82 FR 55497 - Corporate Credit Unions
NATIONAL CREDIT UNION ADMINISTRATION Federal Register Volume 82, Issue 224 (November 22, 2017)
Federal Register Volume 82, Issue 224 (November 22, 2017)
| Page Range | 55497-55500 | |
| FR Document | 2017-25223 |
[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)] [Rules and Regulations] [Pages 55497-55500] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-25223] ======================================================================= ----------------------------------------------------------------------- NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 704 RIN 3133-AE75 Corporate Credit Unions AGENCY: National Credit Union Administration (NCUA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The NCUA Board (Board) is amending its regulations governing corporate credit unions (corporates) and the scope of their activities. Specifically, the amendments revise provisions on retained earnings and Tier 1 capital. DATES: The rule is effective December 22, 2017. FOR FURTHER INFORMATION CONTACT: Yvonne Applonie, Director of Supervision, Office of National Examinations and Supervision, at 1775 Duke Street, Alexandria, Virginia 22314 or telephone (703) 518-6595; or Marvin Shaw, Staff Attorney, Office of General Counsel, at the above address or telephone (703) 518-6553. SUPPLEMENTARY INFORMATION: I. Background The Financial Crisis of 2007-2009 The financial crisis of 2007-2009 took a heavy toll on the corporate credit union system. The crisis, largely mortgage related, greatly affected the investment portfolios of many corporates, causing widespread liquidity problems, instability in the system, and failures. During this period, the NCUA took extraordinary short and mid-term measures to stabilize the corporate system. Among other things, it: (1) Made capital injections; (2) approved the Temporary Corporate Credit Union Share Guarantee Program, which guaranteed uninsured shares at participating corporates; (3) retained an independent third party to analyze expected non-recoverable credit losses for distressed securities held by corporates; (4) conserved five corporates; and (5) created the NCUA Guaranteed Note Program.\1\ --------------------------------------------------------------------------- \1\ As part of the corporate system resolution, the NCUA created the NCUA Guaranteed Note Program to provide long-term funding for distressed investment securities (Legacy Assets) from the five failed corporates. Legacy Assets consisted of over 2,000 investment securities secured by approximately 1.6 million residential mortgages, as well as commercial mortgages and other securitized assets. --------------------------------------------------------------------------- The 2010 Amendments In 2010, the Board comprehensively revised the regulations governing corporates and their activities to provide longer term structural enhancements to the corporate system.\2\ The 2010 rule established a regulatory framework that provides a foundation for a healthy corporate system that: (1) Delivers important services to the corporates' natural person credit union members, such as payment systems and liquidity; and (2) builds and attracts sufficient capital.\3\ The 2010 rule also sought to prevent the recurrence of financial losses similar to those that led to the failure of the referenced five corporates and weakened the financial condition of others. --------------------------------------------------------------------------- \2\ 12 CFR part 704; 75 FR 64786 (Oct. 20, 2010). \3\ 75 FR 64787, 64787 (Oct. 20, 2010). --------------------------------------------------------------------------- The 2010 rule curtailed several practices that contributed to the corporate failures. Specifically, it established investment concentration limits, limited asset maturities, and prohibited investments in subordinated and private label mortgage-backed securities. The 2010 rule also implemented a prompt corrective action (PCA) regime stipulating capital adequacy for corporates. Largely based on the Basel I requirements, the capital requirements of the 2010 rule emphasized corporates holding tangible and durable capital. The Current Environment The provisions of the 2010 rule have successfully stabilized the corporate system and improved the corporates' ability to function and provide services to natural person credit unions. Additionally, since 2010, the overall economy has improved greatly, thereby improving the economic landscape in which corporates operate. Further, the large concentration of troubled assets within the corporate system has been reduced through portfolio repositioning or the NCUA's intervention. The corporate system has significantly contracted and consolidated, with assets declining from approximately $81.7 billion prior to the 2010 rule to approximately $24.9 billion today. In that same time period, the number of corporates has decreased from 26 to 11. Given these developments, the Board decided to revisit the 2010 rule's capital standards. II. July 2017 Proposal As a result of its review of the corporate capital standards, in July 2017, the Board published amendments to the corporate rule, which primarily affect the calculation of capital after corporates consolidate and set a retained earnings ratio target in meeting PCA standards.\4\ --------------------------------------------------------------------------- \4\ 82 FR 30774 (July 3, 2017). --------------------------------------------------------------------------- Specifically, the Board proposed incorporating ``GAAP equity acquired in a merger'' as a component of retained earnings. This amendment to the definition of ``retained earnings'' in turn affects the definition of ``Tier 1 capital,'' which includes retained earnings as one component of Tier 1 capital. In the proposal, the Board stated that expressly including such equity acquired in a merger as retained earnings and referencing GAAP clarifies that this capital is available to cover losses, enhances transparency, and reduces ambiguity.\5\ The Board also proposed deleting the phrase ``the retained earnings of any acquired credit union, or an integrated set of activities and assets, calculated at the point of acquisition, if the acquisition is a mutual combination'' from the current definition of ``Tier 1 capital,'' given that it would be redundant as a result of the proposal. --------------------------------------------------------------------------- \5\ Id. --------------------------------------------------------------------------- In the 2010 rule, the Board encouraged corporates to build retained earnings, which has generally yielded positive results. Nevertheless, in the July 2017 proposal, the Board proposed amending this aspect of the regulation for three reasons: (1) The 2010 rule's language did not expressly reference ``GAAP equity acquired in mergers'' as a component of retained earnings; (2) the 2010 rule's language limited perpetual contributed capital (PCC) for regulatory capital purposes; and (3) the 2010 rule's language was inconsistent with other capital regulations. Specifically, the Board proposed removing the requirement \6\ to limit PCC counted as Tier 1 capital to the amount of retained earnings. Further, the Board proposed permitting a corporate to include in its Tier 1 capital all PCC that is sourced from an entity not covered by federal share insurance. --------------------------------------------------------------------------- \6\ This requirement would not have gone into effect until October 2020. --------------------------------------------------------------------------- Further, as discussed in greater detail below, the Board proposed adding a definition of ``retained earnings ratio'' to the regulation. Under the proposal, that term would mean ``the corporate credit union's retained earnings divided by its moving daily average net assets.'' The Board proposed requiring all corporates [[Page 55498]] to achieve an eventual retained earnings ratio of 250 basis points, recognizing the importance of retained earnings to the corporate system and the National Credit Union Share Insurance Fund. Under the proposal, upon attaining this benchmark, a corporate would be permitted to include all PCC in its Tier 1 capital, regardless of source. Until a corporate achieved that benchmark, it would be required to deduct PCC exceeding retained earnings by 200 basis points from its Tier 1 capital. As noted in the proposal, the Board believes this requirement provides an inducement to build retained earnings and promotes clarity as to the minimum amount of retained earnings held by a corporate to account for potential losses. Lastly, in Appendix B to part 704, the Board proposed adding a ``retained earnings ratio'' requirement to the Part I expanded investment authorities. The Board believed that by doing so, the retained earnings ratio requirement would limit the risk of the expanded investment portfolios. Specifically, the Board proposed to employ an indexed retained earnings requirement, thereby correlating with actual risk taking. III. Summary of Comments on the July 2017 Proposal The NCUA received 38 comments on the proposal, including those from corporates, individual credit unions, trade associations, and credit union leagues. These commenters uniformly supported the proposed rule. No commenter opposed the proposal. As an overview, commenters stated that the proposed rule: (1) Enhances transparency; reduces ambiguity; and better aligns capital regulations with the financial marketplace, GAAP accounting standards, and treatment by other financial institutions and their regulators; (2) provides greater flexibility in calculating and treating capital and promotes increased certainty and stability in the credit union system; (3) enhances the safety and soundness of corporate credit unions, which are essential for the credit union system; (4) provides greater liquidity to the benefit of natural person credit unions; and (5) reflects the improved health of the economy, the credit union system, and the corporates since 2010. Each specific proposal and the corresponding public comments are discussed below in more detail. A. Corporate Consolidations and Capital in Mergers--Definition of Retained Earnings As noted above, the Board proposed amending the definition of ``retained earnings.'' The definition of ``retained earnings'' prior to the proposal included undivided earnings, regular reserve, reserve for contingencies, supplemental reserves, reserve for leases, and other appropriations from undivided earnings as designated by management or the NCUA. The proposal added ``GAAP equity acquired in a merger'' to that list. The Board stated that expressly including equity acquired in a merger as retained earnings and referencing GAAP would clarify that this capital is available to cover losses, enhances transparency, and reduce ambiguity. No commenter objected to this proposal. Approximately 30 commenters specifically supported it. These commenters stated that including such equity acquired in a merger as retained earnings and referencing GAAP provides consistency with other regulators and will help match regulatory principles with GAAP and other financial measurements within the industry. In turn, this enhances transparency of capital adequacy and eliminates confusion for users of financial statements. A few commenters stated that the change would not increase risk to the corporate system. Consistent with the proposal and the comments, the Board amends the definition of ``retained earnings'' to incorporate ``GAAP equity acquired in a merger'' as proposed. B. Retained Earnings Ratio As mentioned above, in 2010, the Board comprehensively modified Part 704, with particular focus on providing incentives to increase retained earnings. The 2010 rule's PCA provisions require corporates to meet a leverage ratio. This leverage ratio consists of retained earnings and PCC.\7\ While noting that this effort to increase retained earnings has been successful, the Board also stated that the language in the current rule is indirect and may disadvantage corporates working with third parties. Specifically, the limitation on PCC for regulatory capital purposes does not recognize the full value of PCC that stands to absorb losses and protect counterparties. Accordingly, in the 2017 proposal, the Board proposed modifying the manner in which PCC is treated during a ten-year phase-in period. The phase-in period for PCC is intended to provide an incentive to corporates to increase retained earnings. --------------------------------------------------------------------------- \7\ Perpetual Contributed Capital means accounts or other interests of a corporate credit union that are perpetual, non- cumulative dividend accounts; are available to cover losses that exceed retained earnings, and are not insured by the National Credit Union Share Insurance Fund. --------------------------------------------------------------------------- In the 2017 proposal, the Board proposed to remove the current requirement \8\ to limit PCC counted as Tier 1 capital to the amount of retained earnings. Further, the Board proposed to permit a corporate to include in its Tier 1 capital all PCC that is sourced from an entity not covered by federal share insurance. Recognizing that retained earnings is critical to the health of the corporate system and the share insurance fund, the Board proposed adding a provision to part 704 requiring all corporates to achieve eventual retained earnings of 250 basis points. To this end, the Board proposed adding a definition of retained earnings ratio to mean ``the corporate credit union's retained earnings divided by its moving daily average of net assets.'' Upon attaining the benchmark of 250 basis points, a corporate would be permitted to include all PCC, regardless of its source, in its Tier 1 capital. Prior to attaining the benchmark, the corporate would be required to deduct the amount of PCC exceeding retained earnings by 200 basis points as an inducement to build retained earnings. --------------------------------------------------------------------------- \8\ This requirement would not have gone into effect until 2020. --------------------------------------------------------------------------- No commenter objected to this proposal. Approximately 30 commenters expressly supported it. These commenters stated that the 2010 amendments resulted in corporates accumulating sufficient retained earnings to meet or exceed adequate capitalization under PCA through the 2016 phase-in adjustment. Thus, they agreed with the NCUA's proposal to remove the requirement to limit PCC counted as Tier 1 capital, stating that the amendment enhances clarity, helps ensure capital adequacy, and provides the first layer of insulation to protect the share insurance fund. They stated that the change would better align a corporate's use of capital with the expectations of member credit unions. One commenter requested modifying the proposed definition of Tier 1 capital as follows: ``If a corporate credit union's retained earnings ratio is less than two and a half percent, deduct the amount of PCC received from federally insured credit unions less retained earnings that exceeds two percent of moving daily average net assets (MDANA).'' It believed that this change would clarify the NCUA's acceptance of capital received by corporates from members. The Board has compared this recommended language with the proposed regulatory text and has determined that the Board's proposed language is more direct and more readily understandable. Accordingly, the Board is adopting the proposed [[Page 55499]] language in the final rule without change. Another commenter suggested that the corporate call report continue to clearly reflect the amount of PCC that is not being counted in the leverage ratio, as it currently does in the ``PCC calculation'' section of the call report. The Board notes that it will continue to require this information in the call report. C. Appendix B to Part 704--Expanded Authorities Appendix B to part 704 enumerates the expanded authorities available to corporates and procedures that a corporate must follow to be granted such authorities. Specifically, the Board proposed adding a retained earnings ratio requirement to the expanded investment authorities. The Board believed such an addition would limit the risk of the expanded investment portfolios. No commenters addressed this issue. The Board is adopting this amendment as proposed. D. Miscellaneous Comments Beyond the Scope of the Final Rule Several commenters requested that the NCUA conduct a comprehensive review of Part 704 in 2018. The commenters stated that such a review is overdue considering the last comprehensive review of the corporate rule occurred in 2010. The commenters stated that such a review would allow stakeholders to explore other rule modernization opportunities. One commenter suggested such a review might result in ``thoughtful loosening'' of the corporate rules. One commenter requested that the NCUA improve coordination with state credit union regulators and reinforce the dual chartering system and joint supervision. IV. Regulatory Procedures 1. Regulatory Flexibility Act The Regulatory Flexibility Act requires the NCUA to prepare an analysis of any significant economic impact a regulation may have on a substantial number of small entities (primarily those under $100 million in assets).\9\ This rule only affects corporate credit unions, all of which have more than $100 million in assets. Accordingly, the NCUA certifies the rule will not have a significant economic impact on a substantial number of small credit unions. --------------------------------------------------------------------------- \9\ 5 U.S.C. 603(a). --------------------------------------------------------------------------- 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 modifies the existing burden.\10\ For purposes of the PRA, a paperwork burden may take the form of a reporting or recordkeeping or third party disclosure requirement, both referred to as information collections. The rule does not contain information collection requirements that require approval by OMB under the PRA (44 U.S.C. 3501). --------------------------------------------------------------------------- \10\ 44 U.S.C. 3507(d); 5 CFR part 1320. --------------------------------------------------------------------------- 3. Small Business Regulatory Enforcement Fairness Act The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (SBREFA) provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the Administrative Procedure Act. After reviewing the rule and its likely impacts, NCUA believes that the rule is mostly technical and will not lead to a measurable change to (1) credit union lending to consumers or businesses, (2) net worth of natural person credit unions, or (3) interest rates paid or received by natural person credit unions. Accordingly, NCUA believes this final rule is a not ``major rule'' within the meaning of the relevant sections of SBREFA. As required by SBREFA, NCUA has filed the appropriate reports so that this final rule may be reviewed. 4. Executive Order 13132 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. The 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. The NCUA has, therefore, determined that this rule does not constitute a policy that has federalism implications for purposes of the executive order. 5. Assessment of Federal Regulations and Policies on Families The 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 704 Credit unions, Corporate credit unions, Reporting and recordkeeping requirements. By the National Credit Union Administration Board on November 16, 2017. Gerard Poliquin, Secretary of the Board. For the reasons discussed above, the National Credit Union Administration Board amends 12 CFR part 704 as follows: PART 704--CORPORATE CREDIT UNIONS 0 1. The authority citation for part 704 continues to read as follows: Authority: 12 U.S.C. 1766(a), 1781, and 1789. 0 2. Amend Sec. 704.2 by: 0 a. Revising the definition of ``Retained earnings''; 0 b. Adding in alphabetical order a definition for ``Retained earnings ratio''; and 0 c. Revising the definition of ``Tier 1 capital''. The revisions and addition read as follows: Sec. 704.2 Definitions. * * * * * Retained earnings means undivided earnings, regular reserve, reserve for contingencies, supplemental reserves, reserve for losses, GAAP equity acquired in a merger, and other appropriations from undivided earnings as designated by management or the NCUA. Retained earnings ratio means the corporate credit union's retained earnings divided by its moving daily average net assets. * * * * * Tier 1 capital means the sum of items in paragraphs (1) and (2) of this definition from which items in paragraphs (3) through (6) are deducted: (1) Retained earnings; (2) Perpetual contributed capital; (3) Deduct the amount of the corporate credit union's intangible assets that exceed one half percent of its moving daily average net assets (however, the NCUA may direct the corporate credit union to add back some of these assets on the NCUA's own initiative, or the NCUA's approval of petition from the applicable state regulator or application from the corporate credit union); (4) Deduct investments, both equity and debt, in unconsolidated CUSOs; [[Page 55500]] (5) Deduct an amount equal to any PCC or NCA that the corporate credit union maintains at another corporate credit union; (6) Deduct any amount of PCC received from federally insured credit unions that causes PCC minus retained earnings, all divided by moving daily average net assets, to exceed two percent when a corporate credit union's retained earnings ratio is less than two and a half percent. * * * * * 0 3. In Appendix B to part 704, in part I, revise paragraphs (b)(2) and (3) to read as follows: Appendix B to Part 704--Expanded Authorities and Requirements * * * * * Part I * * * * * (b) * * * (2) 28 percent if the corporate credit union has a seven percent minimum leverage ratio and a two and a half percent retained earnings ratio, and is specifically approved by the NCUA; or (3) 35 percent if the corporate credit union has an eight percent minimum leverage ratio and a three percent retained earnings ratio and is specifically approved by the NCUA. * * * * * [FR Doc. 2017-25223 Filed 11-21-17; 8:45 am] BILLING CODE 7535-01-P
![Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Rules and Regulations 55497
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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![55500 Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Rules and Regulations
(5) Deduct an amount equal to any FOR FURTHER INFORMATION CONTACT: 1, 2017. Under the joint resolution and
PCC or NCA that the corporate credit Owen Bonheimer and Nora Rigby, by operation of the Congressional
union maintains at another corporate Senior Counsels, Office of Regulations, Review Act, the arbitration agreements
credit union; Consumer Financial Protection Bureau, rule has no force or effect. Accordingly,
(6) Deduct any amount of PCC at 202–435–7700 or cfpb_reginquiries@ the Bureau is hereby removing the final
received from federally insured credit cfpb.gov. Press inquiries should be rule titled Arbitration Agreements from
unions that causes PCC minus retained directed to the Office of the CFR.
earnings, all divided by moving daily Communications, at 202–435–7170 or
II. Procedural Requirements
average net assets, to exceed two press@consumerfinance.gov.
percent when a corporate credit union’s SUPPLEMENTARY INFORMATION:
This action is not an exercise of the
retained earnings ratio is less than two Bureau’s rulemaking authority under
and a half percent. I. Background the Administrative Procedure Act (APA)
* * * * * Pursuant to section 1028(b) of the because the Bureau is not ‘‘formulating,
Dodd-Frank Wall Street Reform and amending, or repealing a rule’’ under 5
■ 3. In Appendix B to part 704, in part
Consumer Protection Act (Pub. L. 111– U.S.C. 551(5). Rather, the Bureau is
I, revise paragraphs (b)(2) and (3) to read
203), on July 10, 2017, the Bureau effectuating changes to the CFR to
as follows:
issued a final rule titled Arbitration reflect what congressional action has
Appendix B to Part 704—Expanded Agreements to regulate pre-dispute already accomplished. Accordingly, the
Authorities and Requirements arbitration agreements in contracts for Bureau is not soliciting comments on
* * * * * specified consumer financial products this action.
and services. The Bureau published the List of Subjects in 12 CFR Part 1040
Part I
arbitration agreements rule in the
* * * * * Federal Register on July 19, 2017 (82 FR Banks, Banking, Business and
(b) * * * 33210), establishing 12 CFR part 1040. industry, Claims, Consumer protection,
(2) 28 percent if the corporate credit union
As required by section 1028(a) of the Contracts, Credit, Credit unions,
has a seven percent minimum leverage ratio Finance, National banks, Reporting and
and a two and a half percent retained Dodd-Frank Act, the arbitration
agreements rule followed the recordkeeping requirements, Savings
earnings ratio, and is specifically approved associations.
by the NCUA; or publication and delivery to Congress of
(3) 35 percent if the corporate credit union the Bureau’s March 2015 study PART 1040—[REMOVED]
has an eight percent minimum leverage ratio concerning the use of pre-dispute
and a three percent retained earnings ratio arbitration agreements. The arbitration For the reasons set forth above, and
and is specifically approved by the NCUA. agreements rule would have imposed pursuant to the Congressional Review
* * * * * two sets of limitations on the use of pre- Act (5 U.S.C. 801 et seq.) and Public
[FR Doc. 2017–25223 Filed 11–21–17; 8:45 am] dispute arbitration agreements by Law 115–74 (131 Stat. 1243), the Bureau
BILLING CODE 7535–01–P providers of certain consumer financial amends 12 CFR chapter X by removing
products and services. First, the part 1040.
arbitration agreements rule would have Dated: November 15, 2017.
BUREAU OF CONSUMER FINANCIAL prohibited providers from using a pre- Richard Cordray,
PROTECTION dispute arbitration agreement to block Director, Bureau of Consumer Financial
consumer class actions in court and Protection.
12 CFR Part 1040 would have required providers to [FR Doc. 2017–25324 Filed 11–21–17; 8:45 am]
include a provision reflecting this
[Docket No. CFPB–2016–0020] BILLING CODE 4810–AM–P
limitation in arbitration agreements they
entered into. Second, the arbitration
RIN 3170–AA51
agreements rule would have required
providers to redact and submit to the DEPARTMENT OF TRANSPORTATION
Arbitration Agreements
Bureau certain records relating to Federal Aviation Administration
AGENCY: Bureau of Consumer Financial arbitral proceedings and relating to the
Protection. use of pre-dispute arbitration 14 CFR Part 25
ACTION: Final rule; CRA revocation. agreements in court, and would have
required the Bureau to publish these [Docket No. FAA–2017–0951; Special
SUMMARY: Under the Congressional records on its Web site. While the Conditions No. 25–706–SC]
Review Act, Congress has passed and arbitration agreements rule became
the president has signed a joint effective on September 18, 2017, the Special Conditions: Mitsubishi Aircraft
resolution disapproving a final rule arbitration agreements rule would have Corporation Model MRJ–200 airplane;
published by the Bureau of Consumer applied only to pre-dispute arbitration Design Roll Maneuver for Electronic
Financial Protection (Bureau) on July agreements entered into after March 19, Flight Controls
19, 2017, to regulate arbitration 2018. AGENCY: Federal Aviation
agreements in contracts for specified The United States House of Administration (FAA), DOT.
consumer financial products and Representative passed House Joint ACTION: Final special conditions; request
services. Under the joint resolution and Resolution 111 disapproving the for comments.
by operation of the Congressional arbitration agreements rule under the
ethrower on DSK3G9T082PROD with RULES
Review Act, the arbitration agreements Congressional Review Act (5 U.S.C. 801 SUMMARY: These special conditions are
rule has no force or effect. The Bureau et seq.) on July 25, 2017. The United issued for Mitsubishi Aircraft
is hereby removing it from the Code of States Senate passed the joint resolution Corporation (Mitsubishi) Model MRJ–
Federal Regulations (CFR). on October 24, 2017. President Donald 200 airplanes. These airplanes will have
DATES: This action is effective J. Trump signed the joint resolution into a novel or unusual design feature when
November 22, 2017. law as Public Law 115–74 on November compared to the state of technology
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Document Created: 2017-11-22 00:48:47
Document Modified: 2017-11-22 00:48:47
| 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 | Final rule. | |
| Dates | The rule is effective December 22, 2017. | |
| Contact | Yvonne Applonie, Director of Supervision, Office of National Examinations and Supervision, at 1775 Duke Street, Alexandria, Virginia 22314 or telephone (703) 518-6595; or Marvin Shaw, Staff Attorney, Office of General Counsel, at the above | |
| FR Citation | 82 FR 55497 | |
| RIN Number | 3133-AE75 | |
| CFR Associated | Credit Unions; Corporate Credit Unions and Reporting and Recordkeeping Requirements |
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