80 FR 63932 - Investment and Deposit Activities-Bank Notes

NATIONAL CREDIT UNION ADMINISTRATION

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

Page Range63932-63933
FR Document2015-26788

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]


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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. 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.

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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).
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    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.
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    \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.
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    \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.
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    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.
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    \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.
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    \8\ 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 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


Current View
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionProposed rule.
DatesComments must be received on or before November 23, 2015.
ContactJohn Nilles, Senior Capital Markets
FR Citation80 FR 63932 
RIN Number3133-AE55
CFR AssociatedCredit Unions and Investments

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