and employees per applicant x 1 hour per
individual = 25 hours.
Preparation of NCUA Forms 9500 and 9501: 1 charter applicant x 1
hour = 1 hour.
Preparation of NCUA Form 4008: 1 charter applicant x 2 hours = 2
hours.
Total estimated annual burden hours: 328 hours.
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.
The Paperwork Reduction Act requires OMB to make a decision
concerning the collection of information contained in the proposed
regulation between 30 and 60 days after publication of this document in
the Federal Register. Therefore, a comment to OMB is best assured of
having its full effect if OMB receives it within 30 days of
publication. This does not affect the deadline for the public to
comment to the NCUA on the proposed regulation.
Comments on the proposed information collection requirements should
be sent to: Office of Information and Regulatory Affairs, OMB, New
Executive Office Building, Washington, DC 20503; Attention: NCUA Desk
Officer, with a copy to Mary Rupp, Secretary of the Board, National
Credit Union Administration, 1775 Duke Street, Alexandria, Virginia
22314-3428.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, NCUA, an independent
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order.
The proposed IRPS would not have substantial direct effects on the
states, on the connection between the national government and the
states, or on the distribution of power and responsibilities among the
various levels of government. NCUA has determined that this proposal
does not constitute a policy that has federalism implications for
purposes of the executive order.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed IRPS 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 September
24, 2010.
Mary F. Rupp,
Secretary of the Board.
Authority: 12 U.S.C. 1753, 1754, 1758, 1766.
Corporate Federal Credit Union Chartering Guidelines
I--Goals of NCUA Corporate Chartering Guidelines
These guidelines are intended to achieve the following goals:
Uphold the provisions of the Federal Credit Union Act
(Act);
Promote safety and soundness within the credit union
industry; and
Provide quality services to members.
NCUA will consider the above criteria as the primary factors in
determining whether to approve a corporate federal credit union (FCU)
charter. In unusual circumstances, NCUA may consider
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other information in deciding if a charter should be approved, such as
other federal law or public policies.
II--Subscribers
Seven or more natural person representatives of natural person
credit unions (NPCUs)--``the subscribers''--must present to NCUA for
approval a sworn organization certificate stating at a minimum:
The name of the proposed corporate FCU;
The location of the proposed corporate FCU;
The names and addresses of the subscribers to the
certificate and the number of shares subscribed by each;
The initial par value of the shares; and
The proposed field of membership.
False statements on any of the required documentation filed in
obtaining an FCU charter may be grounds for federal criminal
prosecution.
III--Economic Advisability
A--General
Before chartering a corporate FCU, NCUA must be satisfied that the
institution will be viable and that it will provide needed services to
its members. NCUA will conduct an independent investigation of each
charter application to ensure that the proposed corporate credit union
can be successful. In general, the success of any credit union depends
on: (a) The character and fitness of management; (b) the depth of the
members' support; and (c) present and projected market conditions.
B--Proposed Management's Character and Fitness
The Act requires NCUA to ensure that the subscribers of federal
charters are of good ``general character and fitness.'' In addition,
employees and officials must be competent, experienced, honest, and of
good character.
NCUA will conduct background and credit investigations on
prospective officials and employees, and the reports must establish
each applicant's character and ability to effectively handle financial
matters. Factors that may lead to disapproval of a prospective official
or employee include criminal convictions, indictments, and acts of
fraud and dishonesty. Other factors, such as serious or unresolved past
due credit obligations and bankruptcies disclosed during credit checks,
may also disqualify an individual.
NCUA also needs reasonable assurance that the management team will
have the requisite skills--particularly in leadership, accounting,
funds management, and payment systems risk--and the commitment to
dedicate the time and effort needed to make the proposed corporate FCU
a success.
Section 701.14 of NCUA's Rules and Regulations sets forth the
procedures for NCUA approval of officials of newly chartered FCUs,
including corporate FCUs. If the application of a prospective official
or employee to serve is not acceptable to NCUA's Director, Office of
Corporate Credit Unions (OCCU), the group can propose an alternate to
act in that individual's place. If the charter applicant feels it is
essential that the disqualified individual be retained, the individual
may appeal the OCCU's decision to the NCUA Board. If an appeal is
pursued, action on the application may be delayed. If the appeal is
denied by the NCUA Board, an applicant acceptable to NCUA must be
provided before the charter can be approved.
C--Member Support
An important chartering consideration is the degree of support from
the field of membership. The charter applicant must demonstrate a
sufficient customer base from which to draw business in the form of
membership applications, capital and share commitments, and commitments
to use the corporate FCU's services. The applicant must provide surveys
and/or written commitments certifying to this potential membership base
and capital commitment to the levels required by Part 704 of NCUA's
Rules and Regulations. Although NCUA may work with a newly chartered
corporate on a plan to meet the retained earnings requirements of Part
704, the newly chartered corporate must have a viable plan to solicit
and maintain sufficient contributed capital. Generally, the plan must
show how the corporate FCU will keep its total capital at 4 percent or
more of its moving daily average net assets at all times beginning on
the date NCUA issues the charter.
D--Present and Future Market Conditions--Business Plan
The ability to provide effective service to members, compete in the
marketplace, and adapt to changing market conditions are key to the
survival of any enterprise. Before NCUA will charter a corporate credit
union, a charter applicant must submit a business plan based on
realistic and supportable projections and assumptions. The business
plan should contain, at a minimum, the following elements:
(1) Mission statement;
(2) Analysis of market conditions (i.e., economic prospects for the
corporate credit union and availability of proposed financial services
from alternative depository institutions);
(3) Summary of survey results and/or customer base analysis;
(4) Proposed financial services to be offered;
(5) How and when services are to be implemented;
(6) Anticipated corporate credit union staffing and credentials of
key employees;
(7) Physical facility--office and equipment;
(8) Proposed recordkeeping, data processing, and communications
systems and/or vendors;
(9) Budget for the first three years;
(10) Semiannual pro-forma financial statements for the first three
years, including a listing of the assumptions used to develop the
financial statements;
(11) Goals for the number of members and shares under various
scenarios;
(12) Projected break-even or date of achieving independent
operations;
(13) Source of funds to pay expenses during the initial setup and
early months of operation;
(14) Written policies for shares, lending, investments, funds
management, capital accumulation as required by Part 704, payment
systems, and EDP;
(15) Plan for continuity--directors, committee members, and senior
management;
(16) Evidence of commitment (i.e., letters and/or contracts used to
substantiate projections); and
(17) Services and marketing strategies for financial and
correspondent services, including the ability of the proposed corporate
credit union to efficiently deliver these products.
IV--Organizing a Corporate Federal Credit Union
The subscribers must submit the following documentation to the NCUA
Office of Corporate Credit Unions (OCCU) for processing:
(1) NCUA Form 4001--Federal Credit Union Investigation Report.
(2) NCUA Form 4012--Report of Officials and Agreement to Serve.
This form documents general background information for each official
and employee of the proposed corporate credit union. Each designee must
complete and sign this form. In completing the form, subscribers may
disregard any reference to ``common bond.'' In addition, where Section
B.2 of the form requires a potential interest
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survey sample of at least 250 potential members, subscribers may use a
sample of at least 30 potential members.
(3) NCUA Form 4008--Organization Certificate. This document
establishes the seven criteria required of subscribers by the Act and
is signed by the subscribers and notarized. This document should be
executed in duplicate.
(4) NCUA Form 9501--Certification of Resolutions. This document
certifies the board of the proposed corporate credit union has resolved
to apply for federal insurance of member's accounts and has authorized
the chief executive officer and chief financial officer to execute the
Application and Agreements for Insurance of Accounts. Both the chief
executive officer and recording officer of the proposed corporate
credit union must sign this certification.
(5) NCUA Form 9500--Application and Agreements for Insurance of
Accounts. This document contains agreements FCUs must comply with in
order to obtain NCUA insurance coverage of member accounts. The
document must be completed and signed by both the chief executive
officer and chief financial officer.
V--Name Selection
It is the responsibility of the corporate FCU organizers to ensure
that the proposed corporate FCU name does not constitute an
infringement on the name of any corporation in its trade area. This
responsibility also includes researching any service marks or
trademarks used by any other corporation (including credit unions) in
its trade area. NCUA will ensure, to the extent possible, that the
corporate credit union's name:
Is not already being officially used by another FCU;
Will not be confused with NCUA or another federal or state
agency, or with another credit union; and
Does not include misleading or inappropriate language.
The last three words in the name of every credit union chartered by
NCUA must be ``Federal Credit Union.''
VI--NCUA Review
A--General
OCCU will conduct an independent investigation of the corporate
credit union's charter application to assess the economic and long-term
viability of the proposed corporate credit union. OCCU field staff will
conduct the review and, if necessary, perform an on-site contact with
selected officials and others having an interest in the proposed
corporate credit union.
The review will include evaluation of proposed management's
experience and suitability, commitment of proposed officials, and
assessment of economic viability. OCCU field staff may also be called
upon to assist subscribers in the proper completion of required forms
and the Organization Certificate--NCUA Form 4008.
OCCU field staff will thoroughly analyze the prospective corporate
credit union's business plan for realistic projections, attainable
goals, and time commitment. Any concerns will be reviewed with the
subscribers and discussed with prospective officials.
NCUA will follow the timeline set forth below in processing
corporate charter applications:
1. Within 30 days of receipt of the charter package, OCCU field
staff will meet with the proposed officials and management team to
evaluate the adequacy of management and the information provided and to
discuss the FCU's ability to begin operations and meet their financial
projections if the charter is approved.
2. On completion of all required reviews, but no later than 60 days
after the meeting described above, OCCU field staff will make a
recommendation to the OCCU Director regarding the charter application.
The recommendation may include provisional requirements to be completed
prior to final approval of a corporate FCU charter.
3. Within 30 days of receiving OCCU field staff recommendation, an
OCCU analyst will determine if the application package can be forwarded
to the NCUA Board for appropriate action, or if it should be returned
to the subscribers. The subscribers will receive written notification
of this decision.
4. Within 60 days after receipt of a complete application that
addresses all of OCCU's concerns, the NCUA Board will vote on the
proposed charter. If the charter is approved, the officials must sign a
``Letter of Understanding and Agreement'' (LUA) before the corporate
credit union can commence operations. This LUA will impose certain
operational restrictions, require compliance with NCUA's Rules and
Regulations and adoption of the standard Corporate FCU Bylaws, and
contain several financial performance milestones that the new charter
must meet, consistent with Part 704.
B--Finalization of New Charter
If NCUA approves the charter application, the subscribers, as their
final duty, will elect the board of directors for the newly chartered
corporate FCU. The new board of directors will subsequently appoint the
supervisory committee. The corporate FCU must then submit a report of
officials to OCCU.
[FR Doc. 2010-24659 Filed 9-30-10; 8:45 am]
BILLING CODE 7535-01-P