80 FR 27108 - Corporate Credit Unions

NATIONAL CREDIT UNION ADMINISTRATION

Federal Register Volume 80, Issue 91 (May 12, 2015)

The NCUA Board (Board) proposes to exclude Central Liquidity Facility (CLF)-related bridge loans (CLF-related bridge loans) from the aggregate unsecured lending cap to one borrower applicable to a corporate credit union (Corporate). Specifically, a CLF-related bridge loan that is exempt from that cap is a bridge loan made by a Corporate to a natural person credit union when the natural person credit union has been approved for a loan by the CLF and is awaiting funding from the CLF. Additionally, the proposal excludes CLF-related bridge loans from the calculation of ``net assets'' and ``net risk weighted assets'' for determining minimum capital requirements. This proposal results largely from comments the Board received on the November 2014 proposed rule amending NCUA's Corporate regulations.

[Federal Register Volume 80, Number 91 (Tuesday, May 12, 2015)]
[Proposed Rules]
[Pages 27108-27109]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-10554]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 80, No. 91 / Tuesday, May 12, 2015 / Proposed 
Rules

[[Page 27108]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 704

RIN 3133-AE52


Corporate Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: The NCUA Board (Board) proposes to exclude Central Liquidity 
Facility (CLF)-related bridge loans (CLF-related bridge loans) from the 
aggregate unsecured lending cap to one borrower applicable to a 
corporate credit union (Corporate). Specifically, a CLF-related bridge 
loan that is exempt from that cap is a bridge loan made by a Corporate 
to a natural person credit union when the natural person credit union 
has been approved for a loan by the CLF and is awaiting funding from 
the CLF. Additionally, the proposal excludes CLF-related bridge loans 
from the calculation of ``net assets'' and ``net risk weighted assets'' 
for determining minimum capital requirements. This proposal results 
largely from comments the Board received on the November 2014 proposed 
rule amending NCUA's Corporate regulations.

DATES: Comments must be received on or before June 11, 2015.

ADDRESSES: You may submit comments by any of the following methods, but 
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/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     Email: Address to [email protected]. Include ``[Your 
name]--Comments on Proposed Rule--Corporate Credit Unions'' 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.

FOR FURTHER INFORMATION CONTACT: J. Owen Cole, President, Central 
Liquidity Facility, at the above address or telephone (703) 518-6360; 
David Shetler, Deputy Director, Office of National Examinations and 
Supervision, at the above address or telephone (703) 518-6640; or 
Justin M. Anderson, Senior Staff Attorney, Office of General Counsel, 
at the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Proposed Amendments
III. Regulatory Procedures

I. Background

    In November 2014, the Board issued a proposed rule clarifying and 
modifying several provisions of the Corporate regulations in part 704. 
In response, NCUA received 20 comments addressing various aspects of 
the proposal. Eight commenters recommended that CLF-related bridge 
loans be excluded from the aggregate unsecured lending limit to one 
borrower for Corporates. Currently, only pass-through and guaranteed 
loans from the CLF and the National Credit Union Share Insurance Fund 
are excluded from the lending limit for unsecured loans and lines of 
credit.
    The Board is aware that a CLF-related bridge loan would make it 
possible for a Corporate to assist a natural person credit union in 
meeting its liquidity needs during the time when the natural person 
credit union is awaiting funding from the CLF. The Board supports 
providing this flexibility to Corporates to enhance their ability to 
serve natural person credit unions. Accordingly, the Board agrees that 
CLF-related bridge loans should be excluded from the unsecured lending 
limit in the Corporate regulations.
    Because this amendment will allow Corporates to provide a valuable 
service to natural person credit unions, the Board is issuing this 
proposed rule with a 30-day comment period to ensure credit unions can 
take advantage of this amendment as soon as possible.

II. Proposed Amendments

1. Section 704.2--Definitions

    This proposal would make several changes to the definitions section 
of the Corporate regulation. First, this proposal defines ``CLF-related 
bridge loan'' as:

    Interim financing, extending up to ten business days, that a 
corporate credit union provides for a natural person credit union 
from the time the CLF approves a loan to the natural person credit 
union until the CLF funds the loan. To repay a CLF-related bridge 
loan, the borrowing natural person credit union assigns the proceeds 
of the CLF advance to the corporate credit union making the CLF-
related bridge loan for the duration of the bridge loan.

    The Board notes that, when the CLF grants a liquidity advance, it 
``match funds'' the loan with a borrowing from the Federal Financing 
Bank (FFB). FFB advances may take 1-10 business days to fund, subject 
to terms established by the United States Department of the Treasury 
(Treasury) and the dollar amount of the request. CLF-related bridge 
loans speed the delivery of funds to the borrowing natural person 
credit union by bridging the contractual timing gap between when CLF 
approves a loan and when FFB delivers the requested funds. Under the 
terms of a CLF-related bridge loan, a Corporate only funds an advance 
request once the CLF grants approval to the natural person credit 
union. These loans are short-term in duration and have a guaranteed 
payment source, as proceeds from the CLF-approved loan are used to pay 
off the CLF-related bridge loan on the settlement date of the CLF 
advance.
    Second, this proposal would amend the definitions of ``net assets'' 
and ``net risk-weighted assets'' to specifically exclude CLF-related 
bridge loans. Because the Treasury provides the funding and the CLF is 
backed by the full faith and credit of the U.S. Government, a CLF-
related bridge loan poses no credit risk to a Corporate. The Board, 
therefore, has determined it is appropriate to exclude CLF-related 
bridge loans from the definitions of ``net assets'' and ``net risk-
weighted assets.''

2. Section 704.7--Lending

    Section 704.7(c) currently restricts a Corporate's unsecured member 
lending to 50 percent of capital, but specifically

[[Page 27109]]

excludes pass-through and guaranteed loans from the CLF and the 
National Credit Union Share Insurance Fund. This proposal would include 
CLF-related bridge loans, as defined in proposed Sec.  704.2, in the 
list of loans that may be excluded in calculating the aggregate amount 
of unsecured loans a Corporate may make. In addition, for the same 
reasons discussed above, this proposal would exclude CLF-related bridge 
loans from the requirements of Sec.  704.7(d), which addresses loans to 
nonmembers.

III. Regulatory Procedures

1. Regulatory Flexibility Act.

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
of any significant economic impact a regulation may have on a 
substantial number of small entities (primarily those under $50 million 
in assets).\1\ This proposed rule only affects Corporates, all of which 
have more than $50 million in assets. Accordingly, NCUA certifies the 
rulemaking will not have a significant economic impact on a substantial 
number of small credit unions.
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    \1\ 5 U.S.C. 603(a); 12 U.S.C. 1787(c)(1).
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2. Paperwork Reduction Act.

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden or increases an 
existing burden.\2\ For purposes of the PRA, a paperwork burden may 
take the form of a reporting or recordkeeping requirement, both 
referred to as information collections. This proposed rule would not 
create any new burdens or increase any existing burdens. Therefore, a 
PRA analysis is not required.
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    \2\ 44 U.S.C. 3507(d); 5 CFR part 1320.
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3. Executive Order 13132.

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. 
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 proposed rule does 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. NCUA has, 
therefore, determined that this proposal does not constitute a policy 
that has federalism implications for purposes of the executive order.

4. Assessment of Federal Regulations and Policies on Families.

    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).

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 April 30, 
2015.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the National Credit Union 
Administration proposes to amend 12 CFR part 704 as follows:

PART 704--CORPORATE CREDIT UNIONS

0
1. The authority citation for part 704 continues to read as follows:

    Authority: 12 U.S.C. 1766(a), 1781, and 1789.

0
2. Amend Sec.  704.2 by adding a definition for CLF-related bridge loan 
in alphabetical order and revising the definitions of Net assets and 
Net risk-weighted assets to read as follows:


Sec.  704.2  Definitions.

* * * * *
    CLF-related bridge loan means interim financing, extending up to 
ten business days, that a corporate credit union provides for a natural 
person credit union from the time the CLF approves a loan to the 
natural person credit union until the CLF funds the loan. To repay a 
CLF-related bridge loan, the borrowing natural person credit union 
assigns the proceeds of the CLF advance to the corporate credit union 
making the CLF-related bridge loan for the duration of the bridge loan.
* * * * *
    Net assets means total assets less Central Liquidity Facility (CLF) 
stock subscriptions, CLF-related bridge loans, loans guaranteed by the 
National Credit Union Share Insurance Fund (NCUSIF), and member reverse 
repurchase transactions. For its own account, a corporate credit 
union's payables under reverse repurchase agreements and receivables 
under repurchase agreements may be netted out if the GAAP conditions 
for offsetting are met. Also, any amounts deducted in calculating Tier 
1 capital are also deducted from net assets.
* * * * *
    Net risk-weighted assets means risk-weighted assets less CLF stock 
subscriptions, CLF-related bridge loans, loans guaranteed by the 
NCUSIF, and member reverse repurchase transactions. For its own 
account, a corporate credit union's payables under reverse repurchase 
agreements and receivables under repurchase agreements may be netted 
out if the GAAP conditions for offsetting are met. Also, any amounts 
deducted in calculating Tier 1 capital are also deducted from net risk-
weighted assets.
* * * * *
0
6. Amend Sec.  704.7 by revising paragraph (c)(1)(i), as revised on May 
6, 2015 (80 FR 25932), effective June 5, 2015, and revising paragraph 
(d)(1) to read as follows:


Sec.  704.7  Lending.

* * * * *
    (c) * * *
    (1) * * *
    (i) The maximum aggregate amount in unsecured loans and lines of 
credit from a corporate credit union to any one member credit union, 
excluding CLF-related bridge loans and pass-through and guaranteed 
loans from the CLF and the NCUSIF, must not exceed 50 percent of the 
corporate credit union's total capital.
* * * * *
    (d) * * *
    (1) Credit unions. A loan to a nonmember credit union, other than 
through a loan participation with another corporate credit union or a 
CLF-related bridge loan, is only permissible if the loan is for an 
overdraft related to the providing of correspondent services pursuant 
to Sec.  704.12. Generally, such a loan will have a maturity of one 
business day.
* * * * *
[FR Doc. 2015-10554 Filed 5-11-15; 8:45 am]
 BILLING CODE 7535-01-P