From the Archives: October 2012

Regulatory Roundup 

“Small” Credit Union Threshold; Prompt Corrective Action

The NCUA board issued a proposed rule and Interpretive Ruling and Policy Statement to update the definition of a “small entity” under the Regulatory Flexibility Act to include federally insured credit unions with less than $30 million in assets. If finalized, the proposed asset threshold increase would also provide regulatory relief by excluding more credit unions from risk-based net worth requirements. NCUA’s final interest rate risk rule, went into effect on Sept. 30, 2012, would also be adjusted to correspond with the proposed threshold increase. All credit unions less than the revised asset threshold would be excluded from the requirement to adopt and implement an interest rate risk policy. However, until the small credit union threshold is updated, credit unions from $10 million to less than $30 million in assets will be expected to comply with the interest rate risk rule, as appropriate. Comments are due on or before Nov. 26. A copy of the proposed rule can be found here.

Definition of “Rural District”
The NCUA board proposes to amend the definition of ‘‘rural district’’ in NCUA’s Chartering and Field of Membership Manual. The proposed amendment to the definition of ‘‘rural district’’ permits a geographic area to qualify as a rural district if, among other criteria, it has a total population that does not exceed the greater of 200,000 people or three percent of the population of the state in which the majority of the district is located. The current definition limits the rural district’s population to 200,000, regardless of the population of the state containing the majority of the rural district. Comments are due by Nov. 26. The proposed rule can be found here.

Payday Alternative Loans
The NCUA board is currently reviewing its regulation governing payday-alternative loans (PAL or PAL loans), formerly known as short-term, small-amount loans. The board intends to improve the regulation to encourage more federal credit unions to offer PAL loans and believes it may be necessary to amend the regulation. The board seeks comment on how best to approach this. Although the board identifies specific issues for discussion below, it encourages commenters to discuss any issue related to improving the regulation. Comments are due by Nov. 26. The proposed rule can be found here.

Investments in Treasury Inflation Protected Securities (TIPS)
The NCUA board proposes to amend its investment regulation to allow federal credit unions to purchase Treasury Inflation Protected Securities. This proposed amendment adds TIPS to the list of permissible investments for FCUs in part 703. The board believes TIPS will provide FCUs with an additional investment portfolio risk management tool that can be useful in an inflationary economic environment. Comments are due on or before Nov. 26. The proposed rule can be found here.

12-1007: Charter Change

The question in this Legal Opinion Letter was whether NCUA may approve a credit union’s request to receive a change in its charter and subsequently merge with another credit union with the same type of field of membership. The Federal Credit Union Act, as amended by the Credit Union Membership Access Act, gives the agency the authority to approve such a charter conversion and subsequent merger. NCUA also has the discretion under the FCUA to approve a change to a credit union's charter to facilitate a voluntary merger with another healthy credit union. However, the applicant must satisfy the criteria for a charter change, as spelled out in FCUA and NCUA regulations. A copy of this Legal Opinion Letter can be found here.

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