[Federal Register Volume 69, Number 207 (Wednesday, October 27, 2004)]
[Rules and Regulations]
[Pages 62561-62563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-24002]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701


Change in Official or Senior Executive Officer in Credit Unions 
That Are Newly Chartered or Are in Troubled Condition

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: NCUA is amending its rule concerning the requirement that 
federally-insured credit unions that are newly chartered or troubled 
file notice with NCUA before adding or replacing a board or committee 
member or employing or changing the duties of a senior executive 
officer. The amendments clarify the relationship between the prior 
notice provision and the commencement of service provision, so as to 
eliminate any potential confusion. In addition, the amendments 
reorganize the requirements in the current rule to make it easier to 
understand.

DATES: This rule is effective on November 26, 2004.

FOR FURTHER INFORMATION CONTACT: Ross P. Kendall, Staff Attorney, 
Division of Operations, Office of General Counsel, at telephone: (703) 
518-6562.

SUPPLEMENTARY INFORMATION: 

Background

    On June 24, 2004, the NCUA Board requested comment on proposed 
changes to Sec.  701.14 of its regulations, clarifying the procedures 
that newly chartered or troubled federally-insured credit unions must 
follow to obtain NCUA approval before adding or replacing board or 
committee members or changing the duties of a senior executive officer. 
69 FR 39871 (July 1, 2004). The proposed amendments clarify the 
relationship between the prior notice provision and the commencement of 
service provision in the current rule to eliminate confusion and 
reorganize the requirements to make the rule easier to understand.
    NCUA received comments regarding the proposed changes from two 
federal credit unions, two national credit union trade associations, 
one state credit union trade association and one state credit union 
supervisory association, for a total of six comments.

Summary of Comments

    The comments were generally favorable and supportive of the 
amendments, and all but one commenter supported the efforts to clarify 
and reorganize the provisions of the rule. Two commenters supported the 
proposal as published without recommending any changes.
    One commenter recommended that the revised rule include a specific 
reference to the role of the state supervisory authority (SSA) in cases 
involving state-chartered credit unions. The rule, however, implements 
authority in the Federal Credit Union Act specifically authorizing the 
NCUA to review and approve of the service of certain senior credit 
union officials and employees of federally-insured credit unions, 
including credit unions that are state-chartered. 12 U.S.C. 1790a. 
While the NCUA is the decision maker in these cases, the current rule 
does require a state-chartered, federally-insured credit union to 
provide a copy of the NCUA notice to its SSA. 12 CFR 701.14(d)(1). In 
addition, the Board notes that another provision of our regulations 
also requires NCUA to consult with the appropriate SSA and provide it 
with notice concerning NCUA's decision. 12 CFR 741.205. The Board has 
not adopted this recommendation to otherwise reference the role of 
SSAs.
    Another commenter suggested that the rule provide that a request 
for approval of an official's or employee's service to be deemed 
complete unless the regional office specifically requires additional 
information within ten days of its receipt of the request.
    The current rule provides that the appropriate NCUA regional office 
will notify the credit union within ten days of its receipt of the 
request for approval either that the request is complete or that 
additional information is required and the Board is not aware of any 
instances of problems with the current procedure. The final rule 
retains this provision. The rule already calls for the

[[Page 62562]]

regional office to advise the credit union about whether the request is 
complete and providing an automatic determination that an application 
is deemed complete within ten days could create confusion with the 
provision in the rule providing for automatic approval if a Regional 
Director fails to issue a written decision within thirty days. In 
addition, the suggested revision could, in fact, delay processing. A 
regional office may determine that it wants to provide an applicant 
with an opportunity to supplement a submission after performing an 
initial review. A credit union will generally be willing to provide 
additional information if it is able since failure to do so would 
likely result in the disapproval of its request.
    One commenter suggested that NCUA exclude service by employees from 
coverage of the rule. This commenter contends that selection and 
oversight of employees should be the exclusive province of the board of 
directors, absent some indication that the board has behaved 
unethically or is responsible for the credit union's unhealthy 
financial condition. The authority in the FCU Act for this rule 
specifically addresses senior executive employees as well as board and 
committee members. 12 U.S.C. 1790a(a). Senior executives are directly 
involved in and are responsible for the day-to-day operation of a 
credit union, and the Board believes their competence is as critical as 
that of the elected officers and board members. Accordingly, the Board 
has not adopted this recommended change.
    One commenter noted its opposition to the proposal, contending that 
the current rule permits an officer or senior executive employee to 
commence service on an interim basis until such time as the credit 
union is notified in writing of NCUA's determination to disapprove such 
service. The commenter has mistakenly characterized the current rule, 
which only permits such interim service if NCUA grants a waiver from 
the otherwise mandatory thirty-day notice. The proposed amendments 
preserve the ability of a credit union to seek a waiver from the 
advance notice requirements in those cases in which the circumstances 
may warrant service to begin immediately. The final rule clarifies any 
ambiguity in the current rule between the operation of the prior notice 
and commencement of service provisions in the rule. The final rule 
retains the waiver provisions that provide sufficient flexibility where 
circumstances warrant immediate service yet permits the regional 
offices to conduct the review contemplated by the Federal Credit Union 
Act.

Final Rule

    In view of the comments, NCUA is adopting the proposed amendments 
as a final rule without change.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires NCUA to prepare an 
analysis to describe any significant economic impact any proposed 
regulation may have on a substantial number of small entities. NCUA 
considers credit unions having less than ten million dollars in assets 
to be small for purposes of RFA. Interpretive Ruling and Policy 
Statement (IRPS) 87-2 as amended by IRPS 03-2. The amendment clarifies 
the relationship between the waiver of prior notice provision and the 
temporary service provision, so as to eliminate any potential 
confusion. The NCUA has determined and certifies that this amendment 
will not have a significant economic impact on a substantial number of 
small credit unions. Accordingly, the NCUA has determined that a 
Regulatory Flexibility Analysis is not required.

Paperwork Reduction Act

    NCUA has determined that this amendment would not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget (OMB). NCUA 
currently has OMB clearance for Sec.  701.14's collection requirements 
(OMB No. 3133-0121).

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. The amendment will apply to all federally-
insured credit unions. NCUA has determined that the amendment will 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 amendment does not constitute a policy 
that has federalism implications for purposes of the executive order.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this amendment will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 
2681 (1998).

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) 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. 5 U.S.C. 551. The Office of Management and Budget has 
determined that this rule is not a major rule for purposes of the Small 
Business Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 12 CFR Part 701

    Credit unions, Senior executive officials.

    By the National Credit Union Administration Board on October 21, 
2004.
Mary Rupp,
Secretary of the Board.


0
Accordingly, the National Credit Union Administration amends 12 CFR 
part 701 as follows:

PART 701--ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS

0
1. The authority citation for part 701 continues to read as follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, 1789.


0
2. Amend Sec.  701.14 by removing paragraphs (c), (d) and (e), adding 
new paragraphs (c) and (d), and redesignating paragraph (f) as 
paragraph (e) to read as follows:


Sec.  701.14  Change in official or senior executive officer in credit 
unions that are newly chartered or in troubled condition.

* * * * *
    (c) Procedures for Notice of Proposed Change in Official or Senior 
Executive Officer--(1) Prior Notice Requirement. An insured credit 
union must give NCUA written notice at least 30 days before the 
effective date of any addition or replacement of a member of the board 
of directors or committee member or the employment or change in 
responsibilities of any individual to a position of senior executive 
officer if:

[[Page 62563]]

    (i) The credit union has been chartered for less than two years; or
    (ii) The credit union meets the definition of troubled condition in 
paragraph (b)(3) or (4) of this section.
    (2) Waiver of Prior Notice--(i) Waiver requests. Parties may 
petition the appropriate Regional Director for a waiver of the prior 
notice required under this section. Waiver may be granted if it is 
found that delay could harm the credit union or the public interest.
    (ii) Automatic waiver. In the case of the election of a new member 
of the board of directors or credit committee member at a meeting of 
the members of a federally insured credit union, the prior 30-day 
notice is automatically waived and the individual may immediately begin 
serving, provided that a complete notice is filed with the appropriate 
Regional Director within 48 hours of the election. If NCUA disapproves 
a director or credit committee member, the board of directors of the 
credit union may appoint its own alternate, to serve until the next 
annual meeting, contingent on NCUA approval.
    (iii) Effect on disapproval authority. A waiver does not affect the 
authority of NCUA to issue a Notice of Disapproval within 30 days of 
the waiver or within 30 days of any subsequent required notice.
    (3) Filing procedures--(i) Where to file. Notices will be filed 
with the appropriate Regional Director or, in the case of a corporate 
credit union, with the Director of the Office of Corporate Credit 
Unions. All references to Regional Director will, for corporate credit 
unions, mean the Director of Office of Corporate Credit Unions. State-
chartered federally insured credit unions will also file a copy of the 
notice with their state supervisor.
    (ii) Contents. The notice must contain information about the 
competence, experience, character, or integrity of the individual on 
whose behalf the notice is submitted. The Regional Director or his or 
her designee may require additional information. The information 
submitted must include the identity, personal history, business 
background, and experience of the individual, including material 
business activities and affiliations during the past five years, and a 
description of any material pending legal or administrative proceedings 
in which the individual is a party and any criminal indictment or 
conviction of the individual by a state or federal court. Each 
individual on whose behalf the notice is filed must attest to the 
validity of the information filed. At the option of the individual, the 
information may be forwarded to the Regional Director by the 
individual; however, in such cases, the credit union must file a notice 
to that effect.
    (iii) Processing. Within ten calendar days after receiving the 
notice, the Regional Director will inform the credit union either that 
the notice is complete or that additional, specified information is 
needed and must be submitted within 30 calendar days. If the initial 
notice is complete, the Regional Director will issue a written decision 
of approval or disapproval to the individual and the credit union 
within 30 calendar days of receipt of the notice. If the initial notice 
is not complete, the Regional Director will issue a written decision 
within 30 calendar days of receipt of the original notice plus the 
amount of time the credit union takes to provide the requested 
additional information. If the additional information is not submitted 
within 30 calendar days of the Regional Director's request, the 
Regional Director may either disapprove the proposed individual or 
review the notice based on the information provided. If the credit 
union and the individual have submitted all requested information and 
the Regional Director has not issued a written decision within the 
applicable time period, the individual is approved.
    (d) Commencement of Service. A proposed director, committee member, 
or senior executive officer may begin service after the end of the 30-
day period or any other additional period as provided under paragraph 
(c)(3)(iii) of this section, unless the NCUA disapproves the notice 
before the end of the period.
* * * * *
[FR Doc. 04-24002 Filed 10-26-04; 8:45 am]
BILLING CODE 7535-01-P