[Federal Register Volume 74, Number 57 (Thursday, March 26, 2009)]
[Rules and Regulations]
[Pages 13082-13083]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-6730]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 701 and 742

RIN 3133-AD53


Regulatory Flexibility Regarding Ownership of Fixed Assets

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: NCUA is amending its Regulatory Flexibility (RegFlex) Program 
to provide additional flexibility to qualifying federal credit unions 
(FCUs) when acquiring unimproved land for future expansion. Previously, 
when an FCU acquired unimproved land for future expansion and did not 
fully occupy the completed premises within one year, it was required to 
partially occupy the completed premises within three years or obtain a 
waiver. This amendment increases the three years to six years for 
RegFlex FCUs without a waiver. NCUA is also making conforming 
amendments to its fixed asset rule to be consistent with the RegFlex 
changes.

DATES: The rule is effective April 27, 2009.

FOR FURTHER INFORMATION CONTACT: Frank Kressman, Staff Attorney, Office 
of General Counsel, National Credit Union Administration, 1775 Duke 
Street, Alexandria, Virginia 22314-3428, or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

A. Background

1. Proposal

    NCUA issued proposed amendments to its RegFlex and fixed assets 
rules in September 2008 as summarized above. 73 FR 57013 (October 1, 
2008). NCUA received six comment letters on the proposal: three from 
credit unions, two from credit union trade associations, and one from a 
bank trade association. All commenters except the bank trade 
association support the amendments.

2. Fixed Assets

    The Federal Credit Union Act authorizes an FCU to purchase, hold, 
and dispose of property necessary or incidental to its operations. 12 
U.S.C. 1757(4). Generally, the fixed asset rule provides limits on 
fixed asset investments, establishes occupancy and other requirements 
for acquired and abandoned premises, and prohibits certain 
transactions. 12 CFR 701.36. Fixed assets are defined in Sec.  
701.36(e) as premises, furniture, fixtures, and equipment and include 
any office, branch office, suboffice, service center, parking lot, 
facility, real estate where a credit union transacts or will transact 
business, office furnishings, office machines, computer hardware and 
software, automated terminals, and heating and cooling equipment.
    Section 701.36 prohibits an FCU with $1 million or more in assets 
from investing in fixed assets, the aggregate of which exceeds five 
percent of the FCU's shares and retained earnings; although upon an 
FCU's application, a regional director may set a higher limit. 12 CFR 
701.36(a)(1)-(2). If an FCU acquires premises, as broadly defined in 
Sec.  701.36(e), for future expansion and does not fully occupy the 
space within one year, its board must have a resolution in place by the 
end of that year with plans for full occupation and make those plans 
available to NCUA upon request. 12 CFR 701.36(b)(1). Additionally, the 
FCU must partially occupy the premises within a reasonable period, not 
to exceed three years, unless the FCU obtains a waiver within 30 months 
of acquiring the premises. 12 CFR Sec.  701.36(b)(1)-(2). In this 
rulemaking, NCUA is only addressing the circumstance where an FCU is 
acquiring unimproved land but no other kind of premises.

3. Regulatory Flexibility Program

    The RegFlex Program exempts from certain regulatory restrictions 
and grants additional powers to those FCUs that have demonstrated 
sustained superior performance as measured by CAMEL ratings and net 
worth classifications. 12 CFR 742.1. An FCU may qualify for RegFlex 
treatment automatically or by application to the appropriate regional 
director. 12 CFR 742.2. Also, an FCU's RegFlex authority can be lost or 
revoked. 12 CFR 742.3.

B. Discussion

    Although a RegFlex eligible FCU is exempt from the five percent 
aggregate limit on fixed asset investments under the current rule, it 
is not exempt from the requirement to partially occupy premises 
acquired for future expansion within three years or request a waiver of 
this requirement. 12 CFR 701.36(a), 701.36(b)(2), 701.36(d), 
742.4(a)(3). Where an FCU is acquiring unimproved land, the partial 
occupancy requirement often is more difficult to satisfy than if the 
FCU were purchasing premises with an existing branch building. The 
Board is aware that some FCUs contend the fixed asset rule's three-year 
partial occupancy requirement, even with a waiver option, is burdensome 
and an unnecessary level of oversight for

[[Page 13083]]

RegFlex FCUs that have demonstrated sustained superior performance.
    Although the NCUA Board believes additional regulatory relief can 
and should be granted, the time limit for an FCU to fulfill the partial 
occupancy requirement cannot be unlimited. That would be the equivalent 
of an FCU making an impermissible real estate investment and also could 
cause serious safety and soundness concerns. NCUA recognizes, however, 
that many real estate transactions are complex, time consuming, and can 
involve a host of wide-ranging issues that must be addressed before an 
FCU is ready to occupy the premises. This is especially true in the 
unimproved land context considering the addition of construction-
related issues. Accordingly, NCUA is extending the three-year time 
period to six years for RegFlex FCUs but only with respect to the 
acquisition of unimproved land. NCUA believes six years is a 
sufficiently long time period to provide RegFlex FCUs with the 
flexibility they need to manage their fixed asset portfolios, in any 
context, free of unnecessary regulation and consistent with safe and 
sound credit union operations. All other substantive aspects of the 
fixed asset rule remain unchanged, including an FCU's ability to 
request a waiver of the partial occupancy requirement. NCUA adopts the 
amendments as proposed without change.

C. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a rule may have on a 
substantial number of small entities (primarily those under ten million 
dollars in assets). This rule provides additional flexibility and 
reduces regulatory burden. Accordingly, this rule will not have a 
significant economic impact on a substantial number of small credit 
unions, and therefore, no regulatory flexibility analysis is required.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 
1996, Public Law 104-121, provides generally for congressional review 
of agency rules. A reporting requirement is triggered in instances 
where NCUA issues a final rule as defined by Section 551 of the 
Administrative Procedures Act. 5 U.S.C. 551. The Office of Information 
and Regulatory Affairs, an office within the Office of Management and 
Budget (OMB), has determined that, for purposes of SBREFA, this is not 
a major rule.

Paperwork Reduction Act

    NCUA has determined that this rule will not increase paperwork 
requirements under the Paperwork Reduction Act of 1995 and regulations 
of OMB.

Executive Order 13132

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

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

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

List of Subjects

12 CFR Part 701

    Credit unions.

12 CFR Part 742

    Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on March 19, 
2009.
Mary Rupp,
Secretary of the Board.

0
For the reasons discussed above, NCUA amends 12 CFR parts 701 and 742 
as follows:

PART 701--ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS

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

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, and 1789. Section 701.6 is also 
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by 
15 U.S.C. 1601 et seq., 42 U.S.C. 1861 and 42 U.S.C. 3601-3610. 
Section 701.35 is also authorized by 42 U.S.C. 4311-4312.


0
2. Section 701.36(d) introductory text is amended by adding a sentence 
between the first and second sentences to read as follows:


Sec.  701.36  FCU Ownership of fixed assets.

* * * * *
    (d) * * * Those federal credit unions are also exempt from the 
three-year partial occupancy requirement described in paragraph (b) of 
this section when acquiring unimproved land for future expansion 
pursuant to the terms of section 742.4(a)(3) of this chapter. * * *
* * * * *

PART 742--REGULATORY FLEXIBILITY PROGRAM

0
3. The authority citation for part 742 continues to read as follows:

    Authority: 12 U.S.C. 1756, 1766.


0
4. Section 742.4(a)(3) is amended by adding two sentences at the end to 
read as follows:


Sec.  742.4  RegFlex Relief.

    (a) * * *
    (3) * * * Section 701.36(b)(2) of this chapter concerning the 
three-year partial occupancy requirement when acquiring unimproved land 
for future expansion; RegFlex credit unions are instead subject to a 
six-year partial occupancy requirement when acquiring unimproved land 
but remain subject to all other provisions of that section including 
the waiver provision;
* * * * *
[FR Doc. E9-6730 Filed 3-25-09; 8:45 am]
BILLING CODE 7535-01-P