[Federal Register Volume 89, Number 38 (Monday, February 26, 2024)]
[Notices]
[Pages 14113-14119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-03603]


=======================================================================
-----------------------------------------------------------------------

NATIONAL CREDIT UNION ADMINISTRATION

[NCUA-2023-0070]


Minority Depository Institution Preservation Program

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final interpretive ruling and policy statement.

-----------------------------------------------------------------------

SUMMARY: The NCUA Board is issuing revisions to Interpretive Ruling and 
Policy Statement (IRPS) 13-1, regarding the Minority Depository 
Institution Preservation Program for credit unions.

DATES: The revised IRPS is effective March 27, 2024.

FOR FURTHER INFORMATION CONTACT: Supervisory Program Manager Kristi 
Kubista-Hovis or Program Manager Pamela Williams, Office of Credit 
Union Resources and Expansion, 703-518-6610 or <a href="/cdn-cgi/l/email-protection#a5e6f0f7e0e8e1ece5cbc6d0c48bc2cad3"><span class="__cf_email__" data-cfemail="26657374636b626f664845534708414950">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION

I. Background

    Congress enacted the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (FIRREA) in response to the savings and loan 
industry crisis.\1\ FIRREA included provisions designed to encourage 
federal financial regulators to preserve and promote minority 
depository institutions.\2\ Specifically, FIRREA section 308 required 
the Secretary of the Treasury to consult with the Office of Thrift 
Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) 
on best methods to achieve the following goals:
---------------------------------------------------------------------------

    \1\ Public Law 101-73, 103 Stat. 183 (1989).
    \2\ Id. Title III, sec. 308, 103 Stat. 353, codified at 12 
U.S.C. 1463 note, ``Preserving Minority Ownership of Minority 
Financial Institutions.''
---------------------------------------------------------------------------

    <bullet> Preserving the number of minority depository institutions;
    <bullet> Preserving the minority character of a minority depository 
institution involved in a merger or acquisition;
    <bullet> Providing technical assistance to prevent the insolvency 
of minority depository institutions;
    <bullet> Encouraging the formation of new minority depository 
institutions; and
    <bullet> Providing training, technical assistance, and educational 
programs to minority depository institutions.\3\
---------------------------------------------------------------------------

    \3\ Id. sec. (a). The Office of the Comptroller of the Currency 
and the Board of Governors of the Federal Reserve System also 
initiated minority depository institution programs to comply with 
the spirit of FIRREA section 308, even though neither was originally 
required to do so. OTS became part of the Office of the Comptroller 
of the Currency on July 21, 2011.
---------------------------------------------------------------------------

    Those agencies developed various initiatives aimed at preserving 
federally insured banks and savings institutions that meet FIRREA's 
definition of a minority depository institution.\4\
---------------------------------------------------------------------------

    \4\ Id. sec. (b).
---------------------------------------------------------------------------

    In 2010, Congress enacted the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act).\5\ Section 367(4)(A) of the 
Dodd-Frank Act expanded FIRREA section 308 to require the Secretary of 
the Treasury to consult with the National Credit Union Administration 
(NCUA) and the Board of Governors of the Federal Reserve System, in 
addition to the FDIC and the Office of the Comptroller of the Currency 
on methods for best achieving the FIRREA goals.\6\ Section 367(4)(B) of 
the Dodd-Frank Act also amended FIRREA section 308 to require each 
agency to submit an annual report to Congress describing actions it has 
taken to preserve and encourage minority depository institutions.\7\
---------------------------------------------------------------------------

    \5\ Public Law 111-203, 124 Stat. 1376 (2010); 12 U.S.C. 5301 et 
seq.
    \6\ 12 U.S.C. 1463 note sec. (a).
    \7\ Id. sec. (c).
---------------------------------------------------------------------------

    In 2013, the NCUA Board (Board) proposed Interpretive Ruling and 
Policy Statement (IRPS) 13-1 to establish a Minority Depository 
Institution Preservation Program to encourage the preservation of 
minority depository institutions and the establishment of new ones.\8\ 
In 2015, the Board approved final IRPS 13-1, establishing the

[[Page 14114]]

NCUA's Minority Depository Institution Preservation Program, 
administered by the agency's Office of Minority and Women Inclusion 
(OMWI).\9\ Consistent with the statutory language, IRPS 13-1 required 
that for designation as an minority depository institution, the 
majority of a credit union's members, the majority of its board, and 
the majority of the ``community it services, as defined in its 
charter'' must be eligible minorities. An eligible minority, under 
FIRREA section 308, is any Black American, Asian American, Hispanic 
American, or Native American.
---------------------------------------------------------------------------

    \8\ 78 FR 46374 (July 31, 2013).
    \9\ 80 FR 36356 (June 24, 2015).
---------------------------------------------------------------------------

    The Board restructured the agency in 2018. Among other changes, the 
restructuring created the Office of Credit Union Resources and 
Expansion (CURE). At that time, CURE assumed administration of the 
NCUA's Minority Depository Institution Preservation Program from OMWI.
    In June 2023, the Board invited comment on proposed revisions to 
IRPS 13-1.\10\ The proposed revisions included:
---------------------------------------------------------------------------

    \10\ 88 FR 42105 (June 29, 2023).
---------------------------------------------------------------------------

    <bullet> Updating the administering office to CURE to reflect the 
agency's current structure;
    <bullet> Clarifying that the meaning of ``community it services,'' 
means a credit union's field of membership;
    <bullet> Adding a reference to agency guidance to examiners 
regarding supervision of minority depository institutions;
    <bullet> Clarifying the process for reviewing a minority depository 
institution's designation status; and
    <bullet> Adding new subsection headings and expanding the 
discussion of agency actions and policies in the areas of minority 
depository institution engagement, technical assistance, examinations 
of minority depository institutions, grants and loans, and training.
    The Board invited comment on all aspects of the IRPS, including 
suggestions for any other information or resources the agency could 
provide to assist credit unions that are minority depository 
institutions.

II. Summary of Comments on Proposed Changes to IRPS 13-1 and Final IRPS

    The NCUA received five comments on the proposed changes. All 
commenters were broadly supportive of minority depository institutions 
and the NCUA's Minority Depository Institution Preservation Program. 
Commenters noted that minority depository institution credit unions 
provide important benefits to their communities, including by offering 
services to those excluded from the mainstream financial system, 
providing safe and affordable alternatives to predatory lenders, and 
stimulating economic growth in the communities they serve. Most of the 
commenters also had suggestions for changes to the IRPS and ways in 
which the NCUA can better support minority depository institutions. 
After considering the comments, as discussed below, the Board is 
adopting the IRPS substantially as proposed.
    One commenter requested that the NCUA extend or reopen the comment 
period, stating that some stakeholders may have been unaware of the 
proposed IRPS due to current industry and economic challenges. The 
Board is not extending or reopening the comment period. The original 
IRPS includes outdated references and the Board provided the standard 
60 days for comments under NCUA rulemaking procedures.\11\ Further, the 
comments received represented input from a variety of interested 
parties. One letter, from a trade association focused on community 
development and minority depository institution credit unions, had 42 
co-signers, including 38 individual minority depository institution 
credit unions, a national credit union trade association, a state 
credit union trade association, and groups representing minority 
depository institution credit unions and credit union professionals. 
Another national trade association, a trade association for state 
credit union regulators, and one state-level trade association also 
submitted comments. Every commenter expressed support for the IRPS and 
the mission and purpose of minority depository institutions. 
Additionally, many minority depository institution credit unions are 
members of one or more of the associations that submitted comments. 
Considering the broad representation of credit union industry 
perspectives among the commenters, the Board finds that the comment 
period was adequate to ensure that it received sufficient feedback on 
the proposal.
---------------------------------------------------------------------------

    \11\ IRPS 87-2, as amended by IRPS 03-2 and IRPS 15-1, available 
at https://ncua.gov/files/publications/irps/IRPS1987-2.pdf.
---------------------------------------------------------------------------

    Another commenter requested that the NCUA amend the eligibility 
standards so that credit unions that meet as few as one of the three 
required criteria could become minority depository institutions, 
instead of the requirement in the existing and proposed IRPS that all 
three criteria be met. This commenter noted challenges in establishing 
that a majority of ``the community it services'' is made up of 
minorities. This change is not supported by the statute, which requires 
that a mutual institution meet all three standards to become a minority 
depository institution. The statute specifically requires that for a 
mutual institution to qualify as a minority depository institution, a 
majority of the board of directors, a majority of the account holders, 
and a majority of ``the community which it services'' are 
minorities.\12\ The Board's longstanding interpretation of the 
statutory requirement is that credit unions are subject to the 
requirements for mutual institutions.\13\
---------------------------------------------------------------------------

    \12\ Title III, sec. 308, Public Law 101-73, 103 Stat. 353 
(1989), as amended by title III, sec. 367(4), Public Law 111-203, 
124 Stat. 1556 (2010), codified at 12 U.S.C. 1463 note.
    \13\ 80 FR 36356, 36357 (June 24, 2015).
---------------------------------------------------------------------------

    Similarly, another commenter requested an expansion of the minority 
depository institution criteria to include all credit unions that 
commit to minority depository institution principles, that have some 
minority depository institution characteristics, or that have a 
minority depository institution credit union merge into them. The Board 
reiterates that the statute establishes the requirements for minority 
depository institution designation and permitting differing eligibility 
requirements would not comply with the statute.
    Another commenter commended the NCUA for recognizing the uniqueness 
of minority depository institutions and the need for a tailored 
approach to examination and supervision of them. This commenter 
recommended that the NCUA increase efforts to promote and support the 
minority depository institution mentorship program and be proactive in 
providing more resources to minority depository institutions, such as 
regulatory updates, best practices, and opportunities for training. 
Through CURE, the NCUA communicates opportunities and resources to 
minority depository institution credit unions, such as through social 
media and direct email. The NCUA offered a Minority Depository 
Institution Mentoring Program from 2020-2022 in conjunction with the 
then Minority Depository Institution Mentoring grant initiative. 
Feedback from participating mentees and mentors was overall positive, 
yet there was not sufficient participation to sustain the program. The 
agency will continue to seek opportunities to support minority 
depository institution credit unions and increase their awareness of 
opportunities.
    One commenter suggested the NCUA consider offering technical 
assistance

[[Page 14115]]

funding support to very small minority depository institution credit 
unions and minority depository institution credit unions that are 
managing significant challenges, such as identified in their 
examination reports. The Board notes that for the first time during 
2023 a minority depository institution could receive Community 
Development Revolving Loan Fund funding regardless of its low-income 
designation status. Such funding may be used for technical assistance 
in accordance with grant requirements. The NCUA's Small Credit Union 
and Minority Depository Institution Support Program offers technical 
assistance to address challenges such as those identified in their 
examination reports. This assistance is provided at no additional cost 
to participating credit unions.
    Another commenter opined that it would be helpful if the agency 
provided additional transparency around examination standards for 
minority depository institution credit unions and explained how these 
examination standards differ from standard procedures. While 
examination standards for MDIs and non-MDI credit unions are the same, 
the Board notes that the NCUA provides guidance for examiners to 
consider the MDI's mission, unique characteristics, and tailored 
strategies during an examination. This same commenter suggested 
creating a group of examiners focused on small minority depository 
institution credit unions and extending regulatory flexibility to all 
small minority depository institution credit unions. These suggestions 
go beyond the scope of the proposed revisions to the IRPS and were 
provided to applicable NCUA offices to consider. During 2023, the NCUA 
developed peer metrics in order for examiners to compare minority 
depository institutions with minority depository institutions. The 
agency also issued customized guidance to examiners to provide insights 
into minority depository institutions' unique business models and 
members' needs. The guidance assists examiners in understanding 
minority depository institutions' distinct business model compared to 
other mainstream financial institutions by providing instruction on how 
to use minority depository institution peer metrics instead of 
traditional peer metrics.
    Commenters also requested the NCUA provide resources to minority 
depository institution credit unions for specific purposes, such as 
travel support to enable participation in the NCUA's in-person events, 
access to an interactive analysis tool that would simplify the process 
of determining whether an area meets the concentration of facilities 
test, and additional information about how to track and store member 
demographic data for purposes of minority depository institution 
certification. These suggestions were provided to applicable NCUA 
offices to consider.
    Finally, one commenter requested that the NCUA consider supporting 
the establishment of a fund similar to the Mission-Driven Bank 
Fund.\14\ This commenter also encouraged the NCUA to advocate for more 
inclusion of minority depository institution credit unions in 
opportunities provided by the Economic Opportunity Coalition. As the 
Economic Opportunity Coalition is established and funded by the private 
sector, the Board believes it is not appropriate to take an advocacy 
role with respect to this organization. The NCUA is researching the 
feasibility of the establishment of a fund similar to the Mission-
Driven Bank Fund and will inform stakeholders of the outcome of the 
research. It should be noted that the NCUA engages with other federal 
agencies to educate them about credit unions, ensure access to 
applicable resources, and to host webinars about resources they offer 
minority depository institutions. Examples include engagement with the 
Community Development Financial Institutions (CDFI) Fund concerning 
changes to the requirements for CDFI certification, and engagement with 
the U.S. Department of the Treasury to facilitate credit union access 
to the Emergency Capital Investment Program. The NCUA will continue to 
engage with other government entities to further support minority 
depository institution credit unions, consistent with its mission and 
statutory authorities.
---------------------------------------------------------------------------

    \14\ The Mission-Driven Bank Fund is an initiative of the 
Federal Deposit Insurance Corporation developed for FDIC-insured 
Minority Depository Institutions and Community Development Financial 
Institutions.
---------------------------------------------------------------------------

    In summary, the Board appreciates the various suggestions from 
commenters and, as noted above, will consider whether and how to 
implement some of the suggestions. The final paragraph of the IRPS also 
states that the NCUA's annual report to Congress will include a 
discussion of the feedback it has solicited and received from minority 
depository institution credit unions on the effectiveness of the 
agency's minority depository institution support and preservation 
activities. The Board believes that, should it determine to adopt some 
of the suggestions, further changes to the IRPS would not be necessary.
    After carefully considering the alternatives offered by these 
commenters, the Board adopts the revisions to IRPS 13-1 as proposed, 
with a few minor grammatical and stylistic changes and one correction. 
The stylistic changes are that the final IRPS consistently uses the 
phrase ``field of membership,'' (FOM) instead of the phrase ``potential 
members'' that the proposed IRPS had carried over from the prior 
version. This change makes the language of the entire IRPS consistent 
with the clarification that ``community it services'' means FOM.
    Additionally, the proposed IRPS mischaracterized the agency's 
practice in stating that technical assistance is offered annually to 
each minority depository institution credit union, and the final 
version of the IRPS deletes this sentence. The Board emphasizes that 
the change in the language of the IRPS does not change the availability 
of technical assistance resources for minority depository institution 
credit unions, including through the Community Development Revolving 
Loan Fund's grants and loans and through the Small Credit Union and 
Minority Depository Institution Support Program.
    Authority: 12 U.S.C. 1463 note; Sec. 308, Pub. L. 101-73, 103 Stat. 
353; as amended by Sec. 367(4), Pub. L. 111-203, 124 Stat. 1556.

III. Interpretive Ruling and Policy Statement 13-1, Minority Depository 
Institution Preservation Program, as Amended

    The text of IRPS 13-1 follows:

a. Goals and Objectives of the Minority Depository Institution 
Preservation Program

    Minority depository institutions play an important and unique role 
in promoting the economic viability of minority and underserved 
communities. Through its Minority Depository Institution Preservation 
Program, the NCUA engages in a range of efforts to preserve minority 
depository institutions and foster their success. The Minority 
Depository Institution Preservation Program is designed to comply with 
section 308 of the Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 (FIRREA), which requires the NCUA to submit an 
annual report to Congress summarizing

[[Page 14116]]

its actions taken in furtherance of section 308's goals to: \15\
---------------------------------------------------------------------------

    \15\ Title III, sec. 308, Public Law 101-73, 103 Stat. 353 
(1989), as amended by title III, sec. 367(4), Public Law 111-203, 
124 Stat. 1556 (2010), codified at 12 U.S.C. 1463 note.
---------------------------------------------------------------------------

    <bullet> Preserve the present number of minority depository 
institutions;
    <bullet> Preserve the minority character of minority depository 
institutions involved in mergers and acquisitions;
    <bullet> Provide technical assistance to prevent insolvency of 
minority depository institutions that are not now insolvent;
    <bullet> Promote and encourage the creation of new minority 
depository institutions; and
    <bullet> Provide training, technical assistance, and educational 
programs for minority depository institutions.

b. Description of the Minority Depository Institution Preservation 
Program

    The NCUA's Minority Depository Institution Preservation Program 
consists of proactive steps and outreach efforts to promote and 
preserve minority depository institutions in the credit union system. 
The NCUA's Office of Credit Union Resources and Expansion (CURE) 
administers the agency's Minority Depository Institution Preservation 
Program and will meet periodically with state regulators, other federal 
regulators, and other stakeholders to discuss outreach efforts, share 
ideas, and identify areas to work together to assist minority 
depository institutions.
    The NCUA offers minority depository institution-designated credit 
unions a variety of initiatives to assist in preserving the economic 
viability of their institutions. The initiatives include technical 
assistance, educational opportunities, and funding. Examples of such 
initiatives include the following:
    <bullet> Consulting and support programs;
    <bullet> Trainings; and
    <bullet> Grants and loans through the NCUA's Community Development 
Revolving Loan Fund (CDRLF), subject to eligibility.\16\
---------------------------------------------------------------------------

    \16\ Prior to 2023, under the annual appropriations statutes, 
grants and loans from the CDRLF were historically only available to 
low-income designated credit unions, some of which are also minority 
depository institutions. However, not all minority depository 
institutions have a low-income designation.
---------------------------------------------------------------------------

    Examples of broad-based and individualized technical assistance 
include the following:
    <bullet> Providing guidance in resolving examination concerns;
    <bullet> Helping minority depository institutions locate new 
sponsors, mentors, or merger partners;
    <bullet> Assisting with field of membership expansions;
    <bullet> Supporting management in setting up new programs and 
services;
    <bullet> Attempting to preserve the minority character of failing 
institutions during the resolution process; and
    <bullet> Aiding groups that are interested in chartering a new 
minority depository institution.
Engagement With Minority Depository Institutions
    The NCUA's Minority Depository Institution Preservation Program 
will provide periodic engagement with minority depository institutions 
through interaction with headquarters and field staff. This interaction 
includes:
    <bullet> sharing information and expertise on supervisory topics;
    <bullet> using various venues to engage in an open dialogue between 
the NCUA, minority depository institutions, and related organizations;
    <bullet> seeking feedback on the NCUA's efforts under the Minority 
Depository Institution Preservation Program; and
    <bullet> providing a variety of training opportunities hosted or 
sponsored by the NCUA.
    The NCUA's outreach also includes seeking out, working with, and 
supporting groups interested in applying for a new federal or state 
charter with a minority depository institution designation and aiding 
existing credit unions interested in receiving the minority depository 
institution designation.
Technical Assistance
    The NCUA will provide technical assistance to a minority depository 
institution upon request. A minority depository institution should 
contact its assigned NCUA regional office, supervisory examiner, or 
district examiner to request technical assistance.
    Technical assistance is not an examination or supervisory activity 
and will be provided separately from examination and supervision 
contacts. Technical assistance includes, but is not limited to, 
assistance in understanding applicable laws and regulations, agency 
processes, reporting requirements, supervisory guidance, accounting 
standards, supervisory findings and conclusions (only after the 
conclusion of the applicable examination or supervision contact), 
applications or requests for agency approval or action (such as field 
of membership, bidding on a failing institution, regulatory waivers), 
and assistance in designating as a minority depository institution. In 
providing technical assistance, agency staff will not perform tasks 
expected of an institution's management or employees. And while they 
may help the institution understand how to apply or bid, agency staff 
will not assist or guide the institution in developing the substance of 
such application or bid.
Examinations of Minority Depository Institutions
    Minority depository institution-designated credit unions have a 
unique role in promoting the economic viability of minority and 
underserved communities, at times necessitating distinct approaches to 
taking and managing the related financial and operational risks. The 
NCUA expects examiners to recognize the distinctive characteristics and 
differences in core objectives of each financial institution and 
consider these when evaluating the institution's financial and 
operational condition and related management practices. Examiners will 
evaluate a minority depository institution using, among other things, 
peer metrics such as through the Financial Performance Report.
    The NCUA provides examiners guidance to educate them about the 
unique challenges faced by minority depository institutions and the 
support and services the NCUA offers to help minority depository 
institutions address such challenges. The guidance acknowledges, at 
times, some minority depository institutions may need more or different 
support from the NCUA than other credit unions. The guidance also lists 
specific types of technical assistance a minority depository 
institution may request of the NCUA. It also advises that minority 
depository institutions often have unique memberships and provide 
financial services to consumers and businesses in communities that 
might not otherwise have access to another federally insured financial 
institution. Therefore, the policies, processes, risks, and practices 
of minority depository institutions may vary and comparison to other 
credit unions based solely on similar size may have limited value. 
Instead, examiners are instructed to assess each minority depository 
institution based on its unique strategy and membership.
CDRLF Grants and Loans
    The CDRLF provides loans and grants to low-income designated credit 
unions, some of which are also designated as minority depository 
institutions, to expand outreach to underserved populations, improve 
digital services and cybersecurity, provide staff training, and support 
capacity-building programs, as examples. The

[[Page 14117]]

Consolidated Appropriations Act for fiscal year 2023 made minority 
depository institutions without the low-income designation eligible for 
CDRLF grants and loans through September 30, 2024.\17\
---------------------------------------------------------------------------

    \17\ Div. E, title V, Public Law 117-328, 136 Stat. 4690 (2022). 
Refer to the Grants and Loans section of the NCUA website for 
eligibility requirements in future periods.
---------------------------------------------------------------------------

Training and Education
    The NCUA offers training to credit unions including minority 
depository institutions, through various formats such as webinars, 
online courses, videos, and in-person events. Through the NCUA Learning 
Management System, the agency offers training and educational resources 
to credit union board members, management, employees, and volunteers 
online and at no charge. Examples of the content provided include 
guidance on credit union operations, compliance, community 
partnerships, and strategic planning.\18\
---------------------------------------------------------------------------

    \18\ These training opportunities are accessible to all credit 
unions through the Learning section of the NCUA's website.
---------------------------------------------------------------------------

Preservation of Minority Depository Institutions
    With regard to a potentially failing minority depository 
institution or the need for an assisted merger of a minority depository 
institution, as with any insured credit union, the Board will consider 
providing section 208 assistance under the Federal Credit Union Act to 
reduce the risk or avert a threatened loss to the National Credit Union 
Share Insurance Fund (NCUSIF), facilitate a merger or consolidation, or 
to prevent the closing of a credit union that the Board determines is 
in danger of closing.\19\ Requirements concerning field of membership 
apply to most mergers. In addition, the NCUA must consider resolution 
costs and safety and soundness implications for all mergers.
---------------------------------------------------------------------------

    \19\ 12 U.S.C. 1788(a)(1)-(2).
---------------------------------------------------------------------------

    The NCUA will make every effort to preserve the minority character 
of failing minority depository institutions during the resolution 
process. In the event of the potential failure of an minority 
depository institution, the agency will contact minority depository 
institutions in the NCUA's merger registry that qualify to bid on a 
particular failing institution. Agency staff will solicit interest in 
bidding on the failing minority depository institution and offer 
technical assistance to any minority depository institution desiring to 
bid. The NCUA will also provide minority depository institutions 
interested in submitting a bid with an additional two weeks to submit a 
bid whenever possible. Except in the cases of conservatorships, 
liquidations, or assisted mergers, the minority depository 
institution's board of directors is generally the decision-maker on a 
merger partner provided the selection is consistent with regulatory and 
safety and soundness standards. For conservatorships, liquidations, or 
assisted mergers, in the selection process, the NCUA will consider all 
the requirements applicable to a merger or purchase and assumption, 
including FIRREA's general preference guidelines.\20\
---------------------------------------------------------------------------

    \20\ Generally, the NCUA is involved in the selection process 
when the transaction will cause a loss to the NCUSIF or when the 
failing credit union is in conservatorship and the NCUA Board is the 
conservator. For additional information on the NCUA's selection 
process, see Letter to Credit Unions 10-CU-11, Information on NCUA's 
Merger and Purchase & Assumption Process.
---------------------------------------------------------------------------

c. Minority Depository Institution Designation Eligibility

    The agency adopted the definition of a minority depository 
institution in FIRREA section 308 that applies to a mutual 
institution.\21\ Accordingly, a credit union is eligible to receive the 
minority depository institution designation if it meets all the 
following criteria:
---------------------------------------------------------------------------

    \21\ 12 U.S.C. 1463 note sec. (b)(1)(C).
---------------------------------------------------------------------------

    <bullet> A majority of its current members are from any of the 
eligible minority groups;
    <bullet> A majority of the members of its board of directors are 
from any of the eligible minority groups; and
    <bullet> A majority of the community it services, as designated in 
its field of membership, are from any of the eligible minority groups.
    For minority representation to be a ``majority,'' it must be 
greater than 50 percent.
    The NCUA relies on the FIRREA section 308 ``minority'' definition 
to identify an eligible minority as any Black American, Asian American, 
Hispanic American, or Native American.\22\ For the purpose of this 
IRPS, Asian American includes anyone who is Native Hawaiian or Other 
Pacific Islander, and Native American includes anyone who is American 
Indian or Alaska Native. Also, for the purpose of minority 
representation under the minority depository institution definition, an 
individual who falls into more than one of the minority categories will 
be considered as a single, eligible minority.
---------------------------------------------------------------------------

    \22\ Id.
---------------------------------------------------------------------------

    A credit union that meets the eligibility requirements can self-
designate as a minority depository institution by following the 
guidelines as specified on the NCUA's website. The instructions to the 
NCUA's Credit Union Profile form, which credit unions use to self-
designate as a minority depository institution, contain detailed 
directions on how to make the designation.\23\ A minority depository 
institution may participate in the NCUA's Minority Depository 
Institution Preservation Program subject to the eligibility 
requirements of any specific initiative. An eligible credit union's 
decision to designate as a minority depository institution or to 
participate in the Minority Depository Institution Preservation Program 
is voluntary.
---------------------------------------------------------------------------

    \23\ NCUA Form 4501A, https://ncua.gov/files/publications/regulations/credit-union-profile-form-instructions-4501A-sept-2022.pdf.
---------------------------------------------------------------------------

    A credit union defined as a ``small credit union'' by the NCUA 
under the Regulatory Flexibility Act (RFA) may self-designate greater 
than 50 percent representation among its current members, and within 
the community it services (field of membership), based solely on 
knowledge of those members. Under the RFA, the NCUA currently defines a 
small credit union as a credit union with total assets of less than 
$100 million.\24\
---------------------------------------------------------------------------

    \24\ 80 FR 57512 (Sept. 24, 2015).
---------------------------------------------------------------------------

    A credit union not defined as a small credit union by the NCUA may 
rely on one of the following methods, as applicable, to determine the 
minority composition of its current membership exclusively and of the 
community it services. The credit union must maintain documentation 
supporting its minority depository institution self-designation.
    1. The credit union may ascertain the minority representation using 
demographic data from the U.S. Census Bureau website, based on the 
area(s) where the current membership or field of membership resides, 
such as a township, borough, city, county, or Metropolitan Statistical 
Area. If the U.S. Census data--for example, census tracts, zip codes, 
townships, boroughs, cities, or counties--shows the area's population 
comprises mostly eligible minorities, the credit union may assume that 
its current membership and the community it services each have the same 
minority composition as the Census data indicates.
    2. The credit union may use Home Mortgage Disclosure Act (HMDA) 
data to calculate the reported number of minority mortgage applicants 
divided by the total number of mortgage applicants within the credit 
union's membership. If the share of minority

[[Page 14118]]

representation among applicants is greater than 50 percent, the credit 
union may assume its current membership has the same minority 
composition as the HMDA data indicates. If a credit union grants a 
majority of its mortgage loans to minorities, it is likely the majority 
of the community the credit union services (its field of membership) 
will consist of minorities.\25\
---------------------------------------------------------------------------

    \25\ HMDA data can be obtained from the Federal Financial 
Institutions Examination Council website.
---------------------------------------------------------------------------

    3. The credit union may elect to collect data from members who 
voluntarily choose to participate in such collection about their racial 
identity and use the data to determine minority representation among 
the credit union's membership. The credit union should consider using 
an unbiased third party to conduct such a collection. For example, data 
can be collected through a survey of members assessing the services 
they desire, or by mailed electoral ballots for official positions. 
Once collected, it is essential to maintain the confidentiality of the 
data; it should not be retained in the members' files or with any 
personal identifiers, such as, names, accounts, or Social Security 
numbers. If a majority of its current members are minorities, it is 
likely the majority of the community the credit union services (its 
field of membership) will consist of minorities.
    4. The credit union may use any other reasonable form of data, such 
as membership address list analyses or an employer's demographic 
analysis of employees.
    A minority depository institution credit union must assess whether 
it continues to meet the required definition of a minority depository 
institution whenever there is a change in its board of directors, or it 
makes a significant change to its field of membership, and update its 
designation, if necessary, in the NCUA Credit Union Profile. In 
accordance with the regular examination process, the NCUA will review 
whether a credit union has updated its analysis and made any 
corresponding changes to its self-designation in the Credit Union 
Profile. A minority depository institution may elect to withdraw its 
designation by not completing the relevant questions in the Credit 
Union Profile.

d. Monitoring and Reporting on Minority Depository Institutions

    The NCUA will monitor minority depository institutions and report 
to Congress annually on the number and overall financial condition of 
minority depository institutions, along with actions taken by the 
agency to preserve and strengthen them and to encourage the chartering 
of new ones.\26\ The report will also summarize the NCUA's efforts to 
obtain feedback from minority depository institutions on the 
effectiveness of the agency's minority depository institution support 
and preservation activities. Additionally, the NCUA maintains a list of 
minority depository institutions on its website.
---------------------------------------------------------------------------

    \26\ 12 U.S.C. 1463 note sec. (c).
---------------------------------------------------------------------------

IV. Regulatory Procedures

Regulatory Flexibility Act

    The RFA generally requires that when an agency issues a proposed 
rule or a final rule pursuant to the Administrative Procedure Act or 
another law, the agency must prepare a regulatory flexibility analysis 
that meets the requirements of the RFA and publish such analysis in the 
Federal Register. Specifically, the RFA normally requires agencies to 
describe the impact of a rulemaking on small entities by providing a 
regulatory impact analysis. For purposes of the RFA, the Board 
considers credit unions with assets less than $100 million to be small 
entities.\27\ 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 
and publishes its certification and a short, explanatory statement in 
the Federal Register together with the rule.
---------------------------------------------------------------------------

    \27\ See 80 FR 57512 (Sept. 24, 2015).
---------------------------------------------------------------------------

    The Board fully considered the potential economic impact of the 
changes during the development of the revised IRPS. The revised IRPS 
would clarify the NCUA's current policy on minority depository 
institution preservation and provide additional services to minority 
depository institutions. The revised IRPS would not impose any new 
significant burden on credit unions designated as minority depository 
institutions and may provide some additional resources. The resources 
gained, however, are unlikely to result in a significant economic 
impact for affected credit unions. Small credit unions are also not 
obligated to participate in the minority depository institution 
program. Accordingly, the NCUA certifies that the revised IRPS would 
not have a significant economic impact on a substantial number of small 
federally insured credit unions.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency creates a new information collection or amends existing 
information collection requirements.\28\ For purposes of the PRA, an 
information collection requirement may take the form of a reporting, 
recordkeeping, or a third-party disclosure requirement. The NCUA may 
not conduct or sponsor, and the respondent is not required to respond 
to, an information collection unless it displays a valid Office of 
Management and Budget (OMB) control number. The current information 
collection requirements for the minority depository institution policy 
are approved under OMB control number 3133-0195, Minority Depository 
Institution Preservation Program.
---------------------------------------------------------------------------

    \28\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

    This revision to IRPS 13-1 does not alter the information 
collection described under OMB control number 3133-0195, and the NCUA 
does not anticipate an increase in the burden based on the revisions. 
There are no additional information collections resulting from these 
changes.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. The 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the Executive order to adhere to fundamental 
federalism principles. This revised IRPS will not have a substantial 
direct effect on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Although 
state-chartered credit unions are eligible to obtain the minority 
depository institution designation and receive assistance based on it, 
the NCUA does not believe this designation affects state governments 
generally or state credit union regulators in particular. The NCUA will 
continue to work cooperatively with state credit union regulators to 
examine federally insured, state-chartered credit unions and does not 
expect the revised IRPS to alter these relationships or allocation of 
responsibilities. The decision about whether to designate as a minority 
depository institution or seek minority depository institution program 
benefits will be an individual business decision for each credit 
union's board. The NCUA has determined that this revised IRPS does not 
constitute a policy that has federalism implications for purposes of 
the executive order.

[[Page 14119]]

Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that these revisions to IRPS 13-1 will not 
affect family well-being within the meaning of section 654 of the 
Treasury and General Government Appropriations Act, 1999.\29\ The 
revisions to IRPS 13-1 may increase the ability of minority depository 
institutions to provide financial services to families. However, the 
Board does not have a means to quantify how this might affect family 
well-being as described in factors included in the legislation, which 
include the effects of the action on: the stability and safety of the 
family; parental authority and rights in the education, supervision, 
and nurture of their children; the ability of families to support their 
functions or substitute governmental activity for these functions; and 
increases or decreases to disposable income.
---------------------------------------------------------------------------

    \29\ Public Law 105-277, 112 Stat. 2681 (1998).
---------------------------------------------------------------------------

Small Business Regulatory Enforcement Fairness Act--Congressional 
Review Act

    The Congressional Review chapter of the Small Business Regulatory 
Enforcement Fairness Act of 1996 generally provides for congressional 
review of agency rules.\30\ A reporting requirement is triggered in 
instances where the NCUA issues a final rule as defined in the 
Administrative Procedure Act.\31\ Besides being subject to 
congressional oversight, an agency rule may also be subject to a 
delayed effective date if it is a ``major rule.'' The NCUA does not 
believe this revised IRPS is a ``major rule'' within the meaning of the 
relevant sections of the statute. As required by the statute, the NCUA 
will submit this final IRPS to OMB for it to determine if this final 
IRPS is a ``major rule'' for purposes of the statute. The NCUA also 
will file appropriate reports with Congress and the Government 
Accountability Office so this rule may be reviewed.
---------------------------------------------------------------------------

    \30\ 5 U.S.C. 551.
    \31\ Id.

    By the National Credit Union Administration Board on February 
15, 2024.
Melane Conyers-Ausbrooks,
Secretary of the Board.
[FR Doc. 2024-03603 Filed 2-23-24; 8:45 am]
BILLING CODE 7535-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>