[Federal Register Volume 75, Number 226 (Wednesday, November 24, 2010)]
[Rules and Regulations]
[Pages 71526-71528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29547]
=======================================================================
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 704
RIN 3133-AD58
Corporate Credit Unions, Technical Corrections
AGENCY: National Credit Union Administration (NCUA).
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: NCUA is issuing technical corrections to its corporate credit
union rule, published in the Federal Register of October 20, 2010. The
amendments: Correct the definition of collateralized debt obligation
(CDO) in Sec. 704.2; correct the list of investments exempt from the
single obligor limits and credit rating requirements in Sec. 704.6;
and correct a date contained in Model Form H of Appendix A to part 704.
DATES: Effective on January 18, 2011. Comments must be received by
December 27, 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 name]
Comments on ``Interim Final Rulemaking for Part 704--Corporate Credit
Unions'' 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: Elizabeth Wirick, Staff Attorney,
Office of General Counsel, at the address above or telephone (703) 518-
6540; or David Shetler, Deputy Director, Office of Corporate Credit
Unions, at the address above or telephone (703) 518-6640.
SUPPLEMENTARY INFORMATION
A. Background
The NCUA published a final rule in the Federal Register of October
20, 2010, at 75 FR 64786, containing extensive revisions to its
corporate credit union rule, 12 CFR part 704. The
[[Page 71527]]
final revisions require three technical corrections. The following
corrections reflect the intent of the original revisions as described
in the preamble to the October 20, 2010 rulemaking.
B. Corrections
Section 704.2 Definition of ``collateralized debt obligation''
The final revisions to part 704 prohibited corporate credit unions
(corporates) from purchasing certain overly complex or leveraged
investments, including collateralized debt obligations (CDOs). 75 FR
64786, 64793 (October 20, 2010). These prohibitions were intended to
protect the corporates from the potential for excessive investment
losses. 74 FR 65210, 65237 (December 9, 2009) (preamble to proposed
part 704 revisions). The proposed (and final) definition of CDO,
however, was overly broad, in that it inadvertently included particular
investments that did not--when subject to the other credit risk and
asset liability management limitations of part 704--present the risk of
excessive losses.
This interim final rule amends the CDO definition to ensure the
following are not prohibited: Commercial mortgage backed securities;
securities collateralized by Agency mortgage-backed securities (Agency
MBS); and securities that are fully guaranteed as to principal and
interest by the United States Government and its agencies and
government sponsored enterprises.
The final rulemaking published October 20, 2010, revises Sec.
704.2 twice. The first Sec. 704.2 revision is effective January 18,
2011, and the second revision is effective October 20, 2011. This
technical correction to the definition of ``collateralized debt
obligation'' must be included in both revisions. Accordingly, the rule
text below has two separate instructions for the CDO definition.
Paragraph 704.6(b) Exemptions to Sec. 704.6
Section 704.6 generally requires corporate investments meet certain
single obligor concentration limits, sector concentration limits, and
credit rating requirements. Paragraph 704.6(b) exempts certain
investments, including investments generally issued by or guaranteed by
the U.S. Government or its agencies or sponsored enterprises, from the
requirements of Sec. 704.6. As stated in the preamble to the recent
corporate rule revisions, however, the Board did not intend for this
exemption to apply to agency MBS in the context of sector limits. 75 FR
64786, 64806 (Oct. 20, 2010) (discussing paragraph 704.6(d)(1)(i)). As
drafted, however, not only the sector limits apply to agency MBS, but
the other requirements, including single obligor limits and credit
rating requirements, inadvertently apply to agency MBS. This correction
clarifies the list of exemptions in Sec. 704.6(b) to make clear that
Agency MBS are subject to the sector concentration limits in 704.6(d)
but not the other requirements of Sec. 704.6.
Appendix A, Model Form H
The rule as published included an incorrect date instruction on
Model Form H in Appendix A. Id. at 64851. Model Form H included
introductory text indicating that the form was for use before October
20, 2011. In fact, because Model Form H deals with perpetual
contributed capital, the form should be used only on and after October
20, 2011. The correction replaces the phrase ``before'' with the phrase
``on or after.''
C. Interim Final Rule
NCUA is issuing this rulemaking as an interim final rule effective
as of January 18, 2011, which is the date the relevant provisions of
the previous corporate rulemaking will take effect. The Administrative
Procedure Act (APA), 5 U.S.C. 553, generally requires that before a
rulemaking can be finalized it must first be published as a notice of
proposed rulemaking with the opportunity for public comment, unless the
agency for good cause finds that notice and public comment are
impracticable, unnecessary, or contrary to the public interest. In this
regard, NCUA believes good cause exists for issuing these clarifying
amendments as an interim final rule, in order to coordinate with the
effective date of the recent final revisions as well as eliminate as
soon as possible any confusion resulting from preamble language that is
inconsistent with, or makes ambiguous, the associated regulatory text.
To that extent, NCUA believes issuing this rulemaking as an interim
final rule is in the public interest. NCUA does not anticipate comments
on these changes and so is allowing only a 30-day comment period.
D. 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 interim final rule applies only to corporate credit
unions, all of which have assets well in excess of $10 million.
Accordingly, the interim final rule will not have a significant
economic impact on a substantial number of small credit unions and,
therefore, a regulatory flexibility analysis is not required.
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996, Public Law 104-121, provides generally for congressional review
of agency rules. A reporting requirement is triggered in instances
where NCUA issues a final rule as defined by Section 551 of the
Administrative Procedures Act, 5 U.S.C. 551. While NCUA views these
clarifying amendments as minor, the formal determination by the Office
of Information and Regulatory Affairs is pending.
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. These technical corrections do not impose any
new paperwork burden.
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 interim final rule 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 rule 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 interim final rule will not
affect family well-being within the meaning of section 654 of the
Treasury and General
[[Page 71528]]
Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681
(1998).
List of Subjects in 12 CFR Part 704
Credit unions, Corporate credit unions, Reporting and recordkeeping
requirements.
By the National Credit Union Administration Board on November
18, 2010.
Mary F. Rupp,
Secretary of the Board.
0
For the reasons stated in the preamble, the National Credit Union
Administration amends 12 CFR part 704 as set forth below:
PART 704--CORPORATE CREDIT UNIONS
0
1. The authority citation for part 704 continues to read as follows:
Authority: 12 U.S.C. 1762, 1766(a), 1772a, 1781, 1789, and
1795e.
0
2. Revise the definition of ``collateralized debt obligation'' in Sec.
704.2 to read as follows:
Sec. 704.2 Definitions.
* * * * *
Collateralized debt obligation (CDO) means a debt security
collateralized by mortgage-backed securities, other asset-backed
securities, or corporate obligations in the form of nonmortgage loans
or debt. For purposes of part 704, the term CDO does not include:
(1) Senior tranches of Re-REMIC's consisting of senior mortgage-and
asset-backed securities;
(2) Any security that is fully guaranteed as to principal and
interest by the U.S. Government or its agencies or its sponsored
enterprises; or
(3) Any security collateralized by other securities where all the
underlying securities are fully guaranteed as to principal and interest
by the U.S. Government or its agencies or its sponsored enterprises.
* * * * *
0
3. Effective October 20, 2011, revise the definition of
``collateralized debt obligation'' in Sec. 704.2 to read as follows:
Sec. 704.2 Definitions.
* * * * *
Collateralized debt obligation (CDO) means a debt security
collateralized by mortgage-backed securities, other asset-backed
securities, or corporate obligations in the form of nonmortgage loans
or debt. For purposes of Part 704, the term CDO does not include:
(1) Senior tranches of Re-REMIC's consisting of senior mortgage-and
asset-backed securities;
(2) Any security that is fully guaranteed as to principal and
interest by the U.S. Government or its agencies or its sponsored
enterprises; or
(3) Any security collateralized by other securities where all the
underlying securities are fully guaranteed as to principal and interest
by the U.S. Government or its agencies or its sponsored enterprises.
* * * * *
0
4. Revise paragraph (b) in Sec. 704.6 to read as follows:
Sec. 704.6 Credit risk management.
* * * * *
(b) Exemption. The limitations and requirements of this section do
not apply to certain assets, whether or not considered investments
under this part, including fixed assets, individual loans and loan
participation interests, investments in CUSOs, investments that are
issued or fully guaranteed as to principal and interest by the U.S.
government or its agencies or its sponsored enterprises (but not
exempting, for purposes of paragraph (d) of this section, mortgage
backed securities), investments that are fully insured or guaranteed
(including accumulated dividends and interest) by the NCUSIF or the
Federal Deposit Insurance Corporation, and settlement funds in
federally insured depository institutions.
* * * * *
0
5. Revise the introductory note in Model Form H, Appendix A, to read as
follows:
Appendix A to Part 704--Capital Prioritization and Model Forms
* * * * *
Model Form H
Note: This form is for use on or after October 20, 2011 in the
circumstances where the credit union has determined that it will
give newly issued capital priority over older capital as described
in Part I of this Appendix. Also, capital previously issued under
the nomenclature ``paid-in capital'' is considered perpetual
contributed capital.
* * * * *
[FR Doc. 2010-29547 Filed 11-23-10; 8:45 am]
BILLING CODE 7535-01-P