80 FR 63932 - Investment and Deposit Activities-Bank Notes

NATIONAL CREDIT UNION ADMINISTRATION

Federal Register Volume 80, Issue 204 (October 22, 2015)

Page Range		63932-63933
FR Document		2015-26788
The NCUA Board (Board) proposes to amend the maturity requirement for bank notes to be permissible investments for federal credit unions (FCUs) by removing the word ``original'' from the current requirement that bank notes have ``original weighted average maturities of less than 5 years.'' This amendment will provide regulatory relief for FCUs.
Federal Register, Volume 80 Issue 204 (Thursday, October 22, 2015)
[Federal Register Volume 80, Number 204 (Thursday, October 22, 2015)]
[Proposed Rules]
[Pages 63932-63933]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-26788]


========================================================================
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.

========================================================================


Federal Register / Vol. 80, No. 204 / Thursday, October 22, 2015 / 
Proposed Rules

[[Page 63932]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 703

RIN 3133-AE55


Investment and Deposit Activities--Bank Notes

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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

SUMMARY: The NCUA Board (Board) proposes to amend the maturity 
requirement for bank notes to be permissible investments for federal 
credit unions (FCUs) by removing the word ``original'' from the current 
requirement that bank notes have ``original weighted average maturities 
of less than 5 years.'' This amendment will provide regulatory relief 
for FCUs.

DATES: Comments must be received on or before November 23, 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-- Bank Notes'' 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: John Nilles, Senior Capital Markets 
Specialist, Office of Examination and Insurance, at the above address 
or telephone (703) 518-6360; 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

    By NCUA regulation, bank notes with original weighted average 
maturities of less than 5 years are permissible investments for 
FCUs.\1\ The authority for FCUs to invest in these bank notes is 
derived from the provision of the Federal Credit Union Act (the Act) 
that permits FCUs to make deposits in, among other things, national and 
state banks. The Act does not provide authority for FCUs to purchase 
bank notes that are not deposits. The Act, however, does not define 
``deposit.'' NCUA's long-standing policy has been to use the definition 
of deposit in Regulation D. Regulation D provides, in relevant part, 
that a liability of a depository institution can be a ``deposit'' if, 
among other things: (1) It is insured; (2) it is not subordinated to 
the claims of depositors; and (3) it has a weighted average maturity of 
less than five years.\2\ The Board notes that the third prong of the 
above test does not include the word ``original.''
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    \1\ 12 CFR 703.14(f)(5).
    \2\ 12 CFR 204.2(a)(1)(vii)(C).
---------------------------------------------------------------------------

    When the Board first added ``bank notes'' as a permissible 
investment to its investment regulation, Part 703, the Board noted in 
the preamble to that proposed rule that it was codifying the position 
NCUA had taken in previously issued legal opinions on the topic.\3\ 
Those legal opinions articulated NCUA's policy of using the Regulation 
D definition of ``deposit'' and interpreting ``weighted average 
maturity'' as being the original weighted average maturity.\4\ While 
this interpretation made it easier for FCUs to calculate the weighted 
average maturity,\5\ the Board is aware that this may now be 
unintentionally burdensome to FCUs by limiting the offerings in which 
FCUs may invest. As such, the Board proposes to remove the word 
``original'' from the maturity requirement and thereby more closely 
align NCUA's requirements regarding bank notes with Regulation D.
---------------------------------------------------------------------------

    \3\ 62 FR 32989, 32998 (June 18, 1997).
    \4\ See OGC Ops. 96-0625 (July 22, 1996) and 02-0830 (Dec. 4, 
2002).
    \5\ Id.
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II. Proposed Amendments

    This proposed rule will amend the maturity requirement for bank 
notes to be permissible investments for FCUs by removing the word 
``original'' from the current requirement that bank notes have 
``original weighted average maturities of less than 5 years.'' As 
noted, this will more closely align NCUA's investment restrictions with 
the definition of ``deposit'' in Regulation D. This proposed rule also 
will provide FCUs with some measure of regulatory relief. By removing 
the word ``original,'' which ties the bank note's maturity to its 
original date of issuance, FCUs will be permitted to select from a much 
larger pool of possible bank note offerings. Expanding the list of 
permissible offerings will result in: (1) Cheaper execution prices, as 
the ``less than 5 years'' element resulted in those bank notes often 
selling at a premium; (2) flexibility for FCUs to purchase bank notes 
that were originally issued \6\ with maturities greater than 5 years; 
and (3) FCUs being able to spend less time and effort in finding 
suitable offerings.
---------------------------------------------------------------------------

    \6\ Under this proposal FCUs could purchase a bank note that was 
originally issued with a maturity longer than five years, provided 
that, at the time of purchase, the bank note has a remaining 
maturity of five years or less.
---------------------------------------------------------------------------

    Further, removing the word ``original'' will not pose any safety or 
soundness concerns. Safety and soundness concerns generally apply to an 
FCU's overall maturity risk on a portfolio-wide basis and not to any 
one investment. If this rule is finalized as proposed, FCUs would be 
permitted to purchase bank notes that had original maturities greater 
than 5 years but have remaining maturities of less than 5 years.
    The Board is issuing this proposal with a 30-day comment period 
rather than its traditional 60-day comment period. The shortened period 
reflects the simplicity of the proposed amendment and also enables the 
Board to provide expedited regulatory relief in this area.

[[Page 63933]]

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).\7\ This proposed rule will have a minimal economic impact 
on credit unions as bank notes are just one small portion of a typical 
investment portfolio. Accordingly, NCUA certifies the rule will not 
have a significant economic impact on a substantial number of small 
credit unions.
---------------------------------------------------------------------------

    \7\ 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.\8\ 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 creates new 
investment options for FCUs but will not create any new burdens or 
increase any existing burdens. Therefore, a PRA analysis is not 
required.
---------------------------------------------------------------------------

    \8\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

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 703

    Credit unions, Investments.

    By the National Credit Union Administration Board on October 15, 
2015.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the National Credit Union 
Administration proposes to amend 12 CFR part 703 as follows:

PART 703--INVESTMENT AND DEPOSIT ACTIVITIES

0
1. The authority citation for part 703 continues to read as follows:

    Authority: 12 U.S.C. 1757(7), 1757(8), and 1757(15).


Sec.  703.14  [Amended]

0
2. Amend Sec.  703.14(f)(5) by removing the word ``original''.

[FR Doc. 2015-26788 Filed 10-21-15; 8:45 am]
 BILLING CODE 7535-01-P
63932

Proposed Rules Federal Register
Vol. 80, No. 204

Thursday, October 22, 2015

This section of the FEDERAL REGISTER telephone (703) 518–6360; or Justin M. such, the Board proposes to remove the
contains notices to the public of the proposed Anderson, Senior Staff Attorney, Office word ‘‘original’’ from the maturity
issuance of rules and regulations. The of General Counsel, at the above address requirement and thereby more closely
purpose of these notices is to give interested or telephone (703) 518–6540. align NCUA’s requirements regarding
persons an opportunity to participate in the
rule making prior to the adoption of the final SUPPLEMENTARY INFORMATION: bank notes with Regulation D.
rules. Table of Contents II. Proposed Amendments
I. Background
This proposed rule will amend the
NATIONAL CREDIT UNION II. Proposed Amendments
III. Regulatory Procedures maturity requirement for bank notes to
ADMINISTRATION be permissible investments for FCUs by
I. Background removing the word ‘‘original’’ from the
12 CFR Part 703
By NCUA regulation, bank notes with current requirement that bank notes
RIN 3133–AE55 original weighted average maturities of have ‘‘original weighted average
less than 5 years are permissible maturities of less than 5 years.’’ As
Investment and Deposit Activities—
investments for FCUs.1 The authority noted, this will more closely align
Bank Notes
for FCUs to invest in these bank notes NCUA’s investment restrictions with the
AGENCY: National Credit Union is derived from the provision of the definition of ‘‘deposit’’ in Regulation D.
Administration (NCUA). Federal Credit Union Act (the Act) that This proposed rule also will provide
ACTION: Proposed rule. permits FCUs to make deposits in, FCUs with some measure of regulatory
among other things, national and state relief. By removing the word ‘‘original,’’
SUMMARY: The NCUA Board (Board) banks. The Act does not provide which ties the bank note’s maturity to
proposes to amend the maturity authority for FCUs to purchase bank its original date of issuance, FCUs will
requirement for bank notes to be notes that are not deposits. The Act, be permitted to select from a much
permissible investments for federal however, does not define ‘‘deposit.’’ larger pool of possible bank note
credit unions (FCUs) by removing the NCUA’s long-standing policy has been offerings. Expanding the list of
word ‘‘original’’ from the current to use the definition of deposit in
permissible offerings will result in: (1)
requirement that bank notes have Regulation D. Regulation D provides, in
Cheaper execution prices, as the ‘‘less
‘‘original weighted average maturities of relevant part, that a liability of a
less than 5 years.’’ This amendment will than 5 years’’ element resulted in those
depository institution can be a
provide regulatory relief for FCUs. ‘‘deposit’’ if, among other things: (1) It bank notes often selling at a premium;
is insured; (2) it is not subordinated to (2) flexibility for FCUs to purchase bank
DATES: Comments must be received on
the claims of depositors; and (3) it has notes that were originally issued 6 with
or before November 23, 2015.
a weighted average maturity of less than maturities greater than 5 years; and (3)
ADDRESSES: You may submit comments
five years.2 The Board notes that the FCUs being able to spend less time and
by any of the following methods, but
third prong of the above test does not effort in finding suitable offerings.
please send comments by one method
only: include the word ‘‘original.’’ Further, removing the word ‘‘original’’
• Federal eRulemaking Portal: http:// When the Board first added ‘‘bank will not pose any safety or soundness
www.regulations.gov. Follow the notes’’ as a permissible investment to its concerns. Safety and soundness
instructions for submitting comments. investment regulation, Part 703, the concerns generally apply to an FCU’s
• NCUA Web site: http:// Board noted in the preamble to that overall maturity risk on a portfolio-wide
www.ncua.gov/ proposed rule that it was codifying the basis and not to any one investment. If
RegulationsOpinionsLaws/proposed_ position NCUA had taken in previously this rule is finalized as proposed, FCUs
regs/proposed_regs.html. Follow the issued legal opinions on the topic.3
would be permitted to purchase bank
instructions for submitting comments. Those legal opinions articulated
notes that had original maturities greater
• Email: Address to regcomments@ NCUA’s policy of using the Regulation
than 5 years but have remaining
ncua.gov. Include ‘‘[Your name] — D definition of ‘‘deposit’’ and
interpreting ‘‘weighted average maturities of less than 5 years.
Comments on Proposed Rule— Bank
Notes’’ in the email subject line. maturity’’ as being the original weighted The Board is issuing this proposal
• Fax: (703) 518–6319. Use the average maturity.4 While this with a 30-day comment period rather
subject line described above for email. interpretation made it easier for FCUs to than its traditional 60-day comment
• Mail: Address to Gerard Poliquin, calculate the weighted average period. The shortened period reflects
Secretary of the Board, National Credit maturity,5 the Board is aware that this the simplicity of the proposed
Union Administration, 1775 Duke may now be unintentionally amendment and also enables the Board
Street, Alexandria, Virginia 22314– burdensome to FCUs by limiting the to provide expedited regulatory relief in
tkelley on DSK3SPTVN1PROD with PROPOSALS

3428. offerings in which FCUs may invest. As this area.
• Hand Delivery/Courier: Same as
1 12 CFR 703.14(f)(5).
mail address.
2 12 CFR 204.2(a)(1)(vii)(C). 6 Under this proposal FCUs could purchase a
FOR FURTHER INFORMATION CONTACT: John 3 62 FR 32989, 32998 (June 18, 1997). bank note that was originally issued with a maturity
Nilles, Senior Capital Markets 4 See OGC Ops. 96–0625 (July 22, 1996) and 02– longer than five years, provided that, at the time of
Specialist, Office of Examination and 0830 (Dec. 4, 2002). purchase, the bank note has a remaining maturity
Insurance, at the above address or 5 Id. of five years or less.

VerDate Sep<11>2014 17:42 Oct 21, 2015 Jkt 238001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 E:\FR\FM\22OCP1.SGM 22OCP1
Federal Register / Vol. 80, No. 204 / Thursday, October 22, 2015 / Proposed Rules 63933

III. Regulatory Procedures List of Subjects in 12 CFR Part 703 bond regulations already addressed
Credit unions, Investments. under the Code of Virginia.
1. Regulatory Flexibility Act This document gives the times and
By the National Credit Union locations that the Virginia program and
The Regulatory Flexibility Act Administration Board on October 15, 2015.
requires NCUA to prepare an analysis of this proposed amendment to that
Gerard Poliquin, program are available for your
any significant economic impact a
Secretary of the Board. inspection, the comment period during
regulation may have on a substantial
number of small entities (primarily For the reasons discussed above, the which you may submit written
those under $50 million in assets).7 This National Credit Union Administration comments on the amendment, and the
proposed rule will have a minimal proposes to amend 12 CFR part 703 as procedures that we will follow for the
economic impact on credit unions as follows: public hearing, if one is requested.
bank notes are just one small portion of DATES: We will accept written
a typical investment portfolio. PART 703—INVESTMENT AND comments on this amendment until 4:00
Accordingly, NCUA certifies the rule DEPOSIT ACTIVITIES p.m., Eastern Standard Time (E.S.T.),
will not have a significant economic November 23, 2015. If requested, we
■ 1. The authority citation for part 703 will hold a public hearing on the
impact on a substantial number of small
continues to read as follows: amendment on November 16, 2015. We
credit unions.
Authority: 12 U.S.C. 1757(7), 1757(8), and will accept requests to speak at a
2. Paperwork Reduction Act 1757(15). hearing until 4:00 p.m., E.S.T. on
The Paperwork Reduction Act of 1995 § 703.14 [Amended]
November 6, 2015.
(PRA) applies to rulemakings in which ADDRESSES: You may submit comments,
■ 2. Amend § 703.14(f)(5) by removing
an agency by rule creates a new identified by SATS No. VA–127–FOR,
the word ‘‘original’’.
paperwork burden or increases an by any of the following methods:
existing burden.8 For purposes of the
[FR Doc. 2015–26788 Filed 10–21–15; 8:45 am] • Mail/Hand Delivery: Mr. Earl
PRA, a paperwork burden may take the
BILLING CODE 7535–01–P Bandy, Field Office Director, Knoxville
form of a reporting or recordkeeping Field Office, Office of Surface Mining
requirement, both referred to as Reclamation and Enforcement, 710
information collections. This proposed DEPARTMENT OF THE INTERIOR Locust Street, 2nd Floor, Knoxville,
rule creates new investment options for Tennessee 37902.
FCUs but will not create any new Office of Surface Mining Reclamation • Federal eRulemaking Portal: http://
burdens or increase any existing and Enforcement www.regulations.gov. Follow the
burdens. Therefore, a PRA analysis is instructions for submitting comments.
not required. 30 CFR Part 946 Instructions: All submissions received
must include the agency name and
3. Executive Order 13132 [SATS No. VA–127–FOR; Docket ID: OSM– docket number for this rulemaking. For
2015–0003; S1D1S SS08011000 SX064A000 detailed instructions on submitting
Executive Order 13132 encourages 167S180110; S2D2S SS08011000 comments and additional information
independent regulatory agencies to SX064A000 16XS501520]
on the rulemaking process, see the
consider the impact of their actions on ‘‘Public Comment Procedures’’ heading
state and local interests. NCUA, an Virginia Regulatory Program
of the SUPPLEMENTARY INFORMATION
independent regulatory agency as AGENCY: Office of Surface Mining section of this document.
defined in 44 U.S.C. 3502(5), voluntarily Reclamation and Enforcement, Interior. Docket: For access to the docket to
complies with the executive order to review copies of the Virginia program,
ACTION: Proposed rule; public comment
adhere to fundamental federalism this amendment, a listing of any
principles. The proposed rule does not period and opportunity for public
hearing on proposed amendment. scheduled public hearings, and all
have substantial direct effects on the written comments received in response
states, on the relationship between the SUMMARY: The Office of Surface Mining to this document, you must go to the
national government and the states, or Reclamation and Enforcement (OSMRE), address listed below during normal
on the distribution of power and is announcing receipt of a proposed business hours, Monday through Friday,
responsibilities among the various amendment to the Virginia regulatory excluding holidays. You may receive
levels of government. NCUA has, program (the Virginia program) under one free copy of the amendment by
therefore, determined that this proposal the Surface Mining Control and contacting OSMRE’s Knoxville Field
does not constitute a policy that has Reclamation Act of 1977 (SMCRA or the Office or the full text of the program
federalism implications for purposes of Act). Through this proposed amendment is available for you to read
the executive order. amendment, the State seeks to revise the at www.regulations.gov.
4. Assessment of Federal Regulations Virginia Coal Surface Mining Mr. Earl Bandy, Field Office Director,
and Policies on Families Reclamation Regulations (the State Knoxville Field Office, Office of Surface
regulations) in light of legislative Mining Reclamation and Enforcement,
NCUA has determined that this changes made by the General Assembly 710 Locust Street, 2nd Floor, Knoxville,
proposed rule will not affect family of Virginia. If approved, the proposed Tennessee 37902, Telephone: (865) 545–
tkelley on DSK3SPTVN1PROD with PROPOSALS

well-being within the meaning of amendment would incorporate these 4103 ext 186, Email: ebandy@osmre.gov.
section 654 of the Treasury and General legislative changes into the approved In addition, you may review a copy of
Government Appropriations Act, 1999, State program. Additionally, the State the amendment during regular business
Public Law 105–277, 112 Stat. 2681 regulations would be amended to revise hours at the following location:
(1998). the language of the public participation Mr. Harve A. Mooney, Legal Services
regulations to clarify proof of Officer, Virginia Department of Mines,
75 U.S.C. 603(a); 12 U.S.C. 1787(c)(1). publication, remove the self-bonding Minerals and Energy, 3405 Mountain
8 44 U.S.C. 3507(d); 5 CFR part 1320. instrument, and remove duplicate pool Empire Road, Big Stone Gap, Virginia

VerDate Sep<11>2014 17:42 Oct 21, 2015 Jkt 238001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\22OCP1.SGM 22OCP1
Document Created: 2015-12-14 15:33:59
Document Modified: 2015-12-14 15:33:59
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Proposed rule.
Dates		Comments must be received on or before November 23, 2015.
Contact		John Nilles, Senior Capital Markets
FR Citation		80 FR 63932
RIN Number		3133-AE55
CFR Associated		Credit Unions and Investments