This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

4231 

Vol. 71, No. 17 

Thursday, January 26, 2006 

DEPARTMENT OF AGRICULTURE 

Commodity Credit Corporation 

7 CFR 1427 

RIN 0560–AH29 

Cottonseed Payment Program 

AGENCIES: Commodity Credit 

Corporation, USDA. 

ACTION: Final rule. 

SUMMARY: This final rule codifies 

portions of the Military Construction 

Appropriations and Emergency 

Hurricane Supplemental Appropriations 

Act, 2005, enacted on October 13, 2004 

Public Law 108–324 (‘‘2004 Act’’) to 

provide assistance to producers and 

first-handlers of the 2004 crop of 

cottonseed in counties declared a 

disaster by the President of the United 

States due to 2004 hurricanes and 

tropical storms. Other 2004 Act disaster 

provisions for other crops were 

implemented under separate rules. 

DATES: This rule is effective January 26, 

2006. 

FOR FURTHER INFORMATION CONTACT: 

Chris Kyer, phone: (202) 720–7935; email: chris.kyer@wdc.usda.gov. 

SUPPLEMENTARY INFORMATION: 

Discussion of Final Rule 

In a proposed rule published in the 

Federal Register at 70 FR 36536 (June 

24, 2005), the Commodity Credit 

Corporation (CCC) proposed regulations 

for administering the 2004 Cottonseed 

Payment Program authorized by 

Division B, Section 104 of the 2004 Act 

(Pub. L. 108–324). The 2004 Act 

requires CCC to provide assistance to 

producers and first-handlers (cotton 

gins) of the 2004 crop of cottonseed in 

counties declared a disaster by the 

President of the United States due to 

hurricanes and appropriated $10 

million for these payments. As 

amended, by Section 789 of Division A 

of the Consolidated Appropriations Act, 

2005 (Pub. L. 108–447), Section 104 

provides: 

The Secretary of Agriculture shall use 

$10,000,000 to provide assistance to 

producers and first handlers of the 2004 crop 

of cottonseed located in counties declared a 

disaster by the President of the United States 

in 2004 due to hurricanes or tropical storms. 

The proposed rule described how the 

program was last administered for the 

2002 crop year and how the 2004 

program will be operated differently 

from the 2002 program. To summarize, 

the 2002 program used 2002 crop year 

production as a basis for payment 

because all gins in the nation were 

eligible and the intent of the program 

was to offset the effect on producers of 

low cottonseed prices. However, 

because the 2004 program is tied to 

legislation that involves hurricanes and 

tropical storms, the agency’s intent with 

the 2004 Cottonseed Payment Program 

was to base payments on a loss of cotton 

lint (to be converted to a cottonseed 

equivalent), not actual lint production. 

Therefore, the rule proposed that the 

applicant’s quantity for payment will be 

calculated by a gin by comparing each 

of their eligible producer’s 2003 lint 

production to their 2004 lint production 

and adjusting the difference to reflect 

changes in planted acreages between the 

two years. The gin would then add up 

their producer’s losses to arrive at a total 

quantity for which to request payment. 

The rule also provided for situations 

where the cotton producer did not 

produce 2003 cotton or when the 

producer may have delivered 2004 

cotton to a different gin than for 2003. 

Other key provisions of the rule 

provided regulations for eligible 

cottonseed, eligible applicants, available 

funds, agency calculation of the total 

payment quantity, determining the 

payment rate, and liability of first 

handler. 

Comments and Changes to Final Rule 

The 30-day comment period for the 

proposed rule closed on July 25, 2005. 

FSA received comments from 28 entities 

or persons which included 4 cotton 

associations, 2 gins, 10 United States 

Senators, and 10 Congressmen. In 

general, the respondents consistently 

expressed concerns about how the 

proposed rule will place administrative 

burden on gins, particularly at a time 

when cotton is being harvested and 

ginned, and recommended that USDA 

identify a more efficient and less 

burdensome way to deliver the program. 

However, two cotton associations 

conceded that while the proposed rule 

is much more complicated than 

previous cottonseed assistance programs 

and puts a much heavier administrative 

burden on cotton ginners, it does seem 

to be the most equitable way to 

distribute assistance to producers who 

suffered production losses. 

Specifically, the letters from 10 

Senators and Congressmen cited the 

additional administrative burden placed 

upon gins by the proposed rule but did 

not offer alternative recommendations. 

One ginner expressed concern about the 

administrative burden, plus the 

potential for conflict created by the 

proposed rule between the gin and the 

producer where the gin cannot control 

the outcome of the rules but is blamed 

for the results nonetheless. Another 

ginner specifically recommended a 

distribution of assistance based on 2003 

crop year lint production which would 

be more equitable and less burdensome 

to producers and ginners. Two 

associations stated that cotton ginners 

are willing to gather data from 

producers but suggested an extended 

application time of 45 to 60 days. These 

two associations also suggested use of a 

standard form that producers can use to 

provide production and acreage data to 

their gins that also provides a 

certification by producers that they are 

responsible for the accuracy of the data 

on the form. Two additional 

associations submitted similar 

recommendations and suggested the use 

of a form by producers with a selfcertification clause that would shift 

liability from gins to producers, an 

application period of at least 45 days, 

clarification of provisions regarding 

producers who did not plant cotton in 

either 2003 or 2004, and the use of a 

lint-to-cottonseed conversion factor 

based on the national average as in past 

programs. Further, these associations 

requested that all gins in states with 

eligible disaster counties receive 

disaster application information and the 

eligible county list. 

More specific comments are discussed 

below section by section, along with 

minor changes that will be made in the 

final rule. 


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4232 Federal Register / Vol. 71, No. 17 / Thursday, January 26, 2006 / Rules and Regulations 

Section 1427.1100 Applicability 

Three cotton associations suggested 

that gins in states with disaster-declared 

counties should receive application 

information and an eligible county list 

in order to account for all eligible 

production. While there was no 

recommendation as to how to carry out 

the suggestion, CCC agrees that program 

information must be easily available and 

will, therefore, make the instructions, 

forms and list of eligible counties 

available to gins electronically on the 

internet or by electronic mail. This 

provision will be handled 

administratively. Therefore, the section 

is adopted as proposed. 

Section 1427.1105 Payment 

Application and Deadline 

Four associations stated that in order 

to administer the program as USDA 

proposes they will need additional time 

to gather data from producers, perform 

necessary calculations and prepare 

applications to CCC. One association 

suggested an application deadline of 45 

to 60 days, and three associations 

suggested at least 45 days. CCC agrees 

that additional time may be necessary 

for gins to gather data from producers 

that are not currently on file, to compile 

such data, and prepare an application. 

Thus, the final rule provides that gins 

have 60 calendar days from the date the 

program is announced in the Federal 

Register to file applications with CCC. 

Section 1427.1107 Applicant Payment 

Quantity 

All of the respondents cited the 

additional burden the proposed rule 

would place on gins as compared to 

previous Cottonseed Payment Programs. 

Specifically, the proposed rule provided 

that gins must differentiate production 

from producers located in eligible and 

non-eligible counties, gather data from 

producers or other gins if a producer 

ginned cotton at a different gin in 2003, 

calculate expected production for new 

producers who did not produce cotton 

in 2003, and calculate lint production 

losses for each producer based on 2003 

and 2004 production, adjusting such 

losses for differences in acreage between 

the two years. This required gins to 

gather from producers data not already 

on file such as planted acreages and 

data for producers new to the gin. CCC 

recognizes that, compared to past 

programs, gins will be required to 

perform additional work and thoroughly 

explored other options to ease the 

burden, such as simply using 2003 

production as a basis for payment or 

comparing 2003 production to 2004 

production without considering the 

difference in acreages between the two 

years. After consideration, both options 

were determined to be fiscally 

irresponsible ways to operate a disasterrelated program. Therefore, the section 

will be adopted as proposed. However, 

CCC will make every effort to assist gins 

in obtaining the data necessary that they 

do not currently have on file and will 

provide additional time for the gins to 

gather data and to prepare applications 

for submission to CCC. 

Section 1427.1108 Total Payment 

Quantity 

Two associations recommended that 

the eligible quantity of cottonseed for 

payment be determined using a 

conversion factor based on the national 

average and cited the national average 

seed-to-lint ratio as used for past 

programs. CCC did propose a different 

formula for computing the seed-to-lint 

ratio from what was done in the past, 

except for using the five years preceding 

2004. Thus, CCC adopts § 1427.1108(b) 

as proposed. 

Section 1427.1111 Liability of First 

Handler 

Two cotton associations cited the 

need for a shift in data liability from the 

gin to the producer when additional 

data must be gathered by the gin that the 

gin does not already have, such as 

acreage data. It was suggested that data 

be provided by producers on a form 

containing a self-certification clause that 

would shift liability and also provide 

documentation if an audit is necessary 

or if a dispute arises. CCC disagrees that 

liability should be shifted to the 

producer because the gin is the 

applicant and recipient of program 

benefits. Therefore this section is 

adopted as proposed. 

Executive Order 12866 

This rule has been determined to be 

‘‘Not Significant’’ under Executive 

Order 12866 and has not been reviewed 

by the Office of Management and 

Budget (OMB). 

Regulatory Flexibility Act 

The Regulatory Flexibility Act does 

not apply to this rule because CCC is not 

required by 5 U.S.C. 553 or any other 

law to publish a notice of proposed 

rulemaking with respect to the subject 

of this rule. 

Environmental Assessment 

The environmental impacts of this 

rule have been considered consistent 

with the provisions of the National 

Environmental Policy Act of 1969 

(NEPA), 42 U.S.C. 4321 et seq., the 

regulations of the Council on 

Environmental Quality (40 CFR Parts 

1500–1508), and FSA’s regulations for 

compliance with NEPA, 7 CFR part 799. 

To the extent these authorities may 

apply, CCC has concluded that this rule 

is categorically excluded from further 

environmental review as evidenced by 

the completion of an environmental 

evaluation. No extraordinary 

circumstances or other unforeseeable 

factors exist which would require 

preparation of an environmental 

assessment or environmental impact 

statement. A copy of the environmental 

evaluation is available for inspection 

and review upon request. 

Executive Order 12988 

The rule has been reviewed in 

accordance with Executive Order 12988. 

This proposed rule preempts State laws 

to the extent such laws are inconsistent 

with it. This rule is not retroactive. 

Before judicial action may be brought 

concerning this rule, all administrative 

remedies set forth at 7 CFR Parts 11 and 

780 must be exhausted. 

Executive Order 12372 

This program is not subject to 

Executive Order 12372, which requires 

intergovernmental consultation with 

State and local officials. See the notice 

related to 7 CFR part 3015, subpart V, 

published at 48 FR 29115 (June 24, 

1983). 

Unfunded Mandates 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) does not 

apply to this rule because CCC is not 

required by 5 U.S.C. 553 or any other 

law to publish a notice of proposed 

rulemaking for the subject of this rule. 

Further, this rule contains no unfunded 

mandates as defined in sections 202 and 

205 of UMRA. 

Paperwork Reduction Act of 1995 

A request for comments on the 

information collection needed for this 

program was part of the proposed rule. 

As stated above, several respondents 

commented that the proposed rule is 

much more complicated than previous 

cottonseed assistance programs and puts 

a much heavier administrative burden 

on cotton ginners, and requested that 

this burden be reduced. CCC explored 

options to ease the burden but all were 

determined to be fiscally irresponsible. 

However, CCC will assist gins in 

obtaining the data necessary and will 

provide time to gather data and to 

prepare applications for submission. 

The final information collection package 

has been approved by OMB and 

assigned OMB Control Number 0560–

0256. 


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Federal Register / Vol. 71, No. 17 / Thursday, January 26, 2006 / Rules and Regulations 4233 

Government Paperwork Elimination Act 

CCC is committed to compliance with 

the Government Paperwork Elimination 

Act (GPEA) and the Freedom to E-File 

Act, which require Government 

agencies in general, and the FSA in 

particular, to provide the public the 

option of submitting information or 

transacting business electronically to 

the maximum extent possible. Because 

of the need to publish these regulations 

quickly, the forms and other 

information collection activities 

required to be utilized by a person 

subject to this rule are not yet fully 

implemented in a way that would allow 

the public to conduct business with 

CCC electronically. Accordingly, at this 

time, all forms required to be submitted 

under this rule may be submitted to 

CCC by mail or FAX. 

List of Subjects in 7 CFR Part 1427 

Agriculture, Cottonseed. 

■ For the reasons set out in the 

preamble, 7 CFR 1427 is amended as set 

forth below. 

PART 1427—COTTON 

■ 1. The authority citation for 7 CFR 

part 1427 is revised to read as follows: 

Authority: 7 U.S.C. 7231–7239; 15 U.S.C. 

714b, 714c; Pub. L. 108–324, Pub. L. 108–

447. 

■ 2. Revise the heading to subpart F to 

read as follows: 

Subpart F—2004 Cottonseed Payment 

Program 

■ 3. Revise § 1427.1100 to read as 

follows: 

§ 1427.1100 Applicability. 

(a) Subject to the availability of funds, 

this subpart sets forth the terms and 

conditions under which the Commodity 

Credit Corporation (CCC) will provide 

payments under the cottonseed payment 

program for the 2004 crop year of 

cottonseed. Additional terms and 

conditions may be set forth in the 

application or other forms which must 

be executed to participate in the 

cottonseed payment program. 

(b) Payments shall be available only 

as provided in this subpart and only 

with respect to cottonseed in counties 

declared a disaster by the President of 

the United States due to hurricanes or 

tropical storms. 

§ 1427.1102 [Amended] 

■ 4. In § 1427.1102 remove the 

definitions ‘‘Number of ginned cotton 

bales’’ and ‘‘Running bale.’’

■ 5. Revise § 1427.1103 to read as 

follows: 

§ 1427.1103 Eligible cottonseed and 

counties. 

To be eligible for payments under this 

subpart: 

(a) Counties must have been declared 

a disaster by the President of the United 

States due to 2004 hurricanes or tropical 

storms. 

(b) Cotton must not have been 

destroyed or damaged by fire, flood, or 

other events such that its loss or damage 

was compensated by other local, State, 

or Federal government or private or 

public insurance or disaster relief 

payments. 

■ 6. Amend § 1427.1104 by revising the 

section heading, revising paragraph (a) 

and in paragraph (c) by removing the 

term ‘‘low cottonseed prices’’ and 

adding ‘‘the loss of cottonseed,’’ in its 

place to read as follows: 

§ 1427.1104 Eligible applicants (first 

handlers). 

(a) An eligible first handler of 

cottonseed shall be a gin that has an 

eligible payment quantity as determined 

under § 1427.1107. Only an eligible first 

handler of cottonseed shall be eligible to 

file an application for payment under 

this subpart. 

* * * * * 

■ 7. Amend § 1427.1105 by revising the 

section heading and paragraph (b) to 

read as follows: 

§ 1427.1105 Payment application and 

deadline. 

* * * * * 

(b) The application deadline shall be 

60 calendar days after the rules in this 

subpart become effective unless 

otherwise announced by CCC. 

Applications received after such 

application deadline will not be 

accepted for payment. 

* * * * * 

■ 8. Revise § 1427.1106 to read as 

follows: 

§ 1427.1106 Available funds. 

The total available program funds for 

the 2004-crop cottonseed program 

provided for in this subpart shall be $10 

million. 

■ 9. Revise § 1427.1107 to read as 

follows: 

§ 1427.1107 Applicant payment quantity. 

(a) The applicant’s payment quantity 

of cottonseed will be calculated by the 

applicant and submitted on the 

Cottonseed Payment Application and 

Certification for approval for by CCC. 

An applicant must be an eligible gin and 

the applicant’s payment eligibility will 

be based on the determination of the 

amount of lint deliveries by cotton 

producers in eligible counties which 

were lost to the gin because of the 

qualifying hurricane or tropical storm as 

calculated under this section. 

(1) The lost lint determination will be 

made on a producer-by-producer and 

farm-by-farm basis, based on producer 

certification, ginning records and other 

relevant information as applicable. 

(2) The loss determination will be 

limited to losses related to 2004-crop 

cotton production in eligible counties. A 

cotton producer’s gross loss of lint shall 

be determined based on a comparison of 

lint deliveries for 2003 and 2004 by the 

producer from the eligible farm to all 

gins. That difference will be adjusted to 

reflect changes in the acreage planted in 

the two years by the producer on the 

eligible farm and adjusted for losses due 

to reasons other than hurricane or 

tropical storm. 

(b) The producer will certify the gin 

or gins to which the lost lint production 

as so determined would have been 

delivered. Also, the producer will 

certify the relevant percentages of the 

losses that would have been delivered to 

each gin if more than one gin would 

have received the deliveries. 

Apportionment of the loss may be made 

by CCC between gins on that basis. 

(c) If the producer delivered 2004- 

crop cotton to a gin different than the 

gin to which the producer delivered 

2003-crop cotton, or delivered cotton to 

more than one gin in either 2003 or 

2004, the gin receiving 2004-crop cotton 

shall contact the other gins for 

production information or obtain other 

proof of the eligible quantity from the 

cotton producer so as to make or verify 

the calculation called for in paragraph 

(a) of this section. 

(d) If the cotton producer did not 

produce 2003-crop cotton the producer 

shall be considered a new producer. A 

new producer’s eligible lost quantity 

will be determined as provided in 

paragraph (a) of this section except that 

the amount of loss of lint will be made 

by comparing the producer’s actual 

2004 per-acre yield with the 2003 

USDA, National Agricultural Statistics 

Service county average yield for the 

applicable county. 

(e) The gin’s lint eligibility will be 

calculated individually with respect to 

all eligible cotton producers and those 

individual eligibilities for the gin will 

then be added together to determine the 

total lint eligibility of the gin. From that 

amount of lint eligibility, the applicant 

gin’s payment quantity of cottonseed 

shall be calculated by CCC by 

multiplying: 

(1) The applicant gin’s eligible weight 

of lint for which payment is requested, 

as approved by CCC, and as determined 


erjones on PROD1PC68 with RULES
4234 Federal Register / Vol. 71, No. 17 / Thursday, January 26, 2006 / Rules and Regulations 

1The NCUA Board is authorized by law to define 

‘‘credit unions serving predominantly low-income 

members.’’ 12 U.S.C. 1757(6). To be so designated 

by the appropriate Regional Director, the NCUA 

Board generally requires the majority of a credit 

union’s members to earn less than 80 percent of the 

average national wage as determined by the Bureau 

of Labor Statistics, or to have annual household 

incomes below 80 percent of the national median 

as determined by the Census Bureau. 12 CFR 

701.34(a)(2)–(3). 

2The ‘‘net worth’’ of a LICU is defined by law as 

its retained earnings under GAAP plus any USC on 

deposit. 12 U.S.C. 1790d(o)(2); 12 CFR 702.2(f). The 

‘‘net worth ratio’’ of a credit union is the ratio of 

its net worth to its total assets. 12 U.S.C. 

1790d(o)(3); 12 CFR 702.2(g) and (k). 

in paragraphs (a) through (d) of this 

section by; 

(2) The Olympic average of estimated 

pounds of cottonseed per pound of 

ginned cotton lint, as determined by 

CCC, for the five years preceding the 

2004 crop year. 

■ 10. Revise § 1427.1108 to read as 

follows: 

§ 1427.1108 Total payment quantity. 

The total quantity of 2004-crop 

cottonseed eligible under this subpart 

shall be based on the total payment 

quantity of cottonseed as determined 

under this subpart for which timely 

applications are filed. Eligible 

cottonseed for which no application is 

received according to announced 

application instructions shall not be 

included in the total payment quantity 

of cottonseed. The total payment 

quantity of cottonseed (ton-basis) shall 

be calculated by multiplying: 

(a) The total weight of cotton lint, 

converted to tons, for which payment is 

requested by all applicants, as approved 

by CCC, by 

(b) The Olympic average of estimated 

pounds of cottonseed per pound of 

ginned cotton lint, as determined by 

CCC for the five years preceding the 

2004 crop year. 

■ 11. Revise § 1427.1109 to read as 

follows: 

§ 1427.1109 Payment rate. 

The payment rate (dollars per ton) 

shall be determined by CCC by dividing 

the total available program funds by the 

total eligible payment quantity of 

cottonseed. However, in no event may 

the total payment to an eligible 

applicant exceed $114 per ton of 

cottonseed multiplied by the applicant’s 

total eligible payment quantity. 

■ 12. Amend § 1427.1111 by revising 

paragraph (d) to read as follows: 

§ 1427.1111 Liability of first handler. 

* * * * * 

(d) For 3 years after the date of the 

application for 2004-crop payments, the 

applicant shall keep records, including 

records supporting the quantity of 

cottonseed for which payment was 

requested, and furnish such information 

and reports relating to the application to 

CCC as requested. Such records shall be 

available at all reasonable times for an 

audit or inspection by authorized 

representatives of CCC, United States 

Department of Agriculture, or the 

Comptroller General of the United 

States. Failure to keep, or make 

available, such records may result in 

refund to CCC of all payments received, 

plus interest thereon, as determined by 

CCC. In the event of a controversy 

concerning payments, records must be 

kept for such longer period as may be 

specified by CCC until such controversy 

is resolved. Destruction of records at 

any time is at the risk of the applicant. 

Signed in Washington, DC, on January 12, 

2006. 

Teresa C. Lasseter, 

Executive Vice President, Commodity Credit 

Corporation. 

[FR Doc. 06–742 Filed 1–25–06; 8:45 am] 

BILLING CODE 3410–05–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Parts 701 and 741 

Uninsured Secondary Capital 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Final rule. 

SUMMARY: The National Credit Union 

Administration (NCUA) is adopting 

modifications to its rules on uninsured 

secondary capital accounts to allow 

low-income designated credit unions to 

begin redeeming the funds in those 

accounts when they are within five 

years of maturity, and to require prior 

approval of a plan for the use of 

uninsured secondary capital before a 

credit union can begin accepting the 

funds. 

DATES: This rule is effective February 

27, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Steven W. Widerman, Trial Attorney, 

Office of General Counsel, at 703/518–

6557; or Margaret Miller, Program 

Officer, Office of Examination and 

Insurance, at 703/518–6375. 

SUPPLEMENTARY INFORMATION: 

A. Background 

1. Uninsured secondary capital 

accounts. Under conditions prescribed 

by the NCUA Board, credit unions 

serving predominantly low-income 

members are permitted by law to receive 

payments on shares from non-natural 

persons. 12 U.S.C. 1757(6). In 1996, the 

NCUA Board authorized low-income 

designated credit unions (‘‘LICUs’’),1

including State-chartered credit unions 

to the extent permitted by State law, to 

accept uninsured secondary capital 

(‘‘USC’’) from non-natural person 

members and nonmembers. 12 CFR 

701.34(b) (2005). The purpose of USC is 

to provide a further means—beyond 

setting aside a portion of earnings—for 

LICUs to build capital to support greater 

lending and financial services in their 

communities, and to absorb losses and 

thus protect LICUs from failing. 61 FR 

3788 (Feb. 2, 1996); 61 FR 50696 (Sept 

27, 1996). 

To ensure the safety and soundness of 

LICUs that accept USC, the existing rule 

imposed multiple restrictions that also 

apply to State-chartered LICUs. 12 CFR 

741.204. Before accepting USC, a LICU 

must submit a written plan for the use 

and repayment of USC. § 701.34(b)(1). 

USC accounts must have a minimum 

maturity of five years and may not be 

redeemable prior to maturity. 

§ 701.34(b)(3)–(4). The accounts must be 

established as uninsured, non-share 

instruments. § 701.34(b)(2) and (5). And 

most importantly, USC funds on deposit 

(including interest paid into the 

account) must be available to cover 

operating losses in excess of the LICU’s 

net available reserves and undivided 

earnings. § 701.34(b)(7). Funds used to 

cover such losses may not be 

replenished or restored to the USC 

accounts. Id. 

2. Impact of Prompt Corrective 

Action. Since the inception of USC, 

existing § 701.34(c)(1) has required 

LICUs to discount a USC account’s 

original capital value (now called ‘‘net 

worth value’’)—essentially 

recategorizing the discounted portion as 

subordinated debt—in 20 percent 

annual increments beginning at five 

years remaining maturity. Even as its 

capital value is discounted, however, 

the full amount of USC must remain on 

deposit to cover losses. § 701.34(c)(2) 

(2005). 

In 2000, pursuant to Congressional 

mandate, NCUA adopted a system of 

‘‘prompt corrective action’’ (‘‘PCA’’) 

consisting of mandatory minimum 

capital standards indexed by a credit 

union’s ‘‘net worth ratio’’ to five 

statutory net worth categories.2 12 

U.S.C. 1790d; 12 CFR part 702; 65 FR 

8560 (Feb. 18, 2000). As a credit union’s 

net worth ratio falls, its classification 

among the net worth categories declines 

below ‘‘well capitalized,’’ thus exposing 

it to an expanding range of mandatory 

and discretionary supervisory actions 


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