80_FR_48164 80 FR 48010 - Capital Planning and Stress Testing-Schedule Shift

80 FR 48010 - Capital Planning and Stress Testing-Schedule Shift

NATIONAL CREDIT UNION ADMINISTRATION

Federal Register Volume 80, Issue 154 (August 11, 2015)

Page Range48010-48013
FR Document2015-19526

The NCUA Board (Board) is issuing amendments to the regulation governing credit union capital planning and stress testing. The amendments adjust the timing of certain events in the capital planning and stress testing cycles. The revisions to the regulation become effective January 1, 2016.

Federal Register, Volume 80 Issue 154 (Tuesday, August 11, 2015) 
[Federal Register Volume 80, Number 154 (Tuesday, August 11, 2015)]
[Rules and Regulations]
[Pages 48010-48013]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-19526]


=======================================================================
-----------------------------------------------------------------------

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 702

RIN 3133-AE44


Capital Planning and Stress Testing--Schedule Shift

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The NCUA Board (Board) is issuing amendments to the regulation 
governing credit union capital planning and stress testing. The 
amendments adjust the timing of certain events in the capital planning 
and stress testing cycles. The revisions to the regulation become 
effective January 1, 2016.

DATES: The final rule is effective January 1, 2016.

FOR FURTHER INFORMATION CONTACT: Marvin Shaw, Staff Attorney, Office of 
General Counsel, 1775 Duke Street, Alexandria, VA 22314 or telephone 
(703) 518-6553; or Jeremy Taylor or Dale Klein, Senior Capital Markets 
Specialists, Office of National Examinations and Supervision, at the 
above address or telephone (703) 518-6640.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Proposed Amendments
III. Regulatory Procedures

I. Background

    In April 2014, the Board issued a final rule requiring capital 
planning and stress testing for federally insured credit unions (FICUs) 
with assets of $10

[[Page 48011]]

billion or more.\1\ Capital planning requires covered credit unions to 
assess their financial condition and risks over the planning horizon 
under both expected and unfavorable conditions. Annual supervisory 
stress testing allows NCUA to obtain an independent test of these 
credit unions under stress scenarios. By setting a regulatory minimum 
capital ratio under stress, the April 2014 final rule requires covered 
credit unions to take corrective action before they become 
undercapitalized to an extent that may cause a risk of loss to the 
National Credit Union Share Insurance Fund (NCUSIF).
---------------------------------------------------------------------------

    \1\ 12 CFR part 702, subpart E; 79 FR 24311 (Apr. 30, 2014). The 
rule refers to FICUs with assets of $10 billion or more as ``covered 
credit unions.''
---------------------------------------------------------------------------

    The April 2014 final rule provided several timeframes for the 
formulation and submission of capital plans and for the stress testing 
of covered credit unions. One critical date in the stress testing 
process is the date NCUA releases the baseline, adverse, and severely 
adverse economic scenarios that serve as basis for the testing. NCUA 
plans to base the scenarios on those developed by the Board of 
Governors of the Federal Reserve System, the Federal Deposit Insurance 
Corporation, and the Office of the Comptroller of the Currency 
(collectively, the banking agencies) for their regulated 
institutions.\2\ At the time the Board issued NCUA's April 2014 final 
rule, the banking agencies were scheduled to provide scenarios for 
their regulated institutions by November 15 each year.\3\ The banking 
agencies subsequently moved their scenario release dates three months 
later, to the following February 15.\4\ The Board believes it is 
important that scenarios used for credit union stress testing conform 
to those used by the banking agencies, both in substance and timing. 
The new schedule on which the banking agencies' scenarios are 
published, therefore, necessitates that NCUA modify its stress testing 
schedule.
---------------------------------------------------------------------------

    \2\ 78 FR 65583, 65584 (Nov. 1, 2013).
    \3\ 12 CFR 46.5, 252.144, 252.154, and 325.204.
    \4\ 79 FR 64026 (Oct. 27, 2014); 79 FR 69365 (Nov. 21, 2014); 79 
FR 71630 (Dec. 3, 2014).
---------------------------------------------------------------------------

    On January 26, 2015, the Board issued a proposal to adjust the 
timing of certain events in NCUA's capital planning and stress testing 
cycles.\5\ In the proposal, the Board amended the capital planning and 
stress testing rule to change NCUA's scenario release date from 
December 1 to February 28. In addition, the Board proposed to apply a 
more uniform fixed annual timeline for both capital planning and stress 
testing required under the rule. It also proposed to reword several 
provisions in the rule to clarify their meaning. The Board requested 
comment on all aspects of the proposal.
---------------------------------------------------------------------------

    \5\ 80 FR 3918 (January 26, 2015).
---------------------------------------------------------------------------

    NCUA received eight comments on the proposal to modify the capital 
planning and stress testing requirements, including comments from 
national trade associations, a state credit union league, federal 
credit unions, and federally insured, state-chartered credit unions. 
All commenters stated that they understood the need for the rule and 
that it is appropriate for NCUA to be consistent with the banking 
agencies' capital planning and stress testing requirements.
    Nevertheless, commenters objected to what they considered to be a 
``compressed'' capital planning schedule set out in the proposal. The 
commenters objected on various grounds, including that the capital 
planning process is complex and that a credit union would need input 
from senior management and the credit union's board of directors on 
stress testing and capital planning. Further, commenters stated that an 
as-of date of December 31, a date which triggers numerous other 
reporting requirements, would result in logistical and resource 
allocation problems. Commenters' primary objection was that they 
believed the schedule would be compressed if capital plans were due on 
April 30 (i.e., four months after the as-of date instead of five months 
after the as-of date).
    Seven commenters also noted that the proposed April 30 due date for 
capital plans is only two months after the scenario release date of 
February 28. These commenters contended that much capital planning 
activity could only begin after the scenario release date. However, 
capital planning is an activity distinct from stress testing and thus a 
credit union subject to part 702 can and should begin its capital 
planning activities well before the release of the stress test 
scenarios. A covered credit union's capital planning should be part of 
long-term strategic planning formulated on the basis of the credit 
union's business purposes and risk exposures.
    Nevertheless, the Board understands that covered credit unions may 
want to know what scenarios concern regulators before completing their 
annual capital planning process. Accordingly, after reviewing the 
comments, this final rule amends the capital planning and stress 
testing rule in part 702 to establish a due date of May 31 rather than 
April 30 for covered credit unions to submit their capital plans. This 
change will provide covered credit unions with five months from the as-
of date (and three months from the scenario release date) to prepare 
their capital plans, as commenters requested.
    The Board acknowledges that covered credit unions may encounter 
resource constraints prior to putting in place independent risk 
management and reporting functions. NCUA also expects that some credit 
unions currently under the $10 billion threshold will grow larger than 
$10 billion, and the Board does not want to impose undue regulatory 
burden on these newly covered credit unions.
    One commenter requested that the Board move the scenario release 
date to be earlier than February 28. However, this would not allow NCUA 
reasonable time to review the scenarios released by the banking 
agencies. The Board has therefore retained the February 28 release 
date.
    Several commenters requested that other milestone dates in capital 
planning and stress testing be modified to reflect the new May 31 
deadline for the capital plan submission. The Board agrees with these 
comments and has adjusted the revised annual capital planning and 
stress testing timelines in Table 1 to reflect the shift from April 30 
to May 31. Each other date in the timeline is adjusted accordingly.
    The following table summarizes the changes to the annual timelines 
provided in the capital and stress testing rule.

  Table 1--Revised Annual Capital Planning and Stress Testing Timelines
------------------------------------------------------------------------
        Action required             Current rule          Final rule
------------------------------------------------------------------------
As-of date for covered credit    September 30......  December 31.
 union's capital plan and NCUA
 stress test data.
NCUA releases stress test        December 1........  February 28.
 scenarios.
Covered credit union submits     February 28.......  May 31.
 capital plan to NCUA
 (incorporating credit union-
 run stress tests, if
 authorized).

[[Page 48012]]

 
NCUA provides NCUA-run stress    May 31............  August 31.
 test results to covered credit
 union.
NCUA accepts or rejects covered  Within 90 days of   August 31.
 credit union's capital plan.     plan's submission.
Covered credit union submits     Within 90 days of   November 30.
 stress test capital              receipt of test
 enhancement plan, if required.   results.
Covered credit union submits     Within 90 days of   November 30.
 revised capital plan, if         NCUA rejection.
 required.
Covered credit union requests    July 31...........  November 30.
 authority to conduct stress
 tests.
NCUA approves or declines        August 31.........  December 31.
 covered credit union's request
 to conduct stress tests.
------------------------------------------------------------------------

III. Regulatory Procedures

a. Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
of any significant economic impact any regulation may have on a 
substantial number of small entities (primarily those under $50 million 
in assets). Because this final rule only applies to FICUs with $10 
billion or more in assets, it will not have any economic impact on 
small credit unions.

b. 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 increases an existing burden.\6\ For purposes of the PRA, a 
paperwork burden may take the form of a reporting or recordkeeping 
requirement, both referred to as information collections. The changes 
to part 702 only alter the dates on which already required information 
is required and acted on, and do not impose any new information 
collection requirements. There is no new burden.
---------------------------------------------------------------------------

    \6\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

c. 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 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 the rule does not constitute a policy that 
has federalism implications for purposes of the executive order.

d. Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this rule will not affect family well-
being within the meaning of Sec.  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 702

    Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on July 23, 
2015.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the National Credit Union 
Administration amends 12 CFR part 702 as follows:

PART 702--CAPITAL ADEQUACY

0
1. The authority citation for part 702 continues to read as follows:

    Authority: 12 U.S.C. 1766(a), 1790d.


0
2. Amend Sec.  702.502 by adding in alphabetical order the definition 
``Capital planning process'' and revising the definition ``Covered 
credit union'' to read as follows:


Sec.  702.502  Definitions.

* * * * *
    Capital planning process means development of a capital policy and 
formulation of a capital plan that conforms to this part.
    Covered credit union means a federally insured credit union whose 
assets are $10 billion or more. A credit union that crosses the asset 
threshold as of March 31 of a given calendar year is subject to the 
capital planning and stress testing requirements of this subpart in the 
following calendar year.
* * * * *

0
3. Amend Sec.  702.504 by revising paragraph (a) to read as follows:


Sec.  702.504  Capital planning.

    (a) Annual capital planning. (1) A covered credit union must 
develop and maintain a capital plan. It must submit this plan and its 
capital policy to NCUA by May 31 each year, or such later date as 
directed by NCUA. The plan must be based on the credit union's 
financial data as of December 31 of the preceding calendar year, or 
such other date as directed by NCUA. NCUA will assess whether the 
capital planning and analysis process is sufficiently robust in 
determining whether to accept a credit union's capital plan.
* * * * *

0
4. Amend Sec.  702.505 by revising paragraphs (a), (b)(5), and (d) to 
read as follows:


Sec.  702.505  NCUA action on capital plans.

    (a) Timing. NCUA will notify the covered credit union of the 
acceptance or rejection of its capital plan by August 31 of the year in 
which the credit union submitted its plan.
    (b) * * *
    (5) unacceptable weakness in the capital plan or policy, the 
capital planning analysis, or any critical system or process supporting 
capital analysis;
* * * * *
    (d) Resubmission of a capital plan. If NCUA rejects a credit 
union's capital plan, the credit union must update and resubmit an 
acceptable capital plan to NCUA by November 30 of the year in which the 
credit union submitted its plan. The resubmitted capital plan must, at 
a minimum, address: (1) NCUA-noted deficiencies in the credit union's 
original capital plan or policy; and (2) Remediation plans for 
unresolved supervisory issues contributing to the rejection of the 
credit union's original capital plan.
* * * * *

0
5. Amend Sec.  702.506 by:
0
a. Revising the first two sentences of paragraph (a);
0
b. Revising paragraph (c);
0
c. Removing paragraph (d);
0
d. Redesignating paragraphs (e) through (i) as (d) through (h), 
respectively; and
0
e. Revising newly redesignated paragraphs (d) through (g).
    The revisions read as follows:


Sec.  702.506  Annual supervisory stress testing.

    (a) General requirements. The supervisory stress tests consist of 
baseline, adverse, and severely adverse scenarios, which NCUA will 
provide by February 28 of each year. The tests will be based on the 
credit union's financial data as of December 31 of the preceding

[[Page 48013]]

calendar year, or such other date as directed by NCUA. * * *
* * * * *
    (c) Credit union-run tests under NCUA supervision. After NCUA has 
completed three consecutive supervisory stress tests of a covered 
credit union, the covered credit union may, with NCUA approval, conduct 
the tests described in this subpart. A covered credit union must submit 
its request to NCUA to conduct its own stress test by November 30 for 
the following annual cycle. NCUA will approve or decline the credit 
union's request by December 31 of the year in which the credit union 
submitted its request. NCUA reserves the right to conduct the tests 
described in this section on any covered credit union at any time. 
Where both NCUA and a covered credit union have conducted the tests, 
the results of NCUA's tests will determine whether the covered credit 
union has met the requirements of this subpart.
    (d) Potential impact on capital. In conducting stress tests under 
this subpart, NCUA or the covered credit union will estimate the 
following for each scenario during each quarter of the stress test 
horizon:
    (1) Losses, pre-provision net revenues, loan and lease loss 
provisions, and net income; and
    (2) The potential impact on the stress test capital ratio, 
incorporating the effects of any capital action over the 9-quarter 
stress test horizon and maintenance of an allowance for loan losses 
appropriate for credit exposures throughout the horizon. NCUA or the 
covered credit union will conduct the stress tests without assuming any 
risk mitigation actions on the part of the covered credit union, except 
those existing and identified as part of the covered credit union's 
balance sheet, or off-balance sheet positions, such as asset sales or 
derivatives positions, on the date of the stress test.
    (e) Information collection. Upon request, the covered credit union 
must provide NCUA with any relevant qualitative or quantitative 
information requested by NCUA pertinent to the stress tests under this 
subpart.
    (f) Stress test results. NCUA will provide each covered credit 
union with the results of the stress tests by August 31 of the year in 
which it conducted the tests. A credit union conducting its own stress 
tests must incorporate the test results in its capital plan.
    (g) Supervisory actions. If NCUA-run stress tests show that a 
covered credit union does not have the ability to maintain a stress 
test capital ratio of 5 percent or more under expected and stressed 
conditions in each quarter of the 9-quarter horizon, the credit union 
must provide NCUA, by November 30 of the calendar year in which NCUA 
conducted the tests, a stress test capital enhancement plan showing how 
it will meet that target. If credit union-run stress tests show that a 
covered credit union does not have the ability to maintain a stress 
test capital ratio of 5 percent or more under expected and stressed 
conditions in each quarter of the 9-quarter horizon, the credit union 
must incorporate a stress test capital enhancement plan into its 
capital plan. Any affected credit union operating without a stress test 
capital enhancement plan accepted by NCUA may be subject to supervisory 
actions.
* * * * *
[FR Doc. 2015-19526 Filed 8-10-15; 8:45 am]
BILLING CODE 7535-01-P

48010 Federal Register / Vol. 80, No. 154 / Tuesday, August 11, 2015 / Rules and Regulations system integrated into the water heater) (3) Is equipped at the point of activated by your utility company or that is locked by default and contains a manufacture with an activation lock another program operator. Confirm the physical, software, or digital and; availability of a program in your local communication that must be activated (4) Bears a permanent label applied by area before purchasing or installing this with an activation key to enable to the the manufacturer that— product.’’ product to operate at its designed (i) Is made of material not adversely * * * * * specifications and capabilities and affected by water; ■ 3. Section 430.32 is amended by without which the activation of the (ii) Is attached by means of non-water- revising paragraph (d) to read as product will provide not greater than 50 soluble adhesive; and follows: percent of the rated first hour delivery (iii) Advises purchasers and end-users of hot water certified by the of the intended and appropriate use of § 430.32 Energy and water conservation manufacturer. the product with the following notice standards and their compliance dates. * * * * * printed in 16.5 point Arial Narrow Bold * * * * * Grid-enabled water heater means an font: ‘‘IMPORTANT INFORMATION: (d) Water heaters and grid-enabled electric resistance water heater that— This water heater is intended only for water heaters—(1) Water heaters. The (1) Has a rated storage tank volume of use as part of an electric thermal storage energy factor of water heaters shall not more than 75 gallons; or demand response program. It will not be less than the following for products (2) Is manufactured on or after April provide adequate hot water unless manufactured on or after the indicated 16, 2015; enrolled in such a program and dates. Energy factor as of January 20, Product class Storage volume Energy factor as of April 16, 2015 2004 Gas-fired Storage ≥20 gallons and ≤100 0.67¥(0.0019 × Rated Storage For tanks with a Rated Storage Volume at or below 55 Water Heater. gallons. Volume in gallons). gallons: EF = 0.675¥(0.0015 × Rated Storage Volume in gallons). For tanks with a Rated Storage Volume above 55 gal- lons: EF = 0.8012¥(0.00078 × Rated Storage Volume in gallons). Oil-fired Storage Water ≤50 gallons ................. 0.59¥(0.0019 × Rated Storage EF = 0.68¥(0.0019 × Rated Storage Volume in gallons). Heater. Volume in gallons). Electric Storage Water ≥20 gallons and ≤120 0.97¥(0.00132 × Rated Storage For tanks with a Rated Storage Volume at or below 55 Heater. gallons. Volume in gallons). gallons: EF = 0.960¥(0.0003 × Rated Storage Volume in gallons). For tanks with a Rated Storage Volume above 55 gal- lons: EF = 2.057¥(0.00113 × Rated Storage Volume in gallons). Tabletop Water Heater ≥20 gallons and ≤120 0.93¥(0.00132 × Rated Storage EF = 0.93¥(0.00132 × Rated Storage Volume in gal- gallons. Volume in gallons). lons). Instantaneous Gas- <2 gallons ................... 0.62¥(0.0019 × Rated Storage EF = 0.82¥(0.0019 × Rated Storage Volume in gallons). fired Water Heater. Volume in gallons). Instantaneous Electric <2 gallons ................... 0.93¥(0.00132 × Rated Storage EF = 0.93¥(0.00132 × Rated Storage Volume in gal- Water Heater. Volume in gallons). lons). Note: The Rated Storage Volume equals the water storage capacity of a water heater, in gallons, as certified by the manufacturer. Exclusions: The energy conservation NATIONAL CREDIT UNION FOR FURTHER INFORMATION CONTACT: standards shown in this paragraph do ADMINISTRATION Marvin Shaw, Staff Attorney, Office of not apply to the following types of water General Counsel, 1775 Duke Street, heaters: Gas-fired, oil-fired, and electric 12 CFR Part 702 Alexandria, VA 22314 or telephone water heaters at or above 2 gallons (703) 518–6553; or Jeremy Taylor or storage volume and below 20 gallons RIN 3133–AE44 Dale Klein, Senior Capital Markets storage volume; gas-fired water heaters Specialists, Office of National above 100 gallons storage volume; oil- Capital Planning and Stress Testing— Examinations and Supervision, at the fired water heaters above 50 gallons Schedule Shift above address or telephone (703) 518– storage volume; electric water heaters AGENCY:National Credit Union 6640. above 120 gallons storage volume; gas- Administration (NCUA). SUPPLEMENTARY INFORMATION: fired instantaneous water heaters at or below 50,000 Btu/h; and grid-enabled ACTION: Final rule. Table of Contents water heaters. SUMMARY: The NCUA Board (Board) is I. Background (2) Grid-enabled water heaters. The issuing amendments to the regulation II. Proposed Amendments energy factor of grid-enabled water governing credit union capital planning III. Regulatory Procedures heaters, as of April 30, 2015, shall not and stress testing. The amendments rmajette on DSK2TPTVN1PROD with RULES I. Background be less than 1.06¥(0.00168 × Rated adjust the timing of certain events in the Storage Volume in gallons). capital planning and stress testing In April 2014, the Board issued a final * * * * * cycles. The revisions to the regulation rule requiring capital planning and [FR Doc. 2015–19643 Filed 8–10–15; 8:45 am] become effective January 1, 2016. stress testing for federally insured credit BILLING CODE 6450–01–P DATES: The final rule is effective January unions (FICUs) with assets of $10 1, 2016. VerDate Sep<11>2014 15:24 Aug 10, 2015 Jkt 235001 PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 E:\FR\FM\11AUR1.SGM 11AUR1

Federal Register / Vol. 80, No. 154 / Tuesday, August 11, 2015 / Rules and Regulations 48011 billion or more.1 Capital planning to February 28. In addition, the Board stress test scenarios. A covered credit requires covered credit unions to assess proposed to apply a more uniform fixed union’s capital planning should be part their financial condition and risks over annual timeline for both capital of long-term strategic planning the planning horizon under both planning and stress testing required formulated on the basis of the credit expected and unfavorable conditions. under the rule. It also proposed to union’s business purposes and risk Annual supervisory stress testing allows reword several provisions in the rule to exposures. NCUA to obtain an independent test of clarify their meaning. The Board Nevertheless, the Board understands these credit unions under stress requested comment on all aspects of the that covered credit unions may want to scenarios. By setting a regulatory proposal. know what scenarios concern regulators minimum capital ratio under stress, the NCUA received eight comments on before completing their annual capital April 2014 final rule requires covered the proposal to modify the capital planning process. Accordingly, after credit unions to take corrective action planning and stress testing reviewing the comments, this final rule before they become undercapitalized to requirements, including comments from amends the capital planning and stress an extent that may cause a risk of loss national trade associations, a state credit testing rule in part 702 to establish a to the National Credit Union Share union league, federal credit unions, and due date of May 31 rather than April 30 Insurance Fund (NCUSIF). federally insured, state-chartered credit for covered credit unions to submit their The April 2014 final rule provided unions. All commenters stated that they capital plans. This change will provide several timeframes for the formulation understood the need for the rule and covered credit unions with five months and submission of capital plans and for that it is appropriate for NCUA to be from the as-of date (and three months the stress testing of covered credit consistent with the banking agencies’ from the scenario release date) to unions. One critical date in the stress capital planning and stress testing prepare their capital plans, as testing process is the date NCUA requirements. commenters requested. releases the baseline, adverse, and Nevertheless, commenters objected to The Board acknowledges that covered severely adverse economic scenarios what they considered to be a credit unions may encounter resource that serve as basis for the testing. NCUA ‘‘compressed’’ capital planning constraints prior to putting in place plans to base the scenarios on those schedule set out in the proposal. The independent risk management and developed by the Board of Governors of commenters objected on various reporting functions. NCUA also expects the Federal Reserve System, the Federal grounds, including that the capital that some credit unions currently under Deposit Insurance Corporation, and the planning process is complex and that a the $10 billion threshold will grow Office of the Comptroller of the credit union would need input from larger than $10 billion, and the Board Currency (collectively, the banking senior management and the credit does not want to impose undue agencies) for their regulated union’s board of directors on stress regulatory burden on these newly institutions.2 At the time the Board testing and capital planning. Further, covered credit unions. issued NCUA’s April 2014 final rule, the commenters stated that an as-of date of One commenter requested that the banking agencies were scheduled to December 31, a date which triggers Board move the scenario release date to provide scenarios for their regulated numerous other reporting requirements, be earlier than February 28. However, institutions by November 15 each year.3 would result in logistical and resource this would not allow NCUA reasonable The banking agencies subsequently allocation problems. Commenters’ time to review the scenarios released by moved their scenario release dates three primary objection was that they the banking agencies. The Board has months later, to the following February believed the schedule would be therefore retained the February 28 15.4 The Board believes it is important compressed if capital plans were due on release date. that scenarios used for credit union April 30 (i.e., four months after the as- Several commenters requested that stress testing conform to those used by of date instead of five months after the other milestone dates in capital the banking agencies, both in substance as-of date). planning and stress testing be modified and timing. The new schedule on which Seven commenters also noted that the to reflect the new May 31 deadline for the banking agencies’ scenarios are proposed April 30 due date for capital the capital plan submission. The Board published, therefore, necessitates that plans is only two months after the agrees with these comments and has NCUA modify its stress testing scenario release date of February 28. adjusted the revised annual capital schedule. These commenters contended that much planning and stress testing timelines in On January 26, 2015, the Board issued capital planning activity could only Table 1 to reflect the shift from April 30 a proposal to adjust the timing of certain begin after the scenario release date. to May 31. Each other date in the events in NCUA’s capital planning and However, capital planning is an activity timeline is adjusted accordingly. stress testing cycles.5 In the proposal, distinct from stress testing and thus a The following table summarizes the the Board amended the capital planning credit union subject to part 702 can and changes to the annual timelines and stress testing rule to change NCUA’s should begin its capital planning provided in the capital and stress testing scenario release date from December 1 activities well before the release of the rule. TABLE 1—REVISED ANNUAL CAPITAL PLANNING AND STRESS TESTING TIMELINES Action required Current rule Final rule As-of date for covered credit union’s capital plan and NCUA stress test data ........... September 30 ........................................... December 31. rmajette on DSK2TPTVN1PROD with RULES NCUA releases stress test scenarios ........................................................................... December 1 .............................................. February 28. Covered credit union submits capital plan to NCUA (incorporating credit union-run February 28 .............................................. May 31. stress tests, if authorized). 1 12 CFR part 702, subpart E; 79 FR 24311 (Apr. 2 78 FR 65583, 65584 (Nov. 1, 2013). 4 79 FR 64026 (Oct. 27, 2014); 79 FR 69365 (Nov. 30, 2014). The rule refers to FICUs with assets of 3 12 CFR 46.5, 252.144, 252.154, and 325.204. 21, 2014); 79 FR 71630 (Dec. 3, 2014). $10 billion or more as ‘‘covered credit unions.’’ 5 80 FR 3918 (January 26, 2015). VerDate Sep<11>2014 15:24 Aug 10, 2015 Jkt 235001 PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 E:\FR\FM\11AUR1.SGM 11AUR1

48012 Federal Register / Vol. 80, No. 154 / Tuesday, August 11, 2015 / Rules and Regulations TABLE 1—REVISED ANNUAL CAPITAL PLANNING AND STRESS TESTING TIMELINES—Continued Action required Current rule Final rule NCUA provides NCUA-run stress test results to covered credit union ........................ May 31 ...................................................... August 31. NCUA accepts or rejects covered credit union’s capital plan ...................................... Within 90 days of plan’s submission ........ August 31. Covered credit union submits stress test capital enhancement plan, if required ........ Within 90 days of receipt of test results ... November 30. Covered credit union submits revised capital plan, if required .................................... Within 90 days of NCUA rejection ............ November 30. Covered credit union requests authority to conduct stress tests ................................. July 31 ...................................................... November 30. NCUA approves or declines covered credit union’s request to conduct stress tests .. August 31 .................................................. December 31. III. Regulatory Procedures the meaning of § 654 of the Treasury whether the capital planning and and General Government analysis process is sufficiently robust in a. Regulatory Flexibility Act Appropriations Act, 1999, Public Law determining whether to accept a credit The Regulatory Flexibility Act 105–277, 112 Stat. 2681 (1998). union’s capital plan. requires NCUA to prepare an analysis of * * * * * any significant economic impact any List of Subjects in 12 CFR Part 702 ■ 4. Amend § 702.505 by revising regulation may have on a substantial Credit unions, Reporting and number of small entities (primarily paragraphs (a), (b)(5), and (d) to read as recordkeeping requirements. those under $50 million in assets). follows: By the National Credit Union Because this final rule only applies to Administration Board on July 23, 2015. § 702.505 NCUA action on capital plans. FICUs with $10 billion or more in Gerard Poliquin, (a) Timing. NCUA will notify the assets, it will not have any economic covered credit union of the acceptance Secretary of the Board. impact on small credit unions. or rejection of its capital plan by August For the reasons discussed above, the 31 of the year in which the credit union b. Paperwork Reduction Act National Credit Union Administration submitted its plan. The Paperwork Reduction Act of 1995 amends 12 CFR part 702 as follows: (b) * * * (PRA) applies to rulemakings in which (5) unacceptable weakness in the an agency by rule creates a new PART 702—CAPITAL ADEQUACY capital plan or policy, the capital paperwork burden on regulated entities planning analysis, or any critical system or increases an existing burden.6 For ■ 1. The authority citation for part 702 continues to read as follows: or process supporting capital analysis; purposes of the PRA, a paperwork burden may take the form of a reporting Authority: 12 U.S.C. 1766(a), 1790d. * * * * * or recordkeeping requirement, both (d) Resubmission of a capital plan. If ■ 2. Amend § 702.502 by adding in NCUA rejects a credit union’s capital referred to as information collections. alphabetical order the definition The changes to part 702 only alter the plan, the credit union must update and ‘‘Capital planning process’’ and revising resubmit an acceptable capital plan to dates on which already required the definition ‘‘Covered credit union’’ to information is required and acted on, NCUA by November 30 of the year in read as follows: which the credit union submitted its and do not impose any new information collection requirements. There is no § 702.502 Definitions. plan. The resubmitted capital plan new burden. must, at a minimum, address: (1) * * * * * NCUA-noted deficiencies in the credit c. Executive Order 13132 Capital planning process means union’s original capital plan or policy; development of a capital policy and Executive Order 13132 encourages and (2) Remediation plans for formulation of a capital plan that independent regulatory agencies to unresolved supervisory issues conforms to this part. consider the impact of their actions on contributing to the rejection of the credit Covered credit union means a state and local interests. NCUA, an union’s original capital plan. federally insured credit union whose independent regulatory agency as assets are $10 billion or more. A credit * * * * * defined in 44 U.S.C. 3502(5), voluntarily union that crosses the asset threshold as ■ 5. Amend § 702.506 by: complies with the executive order to ■ a. Revising the first two sentences of of March 31 of a given calendar year is adhere to fundamental federalism paragraph (a); subject to the capital planning and principles. The rule does not have ■ b. Revising paragraph (c); stress testing requirements of this substantial direct effects on the states, ■ c. Removing paragraph (d); subpart in the following calendar year. on the relationship between the national ■ d. Redesignating paragraphs (e) government and the states, or on the * * * * * through (i) as (d) through (h), distribution of power and ■ 3. Amend § 702.504 by revising respectively; and responsibilities among the various paragraph (a) to read as follows: ■ e. Revising newly redesignated levels of government. NCUA has, paragraphs (d) through (g). § 702.504 Capital planning. therefore, determined that the rule does The revisions read as follows: not constitute a policy that has (a) Annual capital planning. (1) A federalism implications for purposes of covered credit union must develop and § 702.506 Annual supervisory stress maintain a capital plan. It must submit testing. the executive order. this plan and its capital policy to NCUA (a) General requirements. The rmajette on DSK2TPTVN1PROD with RULES d. Assessment of Federal Regulations by May 31 each year, or such later date supervisory stress tests consist of and Policies on Families as directed by NCUA. The plan must be baseline, adverse, and severely adverse NCUA has determined that this rule based on the credit union’s financial scenarios, which NCUA will provide by will not affect family well-being within data as of December 31 of the preceding February 28 of each year. The tests will calendar year, or such other date as be based on the credit union’s financial 6 44 U.S.C. 3507(d); 5 CFR part 1320. directed by NCUA. NCUA will assess data as of December 31 of the preceding VerDate Sep<11>2014 15:24 Aug 10, 2015 Jkt 235001 PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 E:\FR\FM\11AUR1.SGM 11AUR1

Federal Register / Vol. 80, No. 154 / Tuesday, August 11, 2015 / Rules and Regulations 48013 calendar year, or such other date as percent or more under expected and recognition of a lack of cabin directed by NCUA. * * * stressed conditions in each quarter of pressurization, and could result in * * * * * the 9-quarter horizon, the credit union incapacitation of the flightcrew due to (c) Credit union-run tests under must provide NCUA, by November 30 of hypoxia (a lack of oxygen in the body), NCUA supervision. After NCUA has the calendar year in which NCUA and consequent loss of control of the completed three consecutive conducted the tests, a stress test capital airplane. supervisory stress tests of a covered enhancement plan showing how it will DATES: This AD is effective September credit union, the covered credit union meet that target. If credit union-run 15, 2015. may, with NCUA approval, conduct the stress tests show that a covered credit The Director of the Federal Register tests described in this subpart. A union does not have the ability to approved the incorporation by reference covered credit union must submit its maintain a stress test capital ratio of 5 of certain publications listed in this AD request to NCUA to conduct its own percent or more under expected and as of September 15, 2015. stress test by November 30 for the stressed conditions in each quarter of The Director of the Federal Register following annual cycle. NCUA will the 9-quarter horizon, the credit union approved the incorporation by reference approve or decline the credit union’s must incorporate a stress test capital of certain other publications listed in request by December 31 of the year in enhancement plan into its capital plan. this AD as of November 7, 2012 (77 FR which the credit union submitted its Any affected credit union operating 60296, October 3, 2012). request. NCUA reserves the right to without a stress test capital ADDRESSES: For service information conduct the tests described in this enhancement plan accepted by NCUA identified in this AD, contact Boeing section on any covered credit union at may be subject to supervisory actions. Commercial Airplanes, Attention: Data any time. Where both NCUA and a * * * * * & Services Management, P. O. Box 3707, covered credit union have conducted [FR Doc. 2015–19526 Filed 8–10–15; 8:45 am] MC 2H–65, Seattle, WA 98124–2207; the tests, the results of NCUA’s tests BILLING CODE 7535–01–P telephone 206–544–5000, extension 1; will determine whether the covered fax 206–766–5680; Internet https:// credit union has met the requirements www.myboeingfleet.com. You may view of this subpart. DEPARTMENT OF TRANSPORTATION this referenced service information at (d) Potential impact on capital. In the FAA, Transport Airplane conducting stress tests under this Federal Aviation Administration Directorate, 1601 Lind Avenue SW., subpart, NCUA or the covered credit Renton, WA. For information on the union will estimate the following for 14 CFR Part 39 availability of this material at the FAA, each scenario during each quarter of the [Docket No. FAA–2014–0487; Directorate call 425–227–1221. stress test horizon: Identifier 2014–NM–026–AD; Amendment (1) Losses, pre-provision net revenues, Examining the AD Docket 39–18226; AD 2015–16–01] loan and lease loss provisions, and net You may examine the AD docket on income; and RIN 2120–AA64 the Internet at http:// (2) The potential impact on the stress www.regulations.gov by searching for Airworthiness Directives; The Boeing and locating Docket No. FAA–2014– test capital ratio, incorporating the Company Airplanes 0487; or in person at the Docket effects of any capital action over the 9- quarter stress test horizon and AGENCY: Federal Aviation Management Facility between 9 a.m. maintenance of an allowance for loan Administration (FAA), DOT. and 5 p.m., Monday through Friday, losses appropriate for credit exposures ACTION: Final rule. except Federal holidays. The AD docket throughout the horizon. NCUA or the contains this AD, the regulatory covered credit union will conduct the SUMMARY: We are superseding evaluation, any comments received, and stress tests without assuming any risk Airworthiness Directive (AD) 2012–19– other information. The address for the mitigation actions on the part of the 11 for certain The Boeing Company Docket Office (phone: 800–647–5527) is covered credit union, except those Model 737 airplanes. AD 2012–19–11 Docket Management Facility, U.S. existing and identified as part of the required incorporating design changes Department of Transportation, Docket covered credit union’s balance sheet, or to improve the reliability of the cabin Operations, M–30, West Building off-balance sheet positions, such as asset altitude warning system by installing a Ground Floor, Room W12–140, 1200 sales or derivatives positions, on the redundant cabin altitude pressure New Jersey Avenue SE., Washington, date of the stress test. switch, replacing the aural warning DC 20590. (e) Information collection. Upon module (AWM) with a new or reworked FOR FURTHER INFORMATION CONTACT: request, the covered credit union must AWM, and changing certain wire Francis Smith, Aerospace Engineer, provide NCUA with any relevant bundles or connecting certain Cabin Safety and Environmental qualitative or quantitative information previously capped and stowed wires as Systems Branch, ANM–150S, FAA, requested by NCUA pertinent to the necessary. For certain airplanes, AD Seattle Aircraft Certification Office, stress tests under this subpart. 2012–19–11 also required prior or 1601 Lind Avenue SW., Renton, WA (f) Stress test results. NCUA will concurrent incorporation of related 98057–3356; telephone: 425–917–6596; provide each covered credit union with design changes by modifying the fax: 425–917–6590; email: the results of the stress tests by August instrument panels, installing light Francis.Smith@faa.gov. 31 of the year in which it conducted the assemblies, modifying the wire bundles, SUPPLEMENTARY INFORMATION: tests. A credit union conducting its own and installing a new circuit breaker, as rmajette on DSK2TPTVN1PROD with RULES stress tests must incorporate the test necessary. This AD was prompted by Discussion results in its capital plan. the report of a flightcrew not receiving We issued a notice of proposed (g) Supervisory actions. If NCUA-run an aural warning during a lack-of-cabin rulemaking (NPRM) to amend 14 CFR stress tests show that a covered credit pressurization event. We are issuing this part 39 to supersede AD 2012–19–11, union does not have the ability to AD to prevent the loss of cabin altitude Amendment 39–17206 (77 FR 60296, maintain a stress test capital ratio of 5 warning, which could delay flightcrew October 3, 2012). AD 2012–19–11 VerDate Sep<11>2014 15:24 Aug 10, 2015 Jkt 235001 PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 E:\FR\FM\11AUR1.SGM 11AUR1


Document Created: 2016-09-27 22:24:48
Document Modified: 2016-09-27 22:24:48
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule.
DatesThe final rule is effective January 1, 2016.
ContactMarvin Shaw, Staff Attorney, Office of General Counsel, 1775 Duke Street, Alexandria, VA 22314 or telephone (703) 518-6553; or Jeremy Taylor or Dale Klein, Senior Capital Markets Specialists, Office of National Examinations and Supervision, at the
FR Citation80 FR 48010 
RIN Number3133-AE44
CFR AssociatedCredit Unions and Reporting and Recordkeeping Requirements
2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR