Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 7949 

Subpart E—Supervisory Stress Test 

Requirements for Certain U.S. Banking 

Organizations With $100 Billion or 

More in Total Consolidated Assets and 

Nonbank Financial Companies 

Supervised by the Board 

■ 10. Amend § 252.44 by revising 

paragraphs (a)(3) and (d) to read as 

follows: 

§ 252.44 Analysis conducted by the Board. 

(a) * * * 

(3) In conducting the analysis, the 

Board will not incorporate changes to a 

firm’s business plan that are likely to 

have a material impact on the covered 

company’s capital adequacy and 

funding profile in its projections of 

losses, net income, pro forma capital 

levels, and capital ratios. 

* * * * * 

(d) Frequency of analysis conducted 

by the Board—(1) General. Except as 

provided in paragraph (d)(2) of this 

section, the Board will conduct its 

analysis of a covered company 

according to the frequency in Table 1 to 

§ 252.44(d)(1). 

TABLE 1 TO § 252.44(D)(1) 

If the covered company is a: Then the Board will conduct its analysis: 

Global systemically important BHC .......................................................... Annually. 

Category II bank holding company .......................................................... Annually. 

Category II U.S. intermediate holding company ...................................... Annually. 

Category III bank holding company ......................................................... Annually. 

Category III U.S. intermediate holding company ..................................... Annually. 

Category IV bank holding company ......................................................... Biennially, occurring in each year ending in an even number. 

Category IV U.S. intermediate holding company ..................................... Biennially, occurring in each year ending in an even number. 

Nonbank financial company supervised by the Board ............................. Annually. 

(2) Change in frequency. (i) The Board 

may conduct a stress test of a covered 

company on a more or less frequent 

basis than would be required under 

paragraph (d)(1) of this section based on 

the company’s financial condition, size, 

complexity, risk profile, scope of 

operations, or activities, or risks to the 

U.S. economy. 

(ii) A Category IV bank holding 

company or Category IV U.S. 

intermediate holding company may 

elect to have the Board conduct a stress 

test with respect to the company in a 

year ending in an odd number by 

providing notice to the Board and the 

appropriate Federal Reserve Bank by 

January 15 of that year. Notwithstanding 

the previous sentence, such a company 

may elect to have the Board conduct a 

stress test with respect to the company 

in the year 2021 by providing notice to 

the Board and the appropriate Federal 

Reserve Bank by April 5, 2021. 

(3) Notice and response—(i) 

Notification of change in frequency. If 

the Board determines to change the 

frequency of the stress test under 

paragraph (d)(2)(i) of this section, the 

Board will notify the company in 

writing and provide a discussion of the 

basis for its determination. 

(ii) Request for reconsideration and 

Board response. Within 14 calendar 

days of receipt of a notification under 

paragraph (d)(3)(i) of this section, a 

covered company may request in 

writing that the Board reconsider the 

requirement to conduct a stress test on 

a more or less frequent basis than would 

be required under paragraph (d)(1) of 

this section. A covered company’s 

request for reconsideration must include 

an explanation as to why the request for 

reconsideration should be granted. The 

Board will respond in writing within 14 

calendar days of receipt of the 

company’s request. 

Subpart F—Company-Run Stress Test 

Requirements for Certain U.S. Bank 

Holding Companies and Nonbank 

Financial Companies Supervised by 

the Board 

■ 11. Amend § 252.54 revising 

paragraph (b)(2)(i)(B) to read as follows: 

§ 252.54 Stress test. 

* * * * * 

(b) * * * 

(2) * * * 

(i) * * * 

(B) Is not a Category IV bank holding 

company. 

* * * * * 

■ 12. Amend § 252.56 by revising 

paragraph (a)(2) to read as follows: 

§ 252.56 Methodologies and practices. 

(a) * * * 

(2) The potential impact on the 

regulatory capital levels and ratios 

applicable to the covered bank, and any 

other capital ratios specified by the 

Board, and in doing so must: 

(i) Incorporate the effects of any 

capital action over the planning horizon 

and maintenance of an allowance for 

loan losses or adjusted allowance for 

credit losses, as appropriate, for credit 

exposures throughout the planning 

horizon; and 

(ii) Exclude the impacts of changes to 

a firm’s business plan that are likely to 

have a material impact on the covered 

company’s capital adequacy and 

funding profile. 

* * * * * 

■ 13. Amend § 252.58 by revising 

paragraph (a)(1) to read as follows: 

§ 252.58 Disclosure of stress test results. 

(a) * * * 

(1) In general. A covered company 

must publicly disclose a summary of the 

results of the stress test required under 

§ 252.54 within the period that is 15 

calendar days after the Board publicly 

discloses the results of its supervisory 

stress test of the covered company 

pursuant to § 252.46(b), unless that time 

is extended by the Board in writing. 

* * * * * 

Appendix B to Part 252—[Amended] 

■ 14. Amend appendix B to part 252 by 

removing and reserving section 2.6. 

By order of the Board of Governors of the 

Federal Reserve System. 

Ann Misback, 

Secretary of the Board. 

[FR Doc. 2021–02182 Filed 2–2–21; 8:45 am] 

BILLING CODE P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 791 

[Docket No. NCUA–2020–0098] 

RIN 3133–AF28 

Role of Supervisory Guidance 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Final rule. 

SUMMARY: The NCUA Board is adopting 

a final rule that codifies the Interagency 

Statement Clarifying the Role of 


jbell on DSKJLSW7X2PROD with RULES
7950 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

1Regulations are commonly referred to as 

legislative rules because regulations have the ‘‘force 

and effect of law.’’ Perez v. Mortgage Bankers 

Association, 575 U.S. 92, 96 (2015) (citations 

omitted). 

2See Chrysler v. Brown, 441 U.S. 281, 302 (1979) 

(quoting the Attorney General’s Manual on the 

Administrative Procedure Act at 30 n.3 (1947) 

(Attorney General’s Manual) and discussing the 

distinctions between regulations and general 

statements of policy, of which supervisory guidance 

is one form). 

3See https://www.occ.gov/news-issuances/newsreleases/2018/nr-ia-2018-97a.pdf. 

4While supervisory guidance offers guidance to 

the public on the agencies’ approach to supervision 

under statutes and regulations and safe and sound 

practices, the issuance of guidance is discretionary 

and is not a prerequisite to an agency’s exercise of 

its statutory and regulatory authorities. This point 

reflects the fact that statutes and legislative rules, 

not statements of policy, set legal requirements. 

5The Administrative Conference of the United 

States (ACUS) has recognized the important role of 

guidance documents and has stated that guidance 

can ‘‘make agency decision-making more 

predictable and uniform and shield regulated 

parties from unequal treatment, unnecessary costs, 

and unnecessary risk, while promoting compliance 

with the law.’’ ACUS, Recommendation 2017–5, 

Agency Guidance Through Policy Statements at 2 

(adopted December 14, 2017), available at https:// 

www.acus.gov/recommendation/agency-guidancethrough-policy-statements. ACUS also suggests that 

‘‘policy statements are generally better [than 

legislative rules] for dealing with conditions of 

uncertainty and often for making agency policy 

accessible.’’ Id. ACUS’s reference to ‘‘policy 

statements’’ refers to the statutory text of the APA, 

which provides that notice and comment is not 

required for ‘‘general statements of policy.’’ The 

phrase ‘‘general statements of policy’’ has 

commonly been viewed by courts, agencies, and 

administrative law commentators as including a 

wide range of agency issuances, including 

guidance. 

6 5 U.S.C. 553(e). 

7See Petition for Rulemaking on the Role of 

Supervisory Guidance, available at https://bpi.com/ 

wp-content/uploads/2018/11/BPI_PFR_on_Role_of_

Supervisory_Guidance_Federal_Reserve.pdf. 

Supervisory Guidance, issued by the 

NCUA, Federal Deposit Insurance 

Corporation (FDIC), the Board of 

Governors of the Federal Reserve (the 

Board), the Office of Comptroller of the 

Currency (OCC), and the Consumer 

Financial Protection Bureau (Bureau) 

(collectively, the agencies) on 

September 11, 2018 (2018 Statement). 

By codifying the 2018 Statement, with 

amendments, the final rule confirms 

that the NCUA will continue to follow 

and respect the limits of administrative 

law in carrying out their supervisory 

responsibilities. The 2018 Statement 

reiterated well-established law by 

stating that, unlike a law or regulation, 

supervisory guidance does not have the 

force and effect of law. As such, 

supervisory guidance does not create 

binding legal obligations for the public. 

Because it is incorporated into the final 

rule, the 2018 Statement, as amended, is 

binding on the NCUA. The final rule 

adopts the rule as proposed without 

change. 

DATES: The provisions of this final rule 

are effective on March 5, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Naghi Khaled, Policy Officer (703) 664– 

3883 or Scott Neat, Associate Director, 

Office of Examinations and Insurance at 

(703) 518–6363; Ian Marenna, Associate 

General Counsel, or Marvin Shaw, Staff 

Attorney, Office of General Counsel, at 

the above address or telephone (703) 

518–6540. National Credit Union 

Administration, 1775 Duke Street, 

Alexandria, VA 22314. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The NCUA recognizes the important 

distinction between issuances that serve 

to implement acts of Congress (known 

as ‘‘regulations’’ or ‘‘legislative rules’’) 

and non-binding supervisory guidance 

documents.1 Regulations create binding 

legal obligations. Supervisory guidance 

is issued by an agency to ‘‘advise the 

public prospectively of the manner in 

which the agency proposes to exercise 

a discretionary power’’ and does not 

create binding legal obligations.2

In recognition of the important 

distinction between rules and guidance, 

on September 11, 2018, the NCUA along 

with the Federal Deposit Insurance 

Corporation (FDIC), the Board of 

Governors of the Federal Reserve (the 

Board), the Office of Comptroller of the 

Currency (OCC), and the Consumer 

Financial Protection Bureau (Bureau) 

(collectively, the agencies) issued the 

Interagency Statement Clarifying the 

Role of Supervisory Guidance (2018 

Statement) to explain the role of 

supervisory guidance and describe the 

agencies’ approach to supervisory 

guidance.3 As noted in the 2018 

Statement, the agencies issue various 

types of supervisory guidance to their 

respective supervised institutions, 

including, but not limited to, 

interagency statements, advisories, 

bulletins, policy statements, questions 

and answers, and frequently asked 

questions. Supervisory guidance 

outlines the agencies’ supervisory 

expectations or priorities and articulates 

the agencies’ general views regarding 

practices for a given subject area. 

Supervisory guidance often provides 

examples of practices that mitigate risks, 

or that the agencies generally consider 

to be consistent with safety-andsoundness standards or other applicable 

laws and regulations, including those 

designed to protect consumers.4 The 

agencies noted in the 2018 Statement 

that supervised institutions at times 

request supervisory guidance and that 

guidance is important to provide clarity 

to these institutions, as well as 

supervisory staff, in a transparent way 

that helps to ensure consistency in the 

supervisory approach.5

The 2018 Statement restated existing 

law and reaffirmed the agencies’ 

understanding that supervisory 

guidance does not create binding, 

enforceable legal obligations. The 2018 

Statement reaffirmed that the agencies 

do not issue supervisory criticisms for 

‘‘violations’’ of supervisory guidance 

and described the appropriate use of 

supervisory guidance by the agencies. In 

the 2018 Statement, the agencies also 

expressed their intention to (1) limit the 

use of numerical thresholds in 

guidance; (2) reduce the issuance of 

multiple supervisory guidance 

documents on the same topic; (3) 

continue efforts to make the role of 

supervisory guidance clear in 

communications to examiners and 

supervised institutions; and (4) 

encourage supervised institutions to 

discuss their concerns about 

supervisory guidance with their agency 

contact. 

On November 5, 2018, the OCC, 

Board, FDIC, and Bureau each received 

a petition for a rulemaking (Petition), as 

permitted under the Administrative 

Procedure Act (APA),6 requesting that 

the agencies codify the 2018 Statement.7

The Petitioners did not submit a 

petition to the NCUA, which has no 

supervisory authority over the financial 

institutions that are represented by 

Petitioners. The NCUA determined that 

it was appropriate to join this 

rulemaking on its own initiative. 

References in the preamble to 

‘‘agencies’’ therefore include the NCUA. 

The Petition argued that a rule on 

guidance is necessary to bind future 

agency leadership and staff to the 2018 

Statement’s terms. The Petition also 

suggested there are ambiguities in the 

2018 Statement concerning how 

supervisory guidance is used in 

connection with matters requiring 

attention, matters requiring immediate 

attention (collectively, MRAs for banks), 

as well as in connection with other 

supervisory actions that should be 

clarified through a rulemaking. As 

explained in the next section, the NCUA 

examiners use a notification similar to 

an MRA called a Document of 

Resolution (DOR). Finally, the Petition 

called for the rulemaking to implement 

changes in the agencies’ standards for 

issuing MRAs. Specifically, the Petition 

requested that the agencies limit the role 

of MRAs to addressing circumstances in 

which there is a violation of a statute, 


jbell on DSKJLSW7X2PROD with RULES
Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 7951 

8https://www.ffiec.gov/. 

9There are 21 references to ‘‘safety and 

soundness’’ in the Federal Credit Union Act. See 12 

U.S.C. 1757(5)(A)(vi)(I), 1759(d & f), 1781(c)(2), 

1782(a)(6)(B), 1786(b), 1786(e), 1786(f), 1786(g), 

1786(k)(2), 1786(r), 1786(s), and 1790d(h). 

Similarly, the NCUA requires federally insured 

credit unions to comply with relevant consumer 

protection statutes and regulations. 

10 ‘‘Whenever, in the opinion of the Board, any 

insured credit union is engaging or has engaged in 

unsafe or unsound practices in conducting the 

business of such credit union, or is in an unsafe or 

unsound condition to continue operations as an 

insured credit union, or is violating or has violated 

an applicable law, rule, regulation, order, or any 

condition imposed in writing by the Board in 

connection with any action on any application, 

notice, or other request by the credit union or 

institution-affiliated party, or is violating or has 

violated any written agreement entered into with 

the Board, the Board shall serve upon the credit 

union a statement with respect to such practices or 

conditions or violations for the purpose of securing 

the correction thereof.’’ 

11This provision states: ‘‘Any circumstances 

which may be unique to the particular credit union 

concerned shall also be considered in arriving at the 

determination of whether or not an undue risk to 

the NCUSIF is or may be present. For purposes of 

this section, the term ‘undue risk to the NCUSIF’ 

is defined as a condition which creates a probability 

of loss in excess of that normally found in a credit 

union and which indicates a reasonably foreseeable 

probability of the credit union becoming insolvent 

because of such condition, with a resultant claim 

against the NCUSIF.’’ 

12https://www.ncua.gov/regulation-supervision/ 

manuals-guides/examiners-guide. 

13The Document of Resolution section of the 

NCUA’s report of examination is the equivalent of 

Matters Requiring Immediate Attention used by the 

other banking agencies. 

14 85 FR 70512 (November 5, 2020). 

regulation, or order, or demonstrably 

unsafe or unsound practices. 

B. NCUA’s Examination and 

Supervisory Oversight 

As a member of the Federal Financial 

Institution Examination Council 

(FFIEC),8 the NCUA participates with 

and generally has regulations and 

guidance consistent with the other 

financial regulators. Nevertheless, given 

its different statutory framework, the 

NCUA’s supervision of Federal credit 

unions and federally insured, statechartered credit unions is different than 

the other agencies. With respect to 

safety and soundness, the Federal Credit 

Union Act requires the NCUA to ensure 

all federally insured credit unions 

operate safely and soundly.9 In 

particular, 12 U.S.C. 1786(b) compels 

the agency to act to correct unsafe or 

unsound conditions or practices in 

insured credit unions.10

Often, and necessarily, regulatory 

requirements are not simple 

prescriptions that lend themselves to 

right-or-wrong determinations. 

Codifying in regulation all unsafe and 

unsound conditions and practices in 

explicit detail would be unfeasible, 

especially in light of the ever-evolving 

nature of financial services. Highly 

detailed or prescriptive regulations 

would also lead to unintended 

consequences. Regulated entities would 

face additional burden, less flexibility, 

and innovation would be stifled. 

Notwithstanding these limitations, the 

NCUA has issued a regulation that 

implements the Federal Credit Union 

Act’s requirement that federally insured 

credit unions operate safely and 

soundly. Section 741.3(b) of the NCUA’s 

Rules and Regulation lists various 

factors the agency considers ‘‘in 

determining whether the credit union’s 

financial condition and policies are both 

safe and sound.’’ Regarding the 

continuing insurability of a credit 

union, Section 741.3(d) of the NCUA’s 

Rules and Regulation goes on to specify 

that ‘‘[i]nsurance of member accounts 

would not otherwise involve undue risk 

to the National Credit Union Share 

Insurance Fund (NCUSIF).’’ 11

The NCUA needs to be able to address 

safety and soundness issues through 

supervisory determinations that 

properly evaluate and weigh the 

relevant facts and considerations in 

their totality. For example, a federally 

insured credit union may be engaged in 

an inherently high-risk activity, but the 

credit union may mitigate the risk by 

holding extra capital and liquidity and 

adopting leading practices in managing 

the underlying risk. Conversely, another 

institution may have not adopted 

sufficient mitigations to offset the risk, 

leading to undue risk to the National 

Credit Union Share Insurance Fund and 

taxpayers. 

Like the other agencies, the NCUA has 

instructions that set requirements for 

how examiners supervise institutions.12

For example, when addressing a 

concern in a report of examination, 

examiners are required to cite the 

highest authority related to the subject 

matter, and describe the root problem 

including the corresponding details and 

facts that support the examiner’s 

conclusion. Examiners can cite agency 

guidance when addressing some 

violations or unsafe or unsound 

conditions or practices when they 

involve a significant degree of judgment 

or interpretation in their application. 

This is necessary and helpful for both 

regulated institutions and examiners by 

standardizing application of regulatory 

requirements that require judgment or 

interpretation in their application, 

instead of relying on the individual 

views of each examiner. The examiner 

guidance explains how the subject 

relates to a regulatory or statutory 

requirement and provides the 

institution with additional information 

on the topic. 

Pursuant to agency policy, examiners 

may only include in the Document of 

Resolution (DOR) 13 issues that are 

significant enough that they would be 

escalated to the next level of 

enforcement for failure to correct the 

problem. These types of problems are 

defined as: 

• Unsafe or unsound practices that 

reasonably threaten the stability of the 

credit union—that is, any action or lack 

of action that, if left uncorrected, may 

result in substantial loss or damage to 

the credit union or its members. 

• Violations of law or regulation that 

are systemic, recurring, or that result 

from willful neglect. 

With that statutory and regulatory 

background in mind, the NCUA uses 

DORs to address practices that result in 

substantive noncompliance with laws or 

rules, enforcement actions, or 

conditions imposed in writing. The 

NCUA’s policy is to identify deficient 

practices and violations in a timely 

manner and encourage corrective action 

well before deficiencies affect a credit 

union’s financial condition or viability. 

II. The Proposed Rule and Comments 

Received 

On November 5, 2020, the agencies 

issued a proposed rule (Proposed Rule) 

that would codify the 2018 Statement, 

with clarifying changes, as an appendix 

to proposed rule text.14 The Proposed 

Rule would supersede the 2018 

Statement. The rule text would also 

provide that the amended version of the 

2018 Statement is binding on each 

respective agency. 

Clarification of the 2018 Statement 

The Petition expressed support for the 

2018 Statement and acknowledged that 

it addresses many issues of concern for 

the Petitioners relating to the use of 

supervisory guidance. The Petition 

expressed concern, however, that the 

2018 Statement’s reference to not basing 

‘‘criticisms’’ on violations of 

supervisory guidance has led to 

confusion about whether MRAs are 

covered by the 2018 Statement. 

Accordingly, the agencies proposed to 

clarify in the Proposed Rule that the 

term ‘‘criticize’’ includes the issuance of 

MRAs and other supervisory criticisms 

such as DORs, including those 

communicated through matters 

requiring board attention, documents of 

resolution, and supervisory 

recommendations (collectively, 


jbell on DSKJLSW7X2PROD with RULES
7952 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

15The agencies use different terms to refer to 

supervisory actions that are similar to MRAs and 

Matters Requiring Immediate Attention (MRIAs), 

including matters requiring board attention, 

documents of resolution, and supervisory 

recommendations. 

16The 2018 Statement contains the following 

sentence: 

Examiners will not criticize a supervised 

financial institution for a ‘‘violation’’ of supervisory 

guidance. 

2018 Statement at 2. As revised in the Proposed 

Rule, this sentence read as follows: 

Examiners will not criticize (including through 

the issuance of matters requiring attention, matters 

requiring immediate attention, matters requiring 

board attention, documents of resolution, and 

supervisory recommendations) a supervised 

financial institution for, and agencies will not issue 

an enforcement action on the basis of, a ‘‘violation’’ 

of or ‘‘non-compliance’’ with supervisory guidance. 

Proposed Rule (emphasis added). As discussed 

infra in footnote 12, the Proposed Rule also 

removed the sentences in the 2018 Statement that 

referred to ‘‘citation,’’ which the Petition suggested 

had been confusing. These sentences were also 

removed to clarify that the focus of the Proposed 

Rule related to the use of guidance, not the 

standards for MRAs. 

17The Petition asserted that the federal banking 

agencies rely on 12 U.S.C. 1818(b)(1) when issuing 

MRAs based on safety-and-soundness matters. 

Through statutory examination and reporting 

authorities, Congress has conferred upon the 

agencies the authority to exercise visitorial powers 

with respect to supervised institutions. The 

Supreme Court has indicated support for a broad 

reading of the agencies’ visitorial powers. See, e.g., 

Cuomo v. Clearing House Assn L.L.C., 557 U.S. 519 

(2009); United States v. Gaubert, 499 U.S. 315 

(1991); and United States v. Philadelphia Nat. 

Bank, 374 U.S. 321 (1963). The visitorial powers 

facilitate early identification of supervisory 

concerns that may not rise to a violation of law, 

unsafe or unsound banking practice, or breach of 

fiduciary duty under 12 U.S.C. 1818. For credit 

unions, the corresponding provision is 12 U.S.C. 

1786. 

18The following sentences from the 2018 

Statement were not present in the Proposed Rule: 

Rather, any citations will be for violations of law, 

regulation, or non-compliance with enforcement 

orders or other enforceable conditions. During 

examinations and other supervisory activities, 

examiners may identify unsafe or unsound 

practices or other deficiencies in risk management, 

including compliance risk management, or other 

areas that do not constitute violations of law or 

regulation. 

2018 Statement at 2. The agencies did not intend 

these deletions to indicate a change in supervisory 

policy. 

supervisory criticisms).15 As such, the 

agencies reiterated that examiners will 

not base supervisory criticisms on a 

‘‘violation’’ of or ‘‘non-compliance 

with’’ supervisory guidance. The 

agencies noted that, in some situations, 

examiners may reference (including in 

writing) supervisory guidance to 

provide examples of safe and sound 

conduct, appropriate consumer 

protection and risk management 

practices, and other actions for 

addressing compliance with laws or 

regulations. The agencies also reiterated 

that they will not issue an enforcement 

action on the basis of a ‘‘violation’’ of 

or ‘‘non-compliance’’ with supervisory 

guidance. The Proposed Rule reflected 

these clarifications.16

The Petition requested further that 

these supervisory criticisms should not 

include ‘‘generic’’ or ‘‘conclusory’’ 

references to safety and soundness. The 

agencies agreed that supervisory 

criticisms should continue to be specific 

as to practices, operations, financial 

conditions, or other matters that could 

have a negative effect on the safety and 

soundness of the financial institution, 

could cause consumer harm, or could 

cause violations of laws, regulations, 

final agency orders, or other legally 

enforceable conditions. Accordingly, the 

agencies included language reflecting 

this practice in the Proposed Rule. 

The Petition also suggested that 

MRAs, as well as memoranda of 

understanding (MOUs), examination 

downgrades, and any other formal 

examination mandate or sanction, 

should be based only on a violation of 

a statute, regulation, or order, including 

a ‘‘demonstrably unsafe or unsound 

practice.’’ 17 As noted in the Proposed 

Rule, examiners all take steps to identify 

deficient practices before they rise to 

violations of law or regulation or before 

they constitute unsafe or unsound 

banking practices. The agencies stated 

that they continue to believe that early 

identification of deficient practices 

serves the interest of the public and of 

supervised institutions. Early 

identification protects the safety and 

soundness of banks and credit unions 

promotes consumer protection and 

reduces the costs and risk of 

deterioration of financial condition from 

deficient practices resulting in 

violations of laws or regulations, unsafe 

or unsound conditions, or unsafe or 

unsound practices. The Proposed Rule 

also noted that the agencies have 

different supervisory processes, 

including for issuing supervisory 

criticisms. For these reasons, the 

agencies did not propose revisions to 

their respective supervisory practices 

relating to supervisory criticisms. 

The agencies also noted that the 2018 

Statement was intended to focus on the 

appropriate use of supervisory guidance 

in the supervisory process, rather than 

the standards for supervisory criticisms. 

To address any confusion concerning 

the scope of the 2018 Statement, the 

Proposed Rule removed two sentences 

from the 2018 Statement concerning 

grounds for ‘‘citations’’ and the 

handling of deficiencies that do not 

constitute violations of law.18

Comments on the Proposed Rule 

A. NCUA Specific Comments 

The NCUA received 13 comments 

specifically focusing on credit union 

concerns about the Proposed Rule. 

These commenters, which included 

national trade associations, state credit 

union leagues, and credit unions, 

generally supported he proposed rule. 

Six comments were sent jointly to each 

regulator, two were from associations 

that provided similar comments to the 

CFPB, and five were comments 

provided solely to the NCUA. Topics 

discussed within the scope of the 

proposal are issues addressing the effect 

and applicability of the guidance. Issues 

beyond the scope of the rule addressed 

coordination with other Federal and 

State regulatory authorities, consistency 

in applying guidance, the examination 

cycle, the need for an appeals process, 

and the need for the Board to issue more 

guidance on various topics. 

One commenter stated that each 

guidance statement from the NCUA 

should include a notice that it is 

nonbinding. In addition, the commenter 

believed that the NCUA should add a 

notice to each guidance statement to 

support that credit unions are fully 

permitted to develop their own 

approaches to compliance issues, and 

that the examiner’s recommendations or 

suggestions do not eliminate the ability 

of the credit union to implement its 

specific solutions. 

Aside from expressing general 

support for the rule, most credit union 

specific comments were beyond the 

scope of the rulemaking. Three 

commenters requested that the NCUA 

improve coordination with respect to 

other Federal regulators, especially 

CFPB and FINCEN. Two commenters 

also requested that NCUA improve 

coordination with state supervisory 

authorities. The commenters stated that 

such enhanced coordination would help 

avoid overlapping or consecutive 

examinations, which they stated 

imposes operational burdens and 

utilizes critical staff member time. With 

respect to state guidance, two 

commenters stated that the NCUA must 

ensure state regulators understand how 

the NCUA will incorporate state 

reliance on state guidance into joint 

examinations or in alternating 

examinations where the NCUA may be 

the lead agency. 

Two commenters stated that there 

should be more consistent application 

of the rules and guidance across regions, 

with examples provided about BSA/ 

AML and audit reports. One commenter 

recommended that the NCUA should 

create a task force to evaluate 


jbell on DSKJLSW7X2PROD with RULES
Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 7953 

19Of the comments received, some comments 

were not submitted to all agencies, some comments 

were identical, and many comments were directed 

at an unrelated rulemaking by the Financial Crimes 

Enforcement Network of the Department of the 

Treasury (FinCEN). 

inconsistent application of guidance 

comprised of credit union officials and 

staff. 

One commenter stated that the NCUA 

Interpretive Rules and Policy 

Statements (IRPS) are part exempted 

interpretive rules and covered policy 

statements. NCUA might consider 

explicitly identifying existing and future 

issuances as either covered supervisory 

guidance or exempt interpretive rule to 

provide clarity for stakeholders. 

B. Comments to All the Agencies 

Including the NCUA 

In addition, the agencies received 30 

comments concerning the Proposed 

Rule.19 Commenters representing trade 

associations for banking institutions and 

other businesses, state bankers’ 

associations, individual financial 

institutions, and one member of 

Congress expressed support for the 

proposed rule. These commenters 

supported codification of the 2018 

Interagency Statement and the 

reiteration by the agencies that guidance 

does not have the force of law and 

cannot give rise to binding, enforceable 

legal obligations. One of these 

commenters stated that the proposal 

would serve the interests of consumers 

and competition by allowing 

institutions to know what the law is and 

to develop innovative products that 

serve consumers and business clients, 

without uncertainty regarding potential 

regulatory consequences. These 

commenters expressed strong support as 

well for the clarification in the Proposed 

Rule that the Agencies will not criticize, 

including through the issuance of 

‘‘matters requiring attention,’’ a 

supervised financial institution for a 

‘‘violation’’ of, or ‘‘non-compliance’’ 

with, supervisory guidance. 

One commenter agreed with the 

agencies that supervisory criticisms 

should not be limited to violation of 

statutes, regulations, or order, including 

a ‘‘demonstrable unsafe or unsound 

practice’’ and that supervisory guidance 

remains a beneficial tool to 

communicate supervisory expectations 

to the industry. The commenter stated 

that the proactive identification of 

supervisory criticism or deficiencies 

that do not constitute violations of law 

facilitates forward-looking supervision, 

which helps address problems before 

they warrant a formal enforcement 

action. The commenter noted as well 

that supervisory guidance provides 

important insight to industry and 

ensures consistency in the supervisory 

approach and that supervised 

institutions frequently request 

supervisory guidance. The commenter 

observed that the pandemic has 

amplified the requests for supervisory 

guidance and interpretation, and that it 

is apparent institutions want clarity and 

guidance from regulators. 

Two commenters, both advocacy 

groups, opposed the proposed rule, 

suggesting that codifying the 2018 

Statement may undermine the 

important role that supervisory 

guidance can play by informing 

supervisory criticism, rather than 

merely clarifying that it will not serve 

as the basis for enforcement actions. 

One commenter stated that it is essential 

for agencies to have the prophylactic 

authority to base criticisms on improper 

practices by financial institutions that 

may not yet have ripened into violations 

of law or significant safety and 

soundness concerns. The commenter 

stated that this is particularly important 

with respect to large banks, where delay 

in addressing concerns could lead to a 

broader crisis. One commenter stated 

that the agencies have not explained the 

benefits that would result from the rule 

or demonstrated how the rule will 

promote safety and soundness or 

consumer protection. The commenter 

argued that supervision is different from 

other forms of regulation and requires 

supervisory discretion, which could be 

constrained by the rule. One of these 

commenters argued that the proposal 

would send a signal that financial 

institutions have wider discretion to 

ignore supervisory guidance. 

B. Scope of Rule 

Several commenters requested that 

the Proposed Rule cover interpretive 

rules and clarify that interpretive rules 

do not have the force and effect of law. 

One commenter stated that the agencies 

should clarify whether they believe that 

interpretive rules can be binding. The 

commenter argued that, under 

established legal principles, interpretive 

rules can be binding on the issuing 

agency but not on the public. Some 

commenters suggested that the agencies 

follow ACUS recommendations for 

issuing interpretive rules and that the 

agencies should clarify when particular 

guidance documents are or are not 

interpretive rules and allow the public 

to petition and change an interpretation. 

A number of commenters requested that 

the agencies expand the statement to 

address the standards that apply to 

MRAs and other supervisory criticisms 

such as DORs, a suggestion made in the 

Petition. 

C. Role of Guidance Documents 

Several commenters recommended 

that the agencies clarify that the 

practices described in supervisory 

guidance are merely examples of 

compliant conduct, not expectations 

that may form the basis for supervisory 

criticism. One commenter suggested 

that the agencies state that when 

agencies offer examples of safe and 

sound conduct, compliance with 

consumer protection standards, 

appropriate risk management practices, 

or acceptable practices through 

supervisory guidance or interpretive 

rules, the Agencies will treat adherence 

to that supervisory guidance or 

interpretive rule as deemed compliance. 

One commenter also requested that the 

agencies make clear that guidance that 

goes through public comment, as well as 

any examples used in guidance, are not 

binding. The commenter also requested 

that the agencies affirm that they will 

apply statutory factors while processing 

applications. 

One commenter argued that guidance 

provides valuable information to 

supervisors about how their discretion 

should be exercised and therefore plays 

an important role in supervision. 

According to this commenter, 12 U.S.C. 

1831p–1 and 12 U.S.C. 1818 recognize 

the discretionary power conferred on 

banking agencies separate from the 

power to issue regulations. The 

commenter noted that, pursuant to these 

statutes, regulators may issue cease and 

desist orders based on a reasonable 

cause to believe that an institution has 

engaged, is engaging or is about to 

engage in an unsafe and unsound 

practice, separately and apart from 

whether the institution has technically 

violated a law or regulation. The 

commenter added that Congress 

entrusted the agencies with the power to 

determine whether practices are unsafe 

and unsound and attempt to halt such 

practices through supervision, even if a 

specific case may not constitute a 

violation of a written law or regulation. 

D. Supervisory Criticisms 

Several commenters addressed 

supervisory criticisms and how they 

relate to guidance. Commenters 

suggested that supervisory criticisms 

should be specific as to practices, 

operations, financial conditions, or 

other matters that could have a negative 

effect. Commenters suggested that 

MRAs, memoranda of understanding 

and any other formal written mandates 

or sanctions should be based only on a 

violation of a statute or regulation. 

Similarly, commenters argued that there 

should be no references to guidance in 


jbell on DSKJLSW7X2PROD with RULES
7954 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

20See Mortgage Bankers Association, 575 U.S. at 

96. 

21Questions concerning the legal and supervisory 

nature of interpretive rules are case-specific and 

have engendered debate among courts and 

administrative law commentators. The NCUA takes 

no position in this rulemaking on those specific 

debates. See, e.g., R. Levin, Rulemaking and the 

Guidance Exemption, 70 Admin. L. Rev. 263 (2018) 

(discussing the doctrinal differences concerning the 

status of interpretive rules under the APA); see also 

Nicholas R. Parillo, Federal Agency Guidance and 

the Powder to Bind: An Empirical Study of Agencies 

and Industries, 36 Yale J. Reg 165, 168 n.6 (2019) 

(‘‘Whether interpretive rules are supposed to be 

nonbinding is a question subject to much confusion 

that is not fully settled’’); see also ACUS, 

Recommendation 2019–1, Agency Guidance 

Through Interpretive Rules (Adopted June 13, 

2019), available at https://www.acus.gov/ 

recommendation/agency-guidance-throughinterpretive-rules (noting that courts and 

commentators have different views on whether 

interpretive rules bind an agency and effectively 

bind the public through the deference given to 

agencies’ interpretations of their own rules under 

Auer v. Robbins, 519 U.S. 452 (1997)). 

written formal actions and that banking 

institutions should be reassured that 

they will not be criticized or cited for 

a violation of guidance when no law or 

regulation is cited. One commenter 

suggested that it would instead be 

appropriate to discuss supervisory 

guidance privately, rather than publicly, 

potentially during the pre-exam 

meetings or during examination exit 

meetings. Another commenter suggested 

that, while referencing guidance in 

supervisory criticism may be useful at 

times, agencies should provide 

safeguards to prevent such references 

from becoming the de facto basis for 

supervisory criticisms. One commenter 

suggested that examiners also should 

not criticize community banks in their 

final written examination reports for not 

complying with ‘‘best practices’’ unless 

the criticism involves a violation of 

bank policy or regulation. The 

commenter added that industry best 

practices should be transparent enough 

and sufficiently known throughout the 

industry before they are cited in an 

examination report. One commenter 

requested that examiners should not 

apply large bank practices to 

community banks that have a different, 

less complex and more conservative 

business model. One commenter 

asserted that MRAs should not be based 

on ‘‘reputational risk,’’ but rather the 

underlying conduct giving rise to 

concerns should be the basis for an 

MRA and asked the agencies to address 

this in the final rule. 

Commenters that opposed the 

proposal did not support restricting 

supervisory criticism or sanctions to 

explicit violations of law or regulation. 

One commenter expressed concern that 

requiring supervisors to wait for an 

explicit violation of law before issuing 

criticism would effectively erase the 

line between supervision and 

enforcement. One commenter 

emphasized the importance of bank 

supervisors basing their criticisms on 

imprudent bank practices that may not 

yet have ripened into violations of laws 

or rules but which if left unaddressed 

could undermine safety and soundness 

or pose harm to consumers. 

One commenter argued that the 

agencies should state clearly that 

guidance can and will be used by 

supervisors to inform their assessments 

of banks’ practices; that it may be cited 

as, and serve as the basis for, criticisms. 

According to the commenter, even 

under the ‘‘well-established law’’ 

described in the proposal, it is quite 

permissible for guidance to be used as 

a set of standards that may indeed 

inform a criticism, provided that 

application of the guidance is used for 

corrective purposes, if not to support an 

enforcement action. 

According to one commenter, the 

proposal makes fine conceptual 

distinctions between, for example, 

issuing supervisory criticisms ‘‘on the 

basis of’’ guidance (which is apparently 

forbidden) and issuing supervisory 

criticisms that make ‘‘reference’’ to 

supervisory guidance (which continues 

to be permitted). The commenter 

suggested that is a distinction that it 

may be difficult for people to parse in 

practice. According to the commenter, a 

rule that makes such a distinction is 

likely to have a chilling effect on 

supervisors attempting to implement 

policy in the field. According to another 

commenter, the language allowing 

examiners to reference supervisory 

guidance to provide examples is too 

vague and threatens to marginalize the 

role of guidance to the point that it 

becomes almost useless in the process of 

issuing criticisms designed to correct 

deficient bank practices. 

E. Legal Authority and Visitorial Powers 

One commenter questioned the 

agencies’ reference in the proposal to 

visitorial powers as an additional 

authority for early identification of 

supervisory concerns that may not rise 

to a violation of law, unsafe or unsound 

banking practice, or breach of fiduciary. 

F. Issuance and Management of 

Supervisory Guidance 

Several commenters made suggestions 

about how the agencies should issue 

and manage supervisory guidance. 

Some comments suggested that the 

agencies should clearly delineate 

between regulations and supervisory 

guidance. Commenters encouraged the 

agencies to regularly review, update, 

and potentially rescind outstanding 

guidance. One commenter suggested 

that the agencies rescind outstanding 

guidance that functions as a rule but has 

not gone through notice and comment. 

One commenter suggested that the 

agencies memorialize their intent to 

revisit and potentially rescind existing 

guidance, as well as limit multiple 

guidance documents on the same topic. 

Commenters suggested that supervisory 

guidance should be easy to find, readily 

available, online, and in a format that is 

user-friendly and searchable. 

One commenter encouraged the 

agencies to issue principles-based 

guidance that does not contain the kind 

of granularity that could be 

misconstrued as binding expectations. 

According to this commenter, the 

agencies can issue separate FAQs with 

more detailed information but should 

clearly identify these as non-binding 

illustrations. This commenter also 

encouraged the agencies to publish 

proposed guidance for comment when 

circumstances allow. One commenter 

expressed concern that the agencies will 

aim to reduce the issuances of multiple 

supervisory guidance documents and 

will thereby reduce the availability of 

guidance in circumstances where 

guidance would be valuable. 

Responses to Comments 

As stated in the Proposed Rule, the 

2018 Statement was intended to focus 

on the appropriate use of supervisory 

guidance in the supervisory process, 

rather than the standards for 

supervisory criticisms. The standards 

for issuing MRAs and other supervisory 

actions such as DORs were, therefore, 

outside the scope of this rulemaking. 

For this reason, and for reasons 

discussed earlier, the final rule does not 

address the standards for MRAs and 

other supervisory actions such as DORs. 

Similarly, because the NCUA is not 

addressing approaches to supervisory 

criticism in the final rule, including any 

criticism related to reputation risk, the 

final rule does not include standards for 

supervisory criticisms relating to 

‘‘reputation risk.’’ 

With respect to the comments on 

coverage of interpretive rules, the NCUA 

agrees with the commenter that 

interpretive rules do not, alone, ‘‘have 

the force and effect of law’’ and must be 

rooted in, and derived from, a statute or 

regulation.20 While interpretive rules 

and supervisory guidance are similar in 

lacking the force and effect of law, 

interpretive rules and supervisory 

guidance are distinct under the APA 

and its jurisprudence and are generally 

issued for different purposes.21

Interpretive rules are typically issued by 


jbell on DSKJLSW7X2PROD with RULES
Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 7955 

22 Mortgage Bankers Association, 575 U.S. at 97 

(citing Shalala v. Guernsey Memorial Hospital, 514 

U.S. 87, 99 (1995)); accord Attorney General’s 

Manual at 30 n.3. 

23See Chrysler v. Brown, 441 U.S. at 302 n.31 

(quoting Attorney General’s Manual at 30 n.3); see 

also, e.g., American Mining Congress v. Mine Safety 

& Health Administration, 995 F.2d 1106, 1112 (D.C. 

Cir. 1993) (outlining tests in the D.C. Circuit for 

assessing whether an agency issuance is an 

interpretive rule). 

24The question of whether an example in 

guidance can provide a safe harbor would also 

likely not be a logical outgrowth of the proposed 

rule. 

25 557 U.S. 519, 536 (2009). 

26 Id. at 533. 

27 550 U.S. 1, 127 (2007). 

28The commenter’s reading of the agencies’ 

examination and reporting authorities would assert 

that the agencies may examine supervised 

institutions and require reports, but not make 

findings based on such examinations and reporting, 

unless the finding is sufficient to warrant a formal 

enforcement action under the standard set out in 12 

U.S.C. 1818 for banks. This reading is inconsistent 

with the history of federal financial supervision, 

including as described in the cases cited in the 

Proposed Rule. 

an agency to advise the public of the 

agency’s construction of the statutes and 

rules that it administers,22 whereas 

general statements of policy, such as 

supervisory guidance, advise the public 

of how an agency intends to exercise its 

discretionary powers.23 To this end, 

guidance generally reflects an agency’s 

policy views, for example, on practices 

on safe and sound risk management. On 

the other hand, interpretive rules 

generally resolve ambiguities regarding 

what statutes and regulations require. 

Because supervisory guidance and 

interpretive rules have different 

characteristics and serve different 

purposes, the NCUA is adopting the 

proposed rule’s coverage of supervisory 

guidance only. 

With respect to the question of 

whether to adopt ACUS’s procedures for 

allowing the public to request 

reconsideration or revision of an 

interpretive rule, this rulemaking, again, 

does not address interpretive rules. As 

such, the NCUA is not adding 

procedures for challenges to interpretive 

rules through this rulemaking. 

In response to the comment that the 

agencies treat examples in guidance as 

‘‘safe harbors,’’ the NCUA agrees that 

examples offered in guidance may 

provide reassurance about practices 

that, in general, may lead to safe and 

sound operation and compliance with 

regulations and statutes. The examples 

in guidance, however, are typically 

generalized. The question of whether 

the employment of the examples meets 

supervisory goals requires consideration 

of how an institution applies those 

examples under the facts and 

circumstances. In addition, the 

underlying legal principle of guidance is 

that it does not created binding legal 

obligation for either the public or an 

agency. As such, the NCUA does not 

intend to deem examples in guidance as 

categorically setting safe harbors.24

In response to the comment that the 

proposal may undermine the important 

role that supervisory guidance can play 

by informing supervisory criticism and 

by serving to address conditions before 

those conditions lead to enforcement 

actions, the NCUA agrees that the 

appropriate use of guidance supports a 

more collaborative and constructive 

regulatory process that supports the 

safety and soundness of institutions and 

diminishes the need for enforcement 

actions. In addition, as noted by ACUS, 

guidance can make agency decisionmaking more predictable and uniform 

and shield regulated parties from 

unequal treatment, unnecessary costs, 

and unnecessary risk, while promoting 

compliance with the law. The NCUA 

intends, therefore, to continue using 

guidance to bolster the supervisory 

process. The NCUA does not view the 

final rule as weakening the role of 

guidance in the supervisory process. 

Further, the NCUA will continue to use 

guidance in a robust way to support the 

safety and soundness of credit unions. 

In response to the related question from 

these commenters, which suggested 

there is no basis for the rule, the NCUA 

notes the question of the role of 

guidance has been one of interest to 

regulated parties and other stakeholders 

over the past few years. The Petition is 

evidence of this interest. As such, the 

NCUA believes it will serve the public 

interest to reaffirm the appropriate role 

of supervisory guidance. 

With respect to the comment that 

visitorial powers do not provide the 

authority to issue supervisory criticisms 

like DORs, the NCUA disagrees. The 

visitorial powers of financial regulators 

are well-established. The Supreme 

Court’s decision in Cuomo v. Clearing 

House Assn L.L.C. explained that the 

visitation included the ‘‘exercise of 

supervisory power.’’ 25 The Court ruled 

that the ‘‘power to enforce the law exists 

separate and apart from the power of 

visitation.’’ 26 While the Cuomo 

decision involved the question of which 

powers may be exercised by state 

governments (and ruled that states 

could exercise law enforcement powers 

but could not exercise visitorial 

powers), the decision did not dispute 

that the Federal agencies possess both 

these powers. The Court in Cuomo 

explained that visitorial powers entailed 

‘‘oversight and supervision,’’ while the 

Court’s earlier decision in Watters v. 

Wachovia Bank, N.A. explained that 

visitorial powers entailed ‘‘general 

supervision and control.’’ 27

Accordingly, visitorial powers include 

the power to issue supervisory 

criticisms independent of the agencies’ 

authority to enforce applicable laws or 

ensure safety and soundness. For these 

reasons, the NCUA reaffirms the 

statement in the preamble to the 

Proposed Rule that such visitorial 

powers have been conferred through 

statutory examination and reporting 

authorities, which facilitate the NCUA’s 

identification of supervisory concerns 

that may not rise to a violation of law, 

unsafe or unsound practice, or breach of 

fiduciary duty under 12 U.S.C. 1786. In 

the case of the federal banking agencies, 

such statutory examination and 

reporting authorities pre-existed 12 

U.S.C. 1786, which neither superseded 

nor replaced such authorities. Each of 

the agencies has been vested with 

statutory examination and reporting 

authorities with respect to institutions 

under its supervision.28

In response to the commenter’s 

request regarding guidance issued for 

public comment, the NCUA notes that it 

has made clear through the 2018 

Statement and in this final rule that 

supervisory guidance (including 

guidance that goes through public 

comment) does not create binding, 

enforceable legal obligations. Rather, the 

NCUA issues guidance for comment in 

order to improve its understanding of an 

issue, gather information, or seek ways 

to achieve a supervisory objective most 

effectively. Similarly, examples that are 

included in supervisory guidance are 

not binding on institutions. Rather, 

these examples are intended to be 

illustrative of ways a supervised 

institution may implement safe and 

sound practices, appropriate consumer 

protection, prudent risk management, or 

other actions to comply with laws or 

regulations. 

With respect to the commenter’s 

request that the agencies affirm that they 

will apply statutory factors while 

processing applications, the NCUA 

affirms that the agency will continue to 

consider and apply all applicable 

statutory factors when processing 

applications. 

In response to the question raised by 

some commenters concerning potential 

confusion between guidance and 

interpretive rules, the NCUA notes that 

interpretive rules are outside the scope 

of the rulemaking. In addition, as stated 

earlier, while both guidance and 

interpretive rules serve different 

purposes, both lack the force and effect 

of law. Interpretive rules must be rooted 


jbell on DSKJLSW7X2PROD with RULES
7956 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

29 44 U.S.C. 3501–3521. 

30NCUA Interpretive Ruling and Policy 

Statement (IRPS) 87–2, as amended by IRPS 03–2 

and 15–1, available at https://www.ncua.gov/files/ 

publications/irps/IRPS1987-2.pdf. 

in the statutes and regulations those 

rules interpret. As for identification of 

these documents, the NCUA generally 

does, identify guidance and interpretive 

rules and will continue to do so going 

forward. 

In response to the two commenters 

opposing the Proposal, this final rule 

does not undermine any of the NCUA’s 

safety and soundness authorities. 

Indeed, the final rule is designed to 

solidify the NCUA’s ability to enforce 

the very matters of most importance. In 

addition, the NCUA notes the question 

of the role of guidance has been one of 

interest to regulated parties and other 

stakeholders over the past few years. 

The Petition is evidence of this interest. 

As such, the NCUA believes it will serve 

the public interest to reaffirm the 

appropriate role of supervisory 

guidance. Therefore, the NCUA is 

proceeding with the rule as proposed. 

One credit union commenter stated 

that examiners should only use 

regulatory requirements as the basis to 

assess credit union operations, and 

afford credit unions the opportunity to 

demonstrate that their practices, which 

may deviate from the examples 

provided in supervisory guidance, 

nonetheless constitute safe and sound 

practices that meet regulatory 

requirements. The NCUA notes that the 

final rule clearly indicates that 

examiners will not criticize a supervised 

financial institution for, and the NCUA 

will not issue an enforcement action on 

the basis of, a ‘‘violation’’ of or ‘‘noncompliance’’ with supervisory guidance. 

Nevertheless, examiners may reference 

supervisory guidance to provide 

examples of safe and sound practices, 

appropriate consumer protection and 

risk management practices, and other 

actions for addressing compliance with 

laws or regulations. 

Another commenter requested that all 

supervisory guidance be published for 

public comment before being issued. 

The commenter argued that this process 

would reinforce the nature of the 

guidance and provide credit unions a 

role in helping to achieve vetted 

guidance that is useful to their 

operations. The NCUA does not agree 

with this comment as publishing each 

supervisory guidance for public 

comment would prevent it from being 

issued timely to provide examples of 

safe and sound practices, appropriate 

consumer protection and risk 

management practices, and other 

actions for addressing compliance with 

laws or regulations where applicable. As 

stated in response to other comments, 

the NCUA’s position is the underlying 

legal principal of guidance is that it 

does not create a binding legal 

obligation for either the public or an 

agency. 

One comment stated that the NCUA 

should include a notice in each 

supervisory guidance indicating that it 

is nonbinding. The NCUA believes such 

a notice is not necessary, given that the 

final rule reflects the NCUA’s position 

that the underlying legal principal of 

supervisory guidance is that it does not 

created binding legal obligation for 

either the public or an agency. 

One comment recommended 

identifying existing and future issuances 

of NCUA Interpretive Rules and Policy 

Statements (IRPS) as either a covered 

supervisory guidance or an exempt 

interpretive rule to provide clarity for 

credit unions. The NCUA reiterates that 

interpretive rules are outside the scope 

of this rulemaking. However, as stated 

in the proposed rule, while both 

guidance and interpretive rules serve 

different purposes, both lack the force 

and effect of law. As for identification 

of NCUA IRPS issuances, the NCUA 

generally does identify guidance and 

interpretive rules and will continue to 

do so going forward. 

Comments Beyond the Scope of the 

Rulemaking 

Most comments by credit union 

affiliated commenters were beyond the 

scope of the rulemaking, including the 

need for coordination with other 

Federal and State regulatory authorities, 

consistency in applying guidance, the 

examination cycle, the need for an 

appeals process, and the need for the 

Board to issue more guidance on various 

topics. Given that these comments 

addressed issues not relevant to the 

guidance rulemaking, the NCUA has 

determined that it is more appropriate 

to assess them outside the context of 

this rulemaking. Nevertheless, the Board 

agrees with the commenters that is 

important to enhance coordination with 

other regulatory authorities and apply 

guidance consistently. 

III. The Final Rule 

For the reasons discussed above, the 

final rule adopts the Proposed Rule 

without change. However, the NCUA 

has decided to issue a final rule that is 

specifically addressed to the NCUA and 

NCUA-supervised institutions, rather 

than the joint version that the five 

agencies included in their joint 

Proposal. Although many of the 

comments were applicable to all of the 

agencies, some comments were specific 

to particular agencies or to groups of 

agencies. Having separate final rules has 

enabled agencies to better focus on 

explaining any agency-specific issues to 

their respective audiences of supervised 

institutions and agency employees. 

IV. Administrative Law Matters 

A. Paperwork Reduction Act Analysis 

The Paperwork Reduction Act of 

1995 29 (PRA) states that no agency may 

conduct or sponsor, nor is the 

respondent required to respond to, an 

information collection unless it displays 

a currently valid Office of Management 

and Budget (OMB) control number. The 

NCUA has reviewed this final rule and 

determined that it does not contain any 

information collection requirements 

subject to the PRA. Accordingly, no 

submissions to OMB will be made with 

respect to this final rule. 

B. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA) 

generally requires that, in connection 

with a notice of proposed rulemaking, 

an agency prepare and make available 

for public comment an initial regulatory 

flexibility analysis that describes the 

impact of a proposed rule on small 

entities. A regulatory flexibility analysis 

is not required, however, if the agency 

certifies that the rule will not have a 

significant economic impact on a 

substantial number of small entities 

(defined by the NCUA for purposes of 

the RFA to include federally insured 

credit unions with assets less than $100 

million) 30 and publishes its 

certification and a short, explanatory 

statement in the Federal Register 

together with the rule. This rule will not 

impose any obligations on federally 

insured credit unions, and regulated 

entities will not need to take any action 

in response to this rule. The NCUA 

certifies that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The NCUA received no comments in 

response to its request for comments on 

this analysis. 

C. 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, the 

NCUA, an independent regulatory 

agency as defined in 44 U.S.C. 3502(5), 

voluntarily complies with the executive 

order. This rule will not have a 

substantial direct effect on the states, on 

the connection between the national 

government and the states, or on the 


jbell on DSKJLSW7X2PROD with RULES
Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 7957 

31Public Law 105–277, 112 Stat. 2681 (1998). 

32 5 U.S.C. 801 et seq. 

33 5 U.S.C. 801(a)(3). 

34 5 U.S.C. 804(2). 

1 Government agencies issue regulations that 

generally have the force and effect of law. Such 

regulations generally take effect only after the 

agency proposes the regulation to the public and 

responds to comments on the proposal in a final 

rulemaking document. 

distribution of power and 

responsibilities among the various 

levels of government. The NCUA has 

determined this rule does not constitute 

a policy that has federalism 

implications for purposes of the 

executive order. 

D. Assessment of Federal Regulations 

and Policies on Families 

The 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, 

1999.31

E. Congressional Review Act 

For purposes of Congressional Review 

Act, the OMB makes a determination as 

to whether a final rule constitutes a 

‘‘major’’ rule.32 If a rule is deemed a 

‘‘major rule’’ by the OMB, the 

Congressional Review Act generally 

provides that the rule may not take 

effect until at least 60 days following its 

publication.33

The Congressional Review Act defines 

a ‘‘major rule’’ as any rule that the 

Administrator of the Office of 

Information and Regulatory Affairs of 

the OMB finds has resulted in or is 

likely to result in (A) an annual effect 

on the economy of $100,000,000 or 

more; (B) a major increase in costs or 

prices for consumers, individual 

industries, Federal, State, or local 

government agencies or geographic 

regions, or (C) significant adverse effects 

on competition, employment, 

investment, productivity, innovation, or 

on the ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic and 

export markets.34 As required by the 

Congressional Review Act, the NCUA 

will submit the final rule and other 

appropriate reports to Congress and the 

Government Accountability Office for 

review. 

List of Subjects in 12 CFR Part 791 

Administrative practice and 

procedure, Credit unions, Sunshine Act. 

By the National Credit Union 

Administration Board on January 19, 2021. 

Melane Conyers-Ausbrooks, 

Secretary of the Board. 

National Credit Union Administration 

12 CFR Chapter VII 

Authority and Issuance 

For the reasons stated in the 

preamble, 12 CFR part 791 is amended 

as follows: 

PART 791—RULES OF NCUA BOARD 

PROCEDURE; PROMULGATION OF 

NCUA RULES AND REGULATIONS; 

OBSERVANCE OF NCUA BOARD 

MEETINGS 

■ 1. The authority citation for part 791 

is revised to read as follows: 

Authority: 12 U.S.C. 1766, 1781, 1786, 

1787, 1789, and 5 U.S.C. 552b. 

■ 2. Subpart D is added to part 791 to 

read as follows: 

Subpart D—Use of Supervisory Guidance 

Sec. 

791.19 Purpose. 

791.20 Implementation of the Interagency 

Statement. 

791.21 Rule of construction. 

Appendix A to Subpart D—Statement 

Clarifying the Role of Supervisory 

Guidance 

Subpart D—Use of Supervisory 

Guidance 

§ 791.19 Purpose. 

The NCUA issues regulations and 

guidance as part of its supervisory 

function. This subpart reiterates the 

distinctions between regulations and 

guidance, as stated in the Interagency 

Statement Clarifying the Role of 

Supervisory Guidance (Interagency 

Statement) and provides that the 

Statement is binding on the NCUA. 

§ 791.20. Implementation of the 

Interagency Statement. 

The Statement describes the official 

policy of the NCUA with respect to the 

use of supervisory guidance in the 

supervisory process. The Statement is 

binding on the NCUA. 

§ 791.21 Rule of construction. 

Appendix A to this subpart does not 

alter the legal status of guidance that is 

authorized by statute, including but not 

limited to 12 U.S.C. 1781, 1786, and 

1789, to create binding legal obligations. 

Appendix A to Subpart D—Statement 

Clarifying the Role of Supervisory 

Guidance 

Statement Clarifying the Role of Supervisory 

Guidance 

The National Credit Union Administration 

is responsible for promoting safety and 

soundness and effective consumer protection 

at Federal credit unions. The NCUA is 

issuing this statement to explain the role of 

supervisory guidance and to describe its 

approach to supervisory guidance. 

Difference Between Supervisory Guidance 

and Laws or Regulations 

(1) The NCUA issue various types of 

supervisory guidance, including interagency 

statements, advisories, bulletins, policy 

statements, questions and answers, and 

frequently asked questions, to their 

respective supervised institutions. A law or 

regulation has the force and effect of law.1

Unlike a law or regulation, supervisory 

guidance does not have the force and effect 

of law, and the NCUA do not take 

enforcement actions based on supervisory 

guidance. Rather, supervisory guidance 

outlines the NCUA’s supervisory 

expectations or priorities and articulates the 

agency’s general views regarding appropriate 

practices for a given subject area. Supervisory 

guidance often provides examples of 

practices that the agency generally considers 

consistent with safety-and-soundness 

standards or other applicable laws and 

regulations, including those designed to 

protect consumers. Supervised institutions at 

times request supervisory guidance, and such 

guidance is important to provide insight to 

industry, as well as supervisory staff, in a 

transparent way that helps to ensure 

consistency in the supervisory approach. 

Ongoing Agency Efforts To Clarify the Role 

of Supervisory Guidance 

(2) The NCUA is clarifying the following 

policies and practices related to supervisory 

guidance: 

(i) The NCUA intends to limit the use of 

numerical thresholds or other ‘‘bright-lines’’ 

in describing expectations in supervisory 

guidance. Where numerical thresholds are 

used, the NCUA intends to clarify that the 

thresholds are exemplary only and not 

suggestive of requirements. The agency will 

continue to use numerical thresholds to 

tailor, and otherwise make clear, the 

applicability of supervisory guidance or 

programs to supervised institutions, and as 

required by statute. 

(ii) Examiners will not criticize (through 

the issuance of matters requiring attention, 

matters requiring immediate attention, 

matters requiring board attention, documents 

of resolution, and supervisory 

recommendations) a supervised financial 

institution for, and the NCUA will not issue 

an enforcement action on the basis of, a 

‘‘violation’’ of or ‘‘non-compliance’’ with 


jbell on DSKJLSW7X2PROD with RULES
7958 Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations 

supervisory guidance. In some situations, 

examiners may reference (including in 

writing) supervisory guidance to provide 

examples of safe and sound conduct, 

appropriate consumer protection and risk 

management practices, and other actions for 

addressing compliance with laws or 

regulations. 

(iii) Supervisory criticisms should 

continue to be specific as to practices, 

operations, financial conditions, or other 

matters that could have a negative effect on 

the safety and soundness of the financial 

institution, could cause consumer harm, or 

could cause violations of laws, regulations, 

final agency orders, or other legally 

enforceable conditions. 

(iv) The NCUA also has at times sought, 

and may continue to seek, public comment 

on supervisory guidance. Seeking public 

comment on supervisory guidance does not 

mean that the guidance is intended to be a 

regulation or have the force and effect of law. 

The comment process helps the agency to 

improve its understanding of an issue, to 

gather information on institutions’ risk 

management practices, or to seek ways to 

achieve a supervisory objective most 

effectively and with the least burden on 

institutions. 

(v) The NCUA will aim to reduce the 

issuance of multiple supervisory guidance 

documents on the same topic and will 

generally limit such multiple issuances going 

forward. 

(3) The NCUA will continue efforts to 

make the role of supervisory guidance clear 

in their communications to examiners and to 

supervised financial institutions and 

encourage supervised institutions with 

questions about this statement or any 

applicable supervisory guidance to discuss 

the questions with their appropriate agency 

contact. 

[FR Doc. 2021–01867 Filed 2–2–21; 8:45 am] 

BILLING CODE 7535–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 97 

[Docket No. 31352; Amdt. No. 3941] 

Standard Instrument Approach 

Procedures, and Takeoff Minimums 

and Obstacle Departure Procedures; 

Miscellaneous Amendments 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: This rule establishes, amends, 

suspends, or removes Standard 

Instrument Approach Procedures 

(SIAPS) and associated Takeoff 

Minimums and Obstacle Departure 

procedures (ODPs) for operations at 

certain airports. These regulatory 

actions are needed because of the 

adoption of new or revised criteria, or 

because of changes occurring in the 

National Airspace System, such as the 

commissioning of new navigational 

facilities, adding new obstacles, or 

changing air traffic requirements. These 

changes are designed to provide safe 

and efficient use of the navigable 

airspace and to promote safe flight 

operations under instrument flight rules 

at the affected airports. 

DATES: This rule is effective February 3, 

2021. The compliance date for each 

SIAP, associated Takeoff Minimums, 

and ODP is specified in the amendatory 

provisions. 

The incorporation by reference of 

certain publications listed in the 

regulations is approved by the Director 

of the Federal Register as of February 3, 

2021. 

ADDRESSES: Availability of matters 

incorporated by reference in the 

amendment is as follows: 

For Examination 

1. U.S. Department of Transportation, 

Docket Ops-M30. 1200 New Jersey 

Avenue SE, West Bldg., Ground Floor, 

Washington, DC 20590–0001. 

2. The FAA Air Traffic Organization 

Service Area in which the affected 

airport is located; 

3. The office of Aeronautical 

Navigation Products, 6500 South 

MacArthur Blvd., Oklahoma City, OK 

73169 or, 

4. The National Archives and Records 

Administration (NARA). For 

information on the availability of this 

material at NARA, email fedreg.legal@

nara.gov or go to: https://

www.archives.gov/federal-register/cfr/ 

ibr-locations.html. 

Availability 

All SIAPs and Takeoff Minimums and 

ODPs are available online free of charge. 

Visit the National Flight Data Center at 

nfdc.faa.gov to register. Additionally, 

individual SIAP and Takeoff Minimums 

and ODP copies may be obtained from 

the FAA Air Traffic Organization 

Service Area in which the affected 

airport is located. 

FOR FURTHER INFORMATION CONTACT: 

Thomas J. Nichols, Flight Procedures 

and Airspace Group, Flight 

Technologies and Procedures Division, 

Flight Standards Service, Federal 

Aviation Administration. Mailing 

Address: FAA Mike Monroney 

Aeronautical Center, Flight Procedures 

and Airspace Group, 6500 South 

MacArthur Blvd., Registry Bldg. 29, 

Room 104, Oklahoma City, OK 73169. 

Telephone (405) 954–4164. 

SUPPLEMENTARY INFORMATION: This rule 

amends 14 CFR part 97 by establishing, 

amending, suspending, or removes 

SIAPS, Takeoff Minimums and/or 

ODPS. The complete regulatory 

description of each SIAP and its 

associated Takeoff Minimums or ODP 

for an identified airport is listed on FAA 

form documents which are incorporated 

by reference in this amendment under 5 

U.S.C. 552(a), 1 CFR part 51, and 14 

CFR part 97.20. The applicable FAA 

Forms 8260–3, 8260–4, 8260–5, 8260– 

15A, 8260–15B, when required by an 

entry on 8260–15A, and 8260–15C. 

The large number of SIAPs, Takeoff 

Minimums and ODPs, their complex 

nature, and the need for a special format 

make publication in the Federal 

Register expensive and impractical. 

Further, airmen do not use the 

regulatory text of the SIAPs, Takeoff 

Minimums or ODPs, but instead refer to 

their graphic depiction on charts 

printed by publishers or aeronautical 

materials. Thus, the advantages of 

incorporation by reference are realized 

and publication of the complete 

description of each SIAP, Takeoff 

Minimums and ODP listed on FAA form 

documents is unnecessary. This 

amendment provides the affected CFR 

sections and specifies the typed of 

SIAPS, Takeoff Minimums and ODPs 

with their applicable effective dates. 

This amendment also identifies the 

airport and its location, the procedure, 

and the amendment number. 

Availability and Summary of Material 

Incorporated by Reference 

The material incorporated by 

reference is publicly available as listed 

in the ADDRESSES section. 

The material incorporated by 

reference describes SIAPS, Takeoff 

Minimums and/or ODPs as identified in 

the amendatory language for part 97 of 

this final rule. 

The Rule 

This amendment to 14 CFR part 97 is 

effective upon publication of each 

separate SIAP, Takeoff Minimums and 

ODP as amended in the transmittal. 

Some SIAP and Takeoff Minimums and 

textual ODP amendments may have 

been issued previously by the FAA in a 

Flight Data Center (FDC) Notice to 

Airmen (NOTAM) as an emergency 

action of immediate flights safety 

relating directly to published 

aeronautical charts. 

The circumstances that created the 

need for some SIAP and Takeoff 

Minimums and ODP amendments may 

require making them effective in less 

than 30 days. For the remaining SIAPs 

and Takeoff Minimums and ODPs, an 

effective date at least 30 days after 

publication is provided. 


jbell on DSKJLSW7X2PROD with RULES