SUPPLEMENTARY INFORMATION:

A. Background

NCUA insures funds maintained in accounts of members or those otherwise eligible to maintain insured accounts (member accounts) at FICUs, protects the members who own FICUs, and charters and regulates federal credit unions (FCUs).^[1] NCUA administers the National Credit Union Share Insurance Fund (Share Insurance Fund). Backed by the full faith and credit of the United States, the Share Insurance Fund provides Federal share insurance to millions of account holders in FICUs.

Under the FCU Act, NCUA is responsible for paying share insurance to any member, or to any person with funds lawfully held in a member account, in the event of a FICU's failure, up to the standard maximum share insurance amount, which is currently set at $250,000.^[2] The FCU Act states the determination of the net amount of share insurance paid “shall be in accordance with such regulations as the Board may prescribe.” ^[3] The Board's share insurance regulations are codified in 12 CFR part 745. Section 745.13 currently requires each FICU to “provide notice to its members concerning NCUA insurance coverage of member accounts” and lists several ways a FICU may comply with this requirement. This section also requires FICUs to make copies of the relevant materials available to their members on request.

B. Legal Authority

The Board is issuing this proposed rule pursuant to its authority under the FCU Act. As noted, the FCU Act grants NCUA specific authority to draft share insurance regulations.^[4] Further, under the FCU Act, NCUA is the chartering and supervisory authority for FCUs and the federal supervisory authority for FICUs.^[5] The FCU Act grants NCUA a broad mandate to issue regulations governing both FCUs and all FICUs. Section 120 of the FCU Act is a general grant of regulatory authority and authorizes the Board to prescribe rules and regulations for the administration of the FCU Act.^[6] Section 207 of the FCU Act is a specific grant of authority over share insurance coverage, conservatorships, and liquidations.^[7] Section 209 of the FCU Act is a plenary grant of regulatory authority to issue rules and regulations necessary or appropriate to carry out its role as share insurer for all FICUs.^[8] Accordingly, the FCU Act grants the Board broad rulemaking authority to ensure that the credit union industry and the Share Insurance Fund remain safe and sound.

II. Proposed Rule

The Board's share insurance regulation at § 745.13 requires that each FICU “provide notice to its members concerning NCUA insurance coverage of member accounts.” Moreover, the regulation specifies the methods a FICU may use to comply with the notification requirement. Specifically, § 745.13 provides that a FICU may comply with the notification requirement by placing “either a copy of part 745 of these rules, the appendix [to part 745], or one or more copies of the NCUA brochure `Your Insured Funds' in each branch office and main office of the credit ( printed page 66538) union.” ^[9] Copies of these materials must also be made available to members upon request. Thus, while the regulation lists options and does not make them exclusive, it ultimately does require FICUs to provide physical copies of materials, which necessarily leads to costs for those FICUs.

Upon reconsideration, the Board has determined that the regulation imposes an unnecessary cost on both NCUA and FICUs. For NCUA, § 745.13 requires that the agency assume the administrative and staff costs associated with periodically reviewing and updating the “Your Insurance Funds” brochure, which is currently 64 pages long, and arranging and paying for the production and distribution of some brochures. FICUs must incur the costs of purchasing or printing and making the hard copy materials readily available to members. The regulation is also unnecessarily prescriptive in requiring such hard copies, given the ready availability of the part 745 regulations online at the Electronic Code of Federal Regulations (eCFR) website.^[10] Further, the eCFR is updated on a daily basis, thereby ensuring it always contains the most up-to-date version of the regulations.^[11] To the contrary, a FICU must dispose of existing hard copies and print a new version of 12 CFR part 745 each time the regulation is amended. In addition, the NCUA's website contains up-to-date information about share insurance coverage.

For the above reasons, the Board has decided to issue this proposed rule, which would amend § 745.13 to simply provide that each FICU “shall provide notice to its members concerning NCUA insurance coverage of member accounts.” ^[12]

As part of this rulemaking, NCUA intends to discontinue the “Your Insurance Funds” brochure and will undertake an update of its share insurance coverage website to ensure its comprehensiveness, clarity, and ease of navigation.^[13] The updated website will provide FICUs and their members with a dynamic and up-to-date resource for information regarding share insurance requirements. At the same time, this resource will be freely available to FICUs and their members.

As is true under the existing regulation, revised § 745.13 would not prescribe the timing for providing the required notice. However, NCUA's expectation is that notice will be provided at a logical point in time that is beneficial to members, which would include upon request by a member. For example, a FICU could, if it chose, provide the notice at account opening or other logical time. In addition, revised § 745.13 would defer to the FICU on the method used for providing the required notification. NCUA's expectation is that a FICU will elect a reasonable method that provides members with authoritative information about share insurance coverage. For example, a FICU could, if it chose, continue to make hard copies available or elect to provide members with a link to NCUA's website or the eCFR. In updating its share insurance coverage website, NCUA will consider ease of printing to facilitate the provision of hard copies for those FICUs that elect to do so.

The Board believes the proposed rule would provide greater flexibility, reduce compliance costs for both NCUA and FICUs, ensure that members and others are provided with up-to-date information regarding share insurance coverage, and allow FICUs to provide the information through digital means. The Board welcomes public comment on all aspects of the proposal.

III. Regulatory Procedures

A. Providing Accountability Through Transparency Act of 2023

The Providing Accountability Through Transparency Act of 2023 (5 U.S.C. 553(b)(4)) (Act) requires that a notice of proposed rulemaking include the internet address of a summary of not more than 100 words in length of a proposed rule, in plain language, that shall be posted on the internet website under section 206(d) of the E-Government Act of 2002 (44 U.S.C. 3501 note) (commonly known as regulations.gov). The Act, under its terms, applies to notices of proposed rulemaking and does not expressly include other types of documents that the Board publishes voluntarily for public comment, such as notices and interim-final rules that request comment despite invoking “good cause” to forgo such notice and public procedure. The Board, however, has elected to address the Act's requirement in these types of documents in the interests of administrative consistency and transparency.

In summary, the Board solicits public comment on a proposal to streamline the methods a FICU may use to provide its members with notice of share insurance coverage. The current regulation is overly prescriptive, mandating that a FICU make available hard copies of certain prescribed materials. While a FICU would still be required to provide notice to members, the proposed rule would defer to the FICU on the method used for such notification.

The proposal and the required summary can be found at www.regulations.gov.

B. Executive Orders 12866, 13563, and 14192

Pursuant to Executive Order 12866 (“Regulatory Planning and Review”), a determination must be made whether a regulatory action is significant and therefore subject to review by the Office of Information and Regulatory Affairs (OIRA), within the Office of Management and Budget (OMB) in accordance with the requirements of the Executive Order.^[14] Executive Order 13563 (“Improving Regulation and Regulatory Review”) supplements and reaffirms the principles, structures, and definitions governing contemporary regulatory review established in Executive Order 12866.^[15] This proposed rule was drafted and reviewed in accordance with Executive Order 12866 and Executive Order 13563. OIRA has determined that this proposed rule is not a “significant regulatory action” as defined by section 3(f) of Executive Order 12866.

Executive Order 14192 (“Unleashing Prosperity Through Deregulation”) requires that any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least 10 prior regulations.^[16] This proposed rule is not an Executive Order 14192 regulatory action because this rule is not significant under Executive Order 12866. This proposed rule is expected to be an Executive Order 14192 deregulatory action.

( printed page 66539)

C. Regulatory Flexibility Act

The Regulatory Flexibility Act ^[17] generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. If the agency makes such a certification, it shall publish the certification at the time of publication of either the proposed rule or the final rule, along with a statement providing the factual basis for such certification.^[18] For purposes of this analysis, NCUA considers small credit unions to be those having under $100 million in assets.^[19] The Board fully considered the potential economic impacts of the regulatory amendments on small credit unions.

The proposed rule would streamline the method a FICU may use to provide its members with notice of share insurance coverage. Under the proposal, a FICU would no longer be required to make available hard copies of certain prescribed materials. FICUs would instead have the flexibility to satisfy the notice requirements by providing members with a link to online resources. Accordingly, to the extent that the proposed rule has any economic impacts on small FICUs, it would be to reduce the costs borne by such credit unions. Neither the current economic burden imposed by the current regulation nor the concomitant reduction resulting from the proposed rule is likely significant, being limited to the staff-time and costs of printing the materials. Accordingly, NCUA certifies the final rule will not have a significant economic impact on a substantial number of small credit unions.

D. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA) generally provides that an agency may not conduct or sponsor, and notwithstanding any other provision of law, a person is not required to respond to a collection of information, unless it displays a currently valid OMB control number. The PRA applies to rulemaking in which an agency creates new or amends existing information collection requirements. For purposes of the PRA, an information collection requirement may take the form of a reporting, recordkeeping, or a third-party disclosure requirement. NCUA has reviewed this proposed rule and determined that it does not create any new or revise any existing collections of information. Accordingly, no PRA submissions to OMB will be made with respect to this rule.

E. Executive Order 13132 on Federalism

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests.^[20] NCUA, an agency as defined in 44 U.S.C. 3502(5), complies with the executive order to adhere to fundamental federalism principles. This proposed rule would only impact NCUA's regulations related to federal share insurance coverage; it would not alter NCUA's relationship or division of responsibilities with state regulatory agencies or bodies. This proposal would not have a substantial direct effect on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this proposal does not constitute a policy that has federalism implications for the purposes of the executive order.

F. Assessment of Federal Regulations and Policies on Families

NCUA has determined that this proposed rule would not affect family well-being within the meaning of Section 654 of the Treasury and General Government Appropriations Act, 1999.^[21] The regulatory requirements that are the subject of this proposed rule are exclusively concerned with notice requirements. To the extent the proposal has any impact on families, it would be beneficial by helping families make better informed financial decisions that implicate NCUA share insurance. However, the potential positive effect on family well-being, including financial well-being is, at most, indirect because the proposed rule would not materially change the information provided to the public about share insurance coverage.

For the reasons stated in the preamble, the NCUA Board proposes to amend 12 CFR part 745 as follows:

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

Authority: 12 U.S.C. 1752(5), 1757, 1765, 1766, 1781, 1782, 1787, 1789; title V, Pub. L. 109-351;120 Stat. 1966.

2. Revise § 745.13 to read as follows:

91 FR 66537