82 FR 55496 - Rules of Organization
FEDERAL RESERVE SYSTEM Federal Register Volume 82, Issue 224 (November 22, 2017)
Federal Register Volume 82, Issue 224 (November 22, 2017)
| Page Range | 55496-55497 | |
| FR Document | 2017-25122 |
[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)] [Rules and Regulations] [Pages 55496-55497] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-25122] ----------------------------------------------------------------------- FEDERAL RESERVE SYSTEM 12 CFR Part 265 [Docket No. OP-1578] Rules of Organization AGENCY: Board of Governors of the Federal Reserve System (Board). ACTION: Amendment to Rules of Organization. ----------------------------------------------------------------------- SUMMARY: The Board has amended its definition of a quorum of the Board in the Board's Rules of Organization. The amendment is designed to facilitate the Board's ability to continue to function efficiently during periods of substantial vacancies on the Board. The amendment does not alter the number of Board members required to constitute a quorum in normal operating environments. The amendment also addresses Board member recusals and disqualifications. In addition, the Board has provided a modified definition of a quorum during exigent circumstances. In connection with this modification, the Board is amending its Rules Regarding Delegation of Authority, published elsewhere in this Federal Register, to authorize the Chair (or Vice Chair, if the Chair is unavailable) to determine when an emergency situation exists. DATES: The amendment to the Board's Rules of Organization became effective on October 25, 2017. FOR FURTHER INFORMATION CONTACT: Laurie Schaffer, Associate General Counsel (202) 452-2272, or Daniel Hickman, Counsel (202) 973-7432, Legal Division, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. For the hearing impaired only, Telecommunication Device for Deaf (TDD) users may contact (202) 263-4869. SUPPLEMENTARY INFORMATION: The Board consists of up to seven members appointed by the President, by and with the advice and consent of the Senate, as provided in the Federal Reserve Act (Act).\1\ The Act does not define a quorum of the Board, and authorizes the Board to make all rules and regulations necessary to enable the Board effectively to perform its duties and functions.\2\ For many years, the Board defined a quorum to be a majority (four members) of its authorized strength of seven members. In 2003, the Board revised its definition of a quorum of the Board to be a majority of the Board members currently in office, unless there are five members in office, in which case a quorum would be four members.\3\ This modification allowed the Board to function with fewer than four members in office and enhanced the Board's ability to function during emergencies. --------------------------------------------------------------------------- \1\ See 12 U.S.C. 241. \2\ See 12 U.S.C. 248(i). \3\ 66 FR 37686 (Jul 19, 2001), as amended at 68 FR 24743 (May 8, 2003). --------------------------------------------------------------------------- Over the past decade, the Board has had to operate with fewer than five members on several occasions.\4\ Based on this experience, the Board has determined that substantial vacancies present administrative and logistical challenges that make it difficult to conduct routine business and efficiently manage operations, particularly with the Board's traditional reliance on a 3-member committee structure. In light of these considerations, the Board has reconsidered its quorum practice and decided to amend its definition of a quorum to provide that a quorum of the Board is four members, unless there are three or fewer members in office, in which case a quorum would be all members in office. This revised definition will facilitate the Board's ability to continue to function efficiently during periods of substantial vacancies on the Board. This revision does not alter the number of Board members required to constitute a quorum or the functioning of the Board's committee structure in normal operating environments (that is, when five or more members are in office). --------------------------------------------------------------------------- \4\ Since the current structure of the Board was established in 1936, the Board has had fewer than five members on only a few occasions for a short period of time and the Board has never had fewer than four members. --------------------------------------------------------------------------- Increasing the quorum requirement for a four-member and three- member Board may make it more difficult to convene a quorum if a member of the Board is recused or disqualified from a particular matter. To address this concern, the Board also has amended its Rules of Organization to clarify that Board members who are recused or disqualified from participating in a particular matter will be excluded from calculations of the quorum requirement for that matter. Since the revisions may make it more difficult to convene a quorum of the Board under exigent circumstances, the Board also has added a modified definition of quorum providing that, in an emergency situation, a quorum of the Board consists of a majority of the Board members in office. An emergency situation is defined as a situation when action on a matter is necessary to prevent, correct, or mitigate serious harm to the economy or the stability of the financial system, and action is required before the full Board can convene. The Board is amending its Rules Regarding Delegation of Authority (12 CFR part 265), published elsewhere in this Federal Register, to authorize the Chair (or the Vice Chair, if the Chair is unavailable) to determine when an emergency situation exists. The Board has incorporated these revisions into its Rules of Organization and Rules Regarding Delegation of Authority,\5\ published elsewhere in this Federal Register. The revisions relate solely to the internal procedure of the Board, and, accordingly, the public notice, public comment and delayed effective date provisions of the Administrative Procedure Act do not apply. See 5 U.S.C. 553(b) and (d). Because public notice and comment is not required, the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) also does not apply to this action. --------------------------------------------------------------------------- \5\ The Board's Rules Regarding Delegation of Authority are codified at 12 CFR part 265. --------------------------------------------------------------------------- Board of Governors--Rules of Organization 0 Section 2 paragraph (b) is revised to read as follows: Section 2 Composition, Location, and Public Information * * * * * (b)(1) Quorum. Four Board members constitutes a quorum of the Board for purposes of transacting business except that, if there are three or fewer Board members in office, then a quorum consists of all Board members currently in office. If a Board member is recused or disqualified from participating in a matter, the member shall not be counted for purposes of calculating the quorum for that matter. (b)(2) Exigent Circumstances. In an emergency situation, a quorum of the Board consists of a majority of the Board members in office. An emergency situation exists when action on a matter is necessary to prevent, correct, or mitigate serious harm to the economy or the stability of the financial system, and action is required before the full Board can convene. [[Page 55497]] By order of the Board of Governors of the Federal Reserve System, November 15, 2017. Ann E. Misback, Secretary of the Board. [FR Doc. 2017-25122 Filed 11-21-17; 8:45 am] BILLING CODE 6210-01-P
![55496 Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Rules and Regulations
By order of the Board of Governors of the to perform its duties and functions.2 For an emergency situation, a quorum of the
Federal Reserve System, October 31, 2017. many years, the Board defined a quorum Board consists of a majority of the Board
Ann E. Misback, to be a majority (four members) of its members in office. An emergency
Secretary of the Board. authorized strength of seven members. situation is defined as a situation when
[FR Doc. 2017–24052 Filed 11–21–17; 8:45 am] In 2003, the Board revised its definition action on a matter is necessary to
BILLING CODE 6210–01–P of a quorum of the Board to be a prevent, correct, or mitigate serious
majority of the Board members currently harm to the economy or the stability of
in office, unless there are five members the financial system, and action is
FEDERAL RESERVE SYSTEM in office, in which case a quorum would required before the full Board can
be four members.3 This modification
convene. The Board is amending its
12 CFR Part 265 allowed the Board to function with
Rules Regarding Delegation of Authority
[Docket No. OP–1578]
fewer than four members in office and
enhanced the Board’s ability to function (12 CFR part 265), published elsewhere
during emergencies. in this Federal Register, to authorize the
Rules of Organization Chair (or the Vice Chair, if the Chair is
Over the past decade, the Board has
AGENCY: Board of Governors of the had to operate with fewer than five unavailable) to determine when an
Federal Reserve System (Board). members on several occasions.4 Based emergency situation exists.
ACTION: Amendment to Rules of on this experience, the Board has The Board has incorporated these
Organization. determined that substantial vacancies revisions into its Rules of Organization
present administrative and logistical and Rules Regarding Delegation of
SUMMARY: The Board has amended its challenges that make it difficult to Authority,5 published elsewhere in this
definition of a quorum of the Board in conduct routine business and efficiently Federal Register. The revisions relate
the Board’s Rules of Organization. The manage operations, particularly with the solely to the internal procedure of the
amendment is designed to facilitate the Board’s traditional reliance on a 3-
Board, and, accordingly, the public
Board’s ability to continue to function member committee structure. In light of
efficiently during periods of substantial notice, public comment and delayed
these considerations, the Board has
vacancies on the Board. The amendment reconsidered its quorum practice and effective date provisions of the
does not alter the number of Board decided to amend its definition of a Administrative Procedure Act do not
members required to constitute a quorum to provide that a quorum of the apply. See 5 U.S.C. 553(b) and (d).
quorum in normal operating Board is four members, unless there are Because public notice and comment is
environments. The amendment also three or fewer members in office, in not required, the Regulatory Flexibility
addresses Board member recusals and which case a quorum would be all Act (5 U.S.C. 601 et seq.) also does not
disqualifications. In addition, the Board members in office. This revised apply to this action.
has provided a modified definition of a definition will facilitate the Board’s
Board of Governors—Rules of
quorum during exigent circumstances. ability to continue to function
Organization
In connection with this modification, efficiently during periods of substantial
the Board is amending its Rules vacancies on the Board. This revision ■ Section 2 paragraph (b) is revised to
Regarding Delegation of Authority, does not alter the number of Board
read as follows:
published elsewhere in this Federal members required to constitute a
Register, to authorize the Chair (or Vice quorum or the functioning of the Section 2 Composition, Location, and
Chair, if the Chair is unavailable) to Board’s committee structure in normal Public Information
determine when an emergency situation operating environments (that is, when * * * * *
exists. five or more members are in office).
Increasing the quorum requirement (b)(1) Quorum. Four Board members
DATES: The amendment to the Board’s
for a four-member and three-member constitutes a quorum of the Board for
Rules of Organization became effective
Board may make it more difficult to purposes of transacting business except
on October 25, 2017.
convene a quorum if a member of the that, if there are three or fewer Board
FOR FURTHER INFORMATION CONTACT:
Board is recused or disqualified from a members in office, then a quorum
Laurie Schaffer, Associate General consists of all Board members currently
particular matter. To address this
Counsel (202) 452–2272, or Daniel
concern, the Board also has amended its in office. If a Board member is recused
Hickman, Counsel (202) 973–7432,
Rules of Organization to clarify that or disqualified from participating in a
Legal Division, Board of Governors of
Board members who are recused or matter, the member shall not be counted
the Federal Reserve System, 20th Street
disqualified from participating in a for purposes of calculating the quorum
and Constitution Avenue NW.,
particular matter will be excluded from for that matter.
Washington, DC 20551. For the hearing
calculations of the quorum requirement
impaired only, Telecommunication (b)(2) Exigent Circumstances. In an
for that matter.
Device for Deaf (TDD) users may contact Since the revisions may make it more emergency situation, a quorum of the
(202) 263–4869. difficult to convene a quorum of the Board consists of a majority of the Board
SUPPLEMENTARY INFORMATION: The Board Board under exigent circumstances, the members in office. An emergency
consists of up to seven members Board also has added a modified situation exists when action on a matter
appointed by the President, by and with definition of quorum providing that, in is necessary to prevent, correct, or
the advice and consent of the Senate, as mitigate serious harm to the economy or
ethrower on DSK3G9T082PROD with RULES
provided in the Federal Reserve Act 2 See 12 U.S.C. 248(i). the stability of the financial system, and
(Act).1 The Act does not define a 3 66 FR 37686 (Jul 19, 2001), as amended at 68 action is required before the full Board
quorum of the Board, and authorizes the FR 24743 (May 8, 2003). can convene.
4 Since the current structure of the Board was
Board to make all rules and regulations
established in 1936, the Board has had fewer than
necessary to enable the Board effectively five members on only a few occasions for a short
5 The Board’s Rules Regarding Delegation of
period of time and the Board has never had fewer
1 See 12 U.S.C. 241. than four members. Authority are codified at 12 CFR part 265.
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By order of the Board of Governors of the The 2010 Amendments II. July 2017 Proposal
Federal Reserve System, November 15, 2017.
In 2010, the Board comprehensively As a result of its review of the
Ann E. Misback,
revised the regulations governing corporate capital standards, in July
Secretary of the Board. 2017, the Board published amendments
[FR Doc. 2017–25122 Filed 11–21–17; 8:45 am] corporates and their activities to provide
to the corporate rule, which primarily
longer term structural enhancements to
BILLING CODE 6210–01–P affect the calculation of capital after
the corporate system.2 The 2010 rule
corporates consolidate and set a
established a regulatory framework that retained earnings ratio target in meeting
provides a foundation for a healthy PCA standards.4
NATIONAL CREDIT UNION
corporate system that: (1) Delivers Specifically, the Board proposed
ADMINISTRATION
important services to the corporates’ incorporating ‘‘GAAP equity acquired in
12 CFR Part 704 natural person credit union members, a merger’’ as a component of retained
such as payment systems and liquidity; earnings. This amendment to the
RIN 3133–AE75 and (2) builds and attracts sufficient definition of ‘‘retained earnings’’ in turn
Corporate Credit Unions capital.3 The 2010 rule also sought to affects the definition of ‘‘Tier 1 capital,’’
prevent the recurrence of financial which includes retained earnings as one
AGENCY: National Credit Union losses similar to those that led to the component of Tier 1 capital. In the
Administration (NCUA). failure of the referenced five corporates proposal, the Board stated that expressly
ACTION: Final rule. and weakened the financial condition of including such equity acquired in a
others. merger as retained earnings and
SUMMARY: The NCUA Board (Board) is referencing GAAP clarifies that this
The 2010 rule curtailed several
amending its regulations governing capital is available to cover losses,
practices that contributed to the
corporate credit unions (corporates) and enhances transparency, and reduces
corporate failures. Specifically, it
the scope of their activities. Specifically, ambiguity.5 The Board also proposed
established investment concentration
the amendments revise provisions on deleting the phrase ‘‘the retained
retained earnings and Tier 1 capital. limits, limited asset maturities, and
earnings of any acquired credit union,
prohibited investments in subordinated
DATES: The rule is effective December or an integrated set of activities and
and private label mortgage-backed
22, 2017. assets, calculated at the point of
securities. The 2010 rule also
FOR FURTHER INFORMATION CONTACT: acquisition, if the acquisition is a
implemented a prompt corrective action
Yvonne Applonie, Director of mutual combination’’ from the current
(PCA) regime stipulating capital definition of ‘‘Tier 1 capital,’’ given that
Supervision, Office of National adequacy for corporates. Largely based
Examinations and Supervision, at 1775 it would be redundant as a result of the
on the Basel I requirements, the capital proposal.
Duke Street, Alexandria, Virginia 22314 requirements of the 2010 rule
or telephone (703) 518–6595; or Marvin In the 2010 rule, the Board
emphasized corporates holding tangible encouraged corporates to build retained
Shaw, Staff Attorney, Office of General and durable capital. earnings, which has generally yielded
Counsel, at the above address or
The Current Environment positive results. Nevertheless, in the
telephone (703) 518–6553.
July 2017 proposal, the Board proposed
SUPPLEMENTARY INFORMATION: amending this aspect of the regulation
The provisions of the 2010 rule have
I. Background successfully stabilized the corporate for three reasons: (1) The 2010 rule’s
system and improved the corporates’ language did not expressly reference
The Financial Crisis of 2007–2009 ability to function and provide services ‘‘GAAP equity acquired in mergers’’ as
The financial crisis of 2007–2009 took to natural person credit unions. a component of retained earnings; (2)
a heavy toll on the corporate credit Additionally, since 2010, the overall the 2010 rule’s language limited
union system. The crisis, largely economy has improved greatly, thereby perpetual contributed capital (PCC) for
mortgage related, greatly affected the improving the economic landscape in regulatory capital purposes; and (3) the
investment portfolios of many which corporates operate. Further, the 2010 rule’s language was inconsistent
corporates, causing widespread large concentration of troubled assets with other capital regulations.
liquidity problems, instability in the within the corporate system has been Specifically, the Board proposed
system, and failures. During this period, reduced through portfolio repositioning removing the requirement 6 to limit PCC
the NCUA took extraordinary short and or the NCUA’s intervention. The counted as Tier 1 capital to the amount
mid-term measures to stabilize the corporate system has significantly of retained earnings. Further, the Board
corporate system. Among other things, contracted and consolidated, with assets proposed permitting a corporate to
it: (1) Made capital injections; (2) declining from approximately $81.7 include in its Tier 1 capital all PCC that
approved the Temporary Corporate billion prior to the 2010 rule to is sourced from an entity not covered by
Credit Union Share Guarantee Program, approximately $24.9 billion today. In federal share insurance.
which guaranteed uninsured shares at that same time period, the number of Further, as discussed in greater detail
participating corporates; (3) retained an corporates has decreased from 26 to 11. below, the Board proposed adding a
independent third party to analyze Given these developments, the Board definition of ‘‘retained earnings ratio’’ to
expected non-recoverable credit losses decided to revisit the 2010 rule’s capital the regulation. Under the proposal, that
for distressed securities held by standards. term would mean ‘‘the corporate credit
corporates; (4) conserved five union’s retained earnings divided by its
ethrower on DSK3G9T082PROD with RULES
corporates; and (5) created the NCUA moving daily average net assets.’’ The
failed corporates. Legacy Assets consisted of over
Guaranteed Note Program.1 2,000 investment securities secured by Board proposed requiring all corporates
approximately 1.6 million residential mortgages, as
1 As part of the corporate system resolution, the well as commercial mortgages and other securitized 4 82 FR 30774 (July 3, 2017).
NCUA created the NCUA Guaranteed Note Program assets. 5 Id.
2 12 CFR part 704; 75 FR 64786 (Oct. 20, 2010).
to provide long-term funding for distressed 6 This requirement would not have gone into
investment securities (Legacy Assets) from the five 3 75 FR 64787, 64787 (Oct. 20, 2010). effect until October 2020.
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Document Created: 2017-11-22 00:48:53
Document Modified: 2017-11-22 00:48:53
| 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 | Rules and Regulations | |
| Action | Amendment to Rules of Organization. | |
| Dates | The amendment to the Board's Rules of Organization became effective on October 25, 2017. | |
| Contact | Laurie Schaffer, Associate General Counsel (202) 452-2272, or Daniel Hickman, Counsel (202) 973-7432, Legal Division, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. For the hearing impaired only, Telecommunication Device for Deaf (TDD) users may contact (202) 263-4869. | |
| FR Citation | 82 FR 55496 |
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