NPRM Fixed Assets 79FR46727 11AUG2014

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(d) The Board shall issue a written
statement of the reasons supporting a
decision to exclude counsel under this
section within five working days
following exclusion. The Board shall
also delay the safety investigation for a
reasonable period of time to permit
retention of new counsel.
§ 1708.111

Sequestration of witnesses.

(a) Witnesses shall be sequestered
during interviews, or during the taking
of testimony, unless otherwise
permitted by the Investigating Officer(s)
or by the Board, as the case may be.
(b) No witness, or counsel
accompanying any such witness, shall
be permitted to be present during the
examination of any other witness called
in such proceeding, unless permitted by
the Investigating Officer(s) or the Board,
as the case may be.
§ 1708.112 Appearance and practice
before the Board.

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(a) Counsel appearing before the
Board or the Investigating Officer(s)
must conform to the standards of ethical
conduct required of practitioners before
the Courts of the United States.
(b) The Board may suspend or deny,
temporarily or permanently, the
privilege of appearing or practicing
before the Board in any way to a person
who is found:
(1) Not to possess the requisite
qualifications to represent others; or
(2) To have engaged in unethical or
improper professional conduct; or
(3) To have engaged in obstructionism
or contumacy before the Board; or
(4) To be otherwise not qualified.
(c) Obstructionist or contumacious
conduct in an investigation before the
Board or the Investigating Officer(s) will
be grounds for exclusion of any person
from such safety investigation
proceedings and for summary
suspension for the duration of the
investigation.
(d) At the time of the finding the
Board shall issue a verbal or written
statement of the reasons supporting a
decision to suspend or exclude counsel
for obstructionism or contumacy.
(e) A witness may have a reasonable
amount of time to retain replacement
counsel if original counsel is suspended
or excluded.
§ 1708.113

Right to submit statements.

At any time during the course of an
investigation, any person may submit
documents, statements of facts, or
memoranda of law for the purpose of
explanation or further development of
the facts and circumstances relevant to
the safety matter under investigation.

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§ 1708.114

Official transcripts.

(a) Official transcripts of witness
testimony, whether or not compelled by
subpoena to appear before a Board
safety investigation, shall be recorded
either by an official reporter or by any
other person or means designated by the
Investigating Officer(s) or the Board’s
General Counsel.
(b) Such witness, after completing the
compelled testimony, may file a request
with the Board’s General Counsel to
procure a copy of the official transcript
of that witness’s testimony. The General
Counsel shall rule on the request, and
may deny for good cause.
(c) Good cause for denying a witness’s
request to procure a transcript may
include, but shall not be limited to, the
protection of a trade secret, nondisclosure of confidential or proprietary
business information, security-sensitive
operational or vulnerability information,
safety privileged information, or the
integrity of Board investigations.
(d) Whether or not a request is made,
the witness and his or her attorney shall
have the right to inspect the official
transcript of the witness’s own
testimony, in the presence of the
Investigating Officer(s) or his designee,
for purposes of conducting errata
review.
(e) Transcripts of testimony are
otherwise considered confidential and
privileged safety information, and in no
case shall a copy or any reproduction of
such transcript be released to any other
person or entity, except as provided in
paragraph (b) above or as required under
the Freedom of Information Act or the
Government in the Sunshine Act, or any
procedures or requirements contained
in Board regulations issued pursuant to
those Acts.
§ 1708.115 Final report of safety
investigation.

(a) The Board will complete a final
report of the safety investigation fully
setting forth the Board’s findings and
conclusions.
(b) The final report of the safety
investigation is confidential and
protected by the safety privilege, and is
therefore not releasable.
(c) The Board, in its discretion, may
sanitize the final report of the safety
investigation by redacting confidential
and safety privileged information so that
the report is put in a publically
releasable format.
(d) Nothing in this section voids or
otherwise displaces the Board’s legal
obligations with respect to compliance
with the Freedom of Information Act,
the Government in the Sunshine Act, or
any procedures or requirements

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contained in the Board’s regulations
issued pursuant to those Acts.
§ 1708.116 Procedure after safety
investigations.

(a) If a formal safety investigation
results in a finding that an event or
practice has adversely affected, or may
adversely affect, public health and
safety, the Board may take any
appropriate action authorized to it
under its enabling statute, including,
but not limited to, making a formal
recommendation to the Secretary of
Energy, convening a hearing, or
establishing a reporting requirement.
(b) If a safety investigation yields
information relating to violations of
federal criminal law involving
government officers and employees, the
Board shall expeditiously refer the
matter to the Department of Justice for
disposition.
(c) If in the course of a safety
investigation, a safety issue or concern
is found to be outside the Board’s
jurisdiction, that safety issue or concern
shall be referred to the appropriate
entity with jurisdiction for disposition.
(d) Statements made in connection
with testimony provided to the Board in
an investigation are subject to the
provisions of 18 U.S.C. 1001.
Dated: August 6, 2014.
Peter S. Winokur,
Chairman.
[FR Doc. 2014–18575 Filed 8–8–14; 8:45 am]
BILLING CODE 3670–01–P

NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 701
RIN 3133–AE39

Federal Credit Union Ownership of
Fixed Assets
National Credit Union
Administration (NCUA).
ACTION: Notice of proposed rulemaking.
AGENCY:

The NCUA Board (Board)
proposes to amend its regulation
governing federal credit union (FCU)
ownership of fixed assets to provide
regulatory relief and to help FCUs better
manage their fixed assets. The proposed
rule provides greater flexibility to FCUs
by removing the waiver requirement for
FCUs to exceed the five percent
aggregate limit on investments in fixed
assets. An FCU that chooses to exceed
the five percent aggregate limit may do
so without prior NCUA approval,
provided it implements a fixed assets
management (FAM) program that

SUMMARY:

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demonstrates appropriate preacquisition analysis to ensure the FCU
can afford any impact on earnings and
net worth levels. An FCU’s FAM
program is subject to supervisory
scrutiny and must provide for close
ongoing oversight of fixed assets levels
and their effect on the financial
performance of the FCU. It must also
include a written policy that sets an
FCU board-established limit on the
aggregate amount of the FCU’s fixed
assets. In addition, the proposal
simplifies the partial occupancy
requirement for premises acquired for
future expansion.
DATES: Comments must be received on
or before October 10, 2014.
ADDRESSES: You may submit comments
by any of the following methods (Please
send comments by one method only):
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• NCUA Web site: http://
www.ncua.gov/
RegulationsOpinionsLaws/proposed_
regs/proposed_regs.html. Follow the
instructions for submitting comments.
• Email: Address to regcomments@
ncua.gov. Include ‘‘[Your name]
Comments on Notice of Proposed
Rulemaking for Part 701, FCU
Ownership of Fixed Assets’’ in the
email subject line.
• Fax: (703) 518–6319. Use the
subject line described above for email.
• Mail: Address to Gerard Poliquin,
Secretary of the Board, National Credit
Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314–
3428.
• Hand Delivery/Courier: Same as
mail address.
Public Inspection: You may view all
public comments on NCUA’s Web site
at http://www.ncua.gov/Legal/Regs/
Pages/PropRegs.aspx as submitted,
except for those we cannot post for
technical reasons. NCUA will not edit or
remove any identifying or contact
information from the public comments
submitted. You may inspect paper
copies of comments in NCUA’s law
library at 1775 Duke Street, Alexandria,
Virginia 22314, by appointment
weekdays between 9 a.m. and 3 p.m. To
make an appointment, call (703) 518–
6546 or send an email to OGCMail@
ncua.gov.
FOR FURTHER INFORMATION CONTACT:
Pamela Yu, Senior Staff Attorney, Office
of General Counsel, at the above address
or telephone (703) 518–6540, or Jacob
McCall, Program Officer, Office of
Examination and Insurance, at the above
address or telephone (703) 518–6360.
SUPPLEMENTARY INFORMATION:

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I. Background
II. Summary of the Proposed Rule
III. Regulatory Procedures

I. Background
The Federal Credit Union Act (FCU
Act) authorizes an FCU to purchase,
hold, and dispose of property necessary
or incidental to its operations.1 NCUA’s
fixed assets rule interprets and
implements this provision of the FCU
Act.2 NCUA’s current fixed assets rule:
(1) Limits FCU investments in fixed
assets; (2) establishes occupancy,
planning, and disposal requirements for
acquired and abandoned premises; and
(3) prohibits certain transactions.3
Under the current rule, fixed assets are
defined as premises, furniture, fixtures,
and equipment, including 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.4
A. Why is NCUA proposing this rule?
Executive Order 13579 provides that
independent agencies, including NCUA,
should consider if they can modify,
streamline, expand, or repeal existing
regulations to make their programs more
effective and less burdensome.5
Additionally, the Board has a policy of
continually reviewing NCUA’s
regulations to ‘‘update, clarify and
simplify existing regulations and
eliminate redundant and unnecessary
provisions.’’ To carry out this policy,
NCUA identifies one-third of its existing
regulations for review each year and
provides notice of this review so the
public may comment. In 2012, NCUA
reviewed its fixed assets rule as part of
this process. As a result of that review,
in March 2013, the Board issued
proposed amendments to the fixed
assets rule to make it easier for FCUs to
understand it.6 The proposed
amendments did not make any
substantive changes to the regulatory
requirements. Rather, they only clarified
the rule and improved its overall
organization, structure, and readability.
The March 2013 proposal was
published with a 60-day public
comment period. In response to the
Board’s request for feedback, several
commenters offered suggestions for
substantive changes to the regulatory
requirements in the fixed assets rule.
1 12
2 12

U.S.C. 1757(4).
CFR 701.36.

3 Id.

CFR 701.36(c).
13579 (July 11, 2011).
6 78 FR 17136 (Mar. 20, 2013).

For example, a number of commenters
urged the Board to consider increasing
or eliminating the aggregate limit on
fixed assets, or to allow FCUs to
establish their own written policies to
set limits on their investments in fixed
assets. One commenter suggested that,
as an alternative to the aggregate cap,
certain FCUs should have the option to
submit periodic fixed assets
management plans to NCUA. Several
commenters also recommended changes
to NCUA’s current waiver process. In
addition, one commenter suggested that
the Board should extend the time frames
for partially occupying improved
premises and unimproved premises
acquired for future expansion, which
under the current rule, are three years
and six years, respectively. These
comments, however, were beyond the
scope and intent of the March 2013
proposal, which only reorganized and
clarified the rule. Therefore, the Board
was prevented by the provisions of the
Administrative Procedure Act from
making such substantive changes at that
time.7 Accordingly, in September 2013,
the Board adopted the March 2013
proposed rule as final without change
except for one minor modification.8 In
finalizing the rule, however, the Board
indicated it would take those
substantive comments into
consideration if it considered making
substantive changes to NCUA’s fixed
assets rule in the future.
The Board has determined that
making the referenced substantive
amendments to the fixed assets rule will
allow FCUs more flexibility in managing
their fixed assets, while maintaining
NCUA’s ability to supervise FCUs’
management of fixed assets in order to
protect safety and soundness. This
proposed rule reflects these substantive
amendments. The Board also believes
this proposal is consistent with the
spirit of Executive Order 13579.
B. How would the proposed rule change
the current rule?
The Board proposes to provide
regulatory relief to FCUs by: (1)
Allowing FCUs to exceed the current
five percent aggregate limit on fixed
assets, without prior NCUA approval,
provided FCUs do so safely and soundly
by establishing their own FAM policies
and programs; and (2) simplifying the
partial occupancy requirement for
premises acquired for future expansion.
The proposed rule also eliminates or
streamlines certain aspects of the fixed
assets waiver requirements in various
circumstances.

4 12

5 E.O.

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75

U.S.C. 553.
FR 57250 (Sept. 18, 2013).

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II. Summary of the Proposed Rule

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A. FCU Investments in Fixed Assets
Above Five Percent of Shares and
Retained Earnings
Section 701.36(c) of the current rule
establishes an aggregate limit on
investments in fixed assets for FCUs
with $1,000,000 or more in assets.9 For
an FCU meeting this threshold asset
amount, the aggregate of all its
investments in fixed assets is limited to
five percent of its shares and retained
earnings, unless NCUA grants a waiver
establishing a higher limit.10
In the past few years, and most
recently in response to the March 2013
proposed rule, FCUs have asked the
Board to consider increasing or
eliminating the current five percent
aggregate limit on fixed assets, or to
allow FCUs to establish their own
written policies to set limits on their
investments in fixed assets.11 Some
credit unions have mentioned that the
limit is too low for FCUs to effectively
manage their investments in fixed assets
and to achieve growth. They have
argued that a higher limit is necessary
to allow FCUs adequate flexibility in
acquiring fixed assets to serve their
members’ needs.
The Board has long stated that the
purpose of the fixed assets rule is to
provide control on the risk of excess or
speculative acquisition of fixed assets.12
In explaining the need for the aggregate
limit on fixed assets, the Board noted in
1978 that ‘‘[i]t is the aggregate amount
invested in non-income producing
assets that is of critical importance.’’ 13
Past experience has shown that
excessive levels of non-income
producing assets may lead to financial
9 This proposed rule does not amend the
$1,000,000 asset threshold. Thus, FCUs under
$1,000,000, which are currently exempt from the
regulatory limit on aggregate investments in fixed
assets, will be also exempt from the proposed FAM
requirements. The Board, however, emphasizes that
investments in fixed assets by FCUs under
$1,000,000 are, and will continue to be, subject to
supervisory review. FCUs exempt from FAM
program requirements must invest in fixed assets
safely and soundly.
10 12 CFR 701.36(c).
11 See, e.g., 75 FR 66295, 66297 (Oct. 28, 2010);
78 FR 57250, 57250 (Sept. 18, 2013).
12 See 43 FR 26317, 26317 (June 19, 1978) (‘‘This
regulation is intended to ensure that the officials of
FCUs’ have considered all relevant factors prior to
committing large sums of members’ funds to the
acquisition of fixed assets.’’); 49 FR 50365, 50366
(Dec. 28, 1984) (‘‘The intent of the regulation is to
prevent, or at least curb, excessive investments in
fixed assets and the related costs and expenses that
may be beyond the financial capability of the credit
union.’’); 54 FR 18466, 18467 (May 1, 1989) (‘‘[T]he
purpose of the regulation is to provide some control
on the potential risk of excess investment and/or
commitment to invest substantial sums in fixed
assets.’’).
13 43 FR 58176, 58177 (Dec. 13, 1978).

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difficulties. While the Board continues
to believe that the five percent aggregate
limit functions as a reasonable
benchmark for safety and soundness,
the Board recognizes that some relief in
this regard should be provided to ensure
FCUs can accomplish their growth
strategies and provide the services their
members demand. Accordingly, the
Board proposes to allow FCUs the
discretion to exceed the five percent
aggregate limit, without the need for a
waiver, provided they implement a
FAM program that provides appropriate
pre-acquisition analysis to ensure the
FCU can afford any impact on its
earnings and net worth levels, and they
maintain close ongoing oversight of how
fixed assets levels are affecting the
financial performance of the FCU.
An FCU’s FAM program, at a
minimum, must include three elements:
(1) A written board policy; (2) board
oversight; and (3) ongoing internal
controls. These elements are discussed
in more detail below. The proposed rule
eliminates the current waiver process
for FCUs that wish to exceed the five
percent aggregate limit, but an FCU’s
actions in this regard are subject to
supervisory scrutiny.14
Written Board Policy
An FCU’s board-approved written
FAM policy must establish a reasonable
limit on the aggregate amount of the
FCU’s total investments in fixed assets.
The policy and the board-established
aggregate limit must demonstrate
adequate consideration for preserving
the FCU’s earnings and net worth.
NCUA will consider policies which
represent a threat to earnings and net
worth unsafe and unsound. The policy
must be consistent with the FCU’s
overall strategic plan, risk tolerance, and
financial condition. The policy must
also state actions and authorities
required for exceptions to policy, limits,
and authorizations. An FCU may adopt
a separate FAM policy or it may
incorporate a FAM policy into an
existing asset liability management or
other risk management policy. In any
case, however, the policy must be
written and approved by the FCU’s
board of directors.
FCU Board Oversight
An FCU that wishes to make an
investment in fixed assets that would
exceed, in the aggregate, five percent of
its shares and retained earnings must
14 The Board notes that the majority of FCU
requests for waiver of the five percent aggregate
limit are approved by NCUA. In 2013, for example,
54 percent of waiver requests for all parts of
§ 701.36 were for a waiver of the aggregate limit. Of
those, 88 percent were approved by NCUA.

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obtain prior approval from its board of
directors. Any board resolution, either
approving the investment or
disapproving the investment, at a
minimum, must clearly document the
board’s analysis of the FCU’s purpose
for the investment. This analysis must
demonstrate, for example, the board’s
full consideration of whether the
investment in fixed assets represents a
routine replacement, a necessary
investment or purchase in the normal
course of business, or an effort to
expand the FCU’s services. The degree
and detail of the board’s analysis must
be commensurate with the FCU’s stated
purpose for the investment. The FAM
may include a delegated authority to the
CEO or operational management to
make acquisitions of equipment within
board specified limits, which would
relieve the board of a requirement to
approve each individual purchase of
equipment.
The board resolution must also reflect
its analysis of the FCU’s pro-forma
balance sheet and income statement
projections, as well as its sensitivity to
material assumptions. This analysis
must be supported by reasonable growth
projections that are consistent with
contemporary observed trends.
For investments in real property, the
board must consider the future
marketability of the premises should it
decide to dispose of the asset in the
future, including reasonable recovery
expectations based on the location of
the premises and other relevant factors.
The board must consider similar factors
for any other unique or special-purpose
fixed assets.
The board must annually review the
FCU’s FAM program and update it as
necessary. If the board determines that
no changes to the FAM program are
necessary, it must appropriately
document that determination.
Internal Controls
An FCU with an aggregate investment
in fixed assets that exceeds five percent
of its shares and retained earnings must
establish, as a part of its FAM program,
strong internal controls to effectively
monitor and measure its investments in
fixed assets. These controls must be
ongoing and appropriate to the total
amount of the FCU’s fixed assets
investments. Internal controls must
include, for example, periodic physical
inventories of the FCU’s fixed assets.
Overall, an FCU’s FAM program must
demonstrate adequate protections to the
FCU’s net worth and earnings, or it will
be considered unsafe and unsound. An
FCU with an unsafe and unsound FAM
program or that does not comply with
its FAM program may be subject to

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supervisory action, including
prohibition of additional investments in
fixed assets or divestiture of fixed
assets.
Grandfathering
Should this rule become finalized as
proposed, FCUs with an existing waiver
of the five percent aggregate limit on
fixed assets will be grandfathered at the
approved limit and may continue to rely
on the waiver until its expiration. The
Board emphasizes, however, an FCU
with an existing waiver will be required
to implement a FAM program prior to
making any future investment in fixed
assets which exceeds the amount
approved. Moreover, if, subsequent to
the effective date of a final rule, the
level of the FCU’s investments in fixed
assets falls below the regulatory five
percent limit, the waiver will cease and
the FCU will be required to implement
a FAM program prior to making any
future investment in fixed assets which
exceeds five percent of its shares and
retained earnings.
B. Partial Occupancy of Premises
Acquired for Future Expansion
The Board also proposes to clarify the
provision in the fixed assets rule that
requires an FCU to partially occupy
property acquired for future expansion
within a time period set by the rule.15
Under the current rule, if an FCU
acquires premises for future expansion
and does not fully occupy them within
one year, it must have a board
resolution in place by the end of that
year with definitive plans for full
occupation.16 There is no set time
period within which an FCU must
achieve full occupation, giving FCUs
significant leeway and flexibility in
managing real property acquired for
future use. An FCU, however, may not
hold (or lease to unrelated third parties)
real property indefinitely without fully
occupying the premises.17 The rule
requires an FCU to show that it will
fully occupy the premises within a
reasonable time, and consistent with its
usage plan, by requiring the FCU’s
partial occupancy of the premises
within a time period set by the rule.
Specifically, for improved premises
15 12

CFR 701.36(d)(2).
CFR 701.36(d)(1).
17 Section 107(4) of the FCU Act authorizes an
FCU to purchase, hold, and dispose of property
necessary or incidental to its operations. 12 U.S.C.
1757(4). Generally, an FCU may only invest in
property it intends to use to transact credit union
business or in property that supports its internal
operations or member services. There is no
authority for an FCU to invest in real estate for
speculative purposes or to otherwise engage in real
estate activities that do not support its purpose of
providing financial services to its members.

acquired for future expansion, an FCU
is currently permitted up to three years
from the date it obtains the property to
meet the partial occupancy requirement,
unless NCUA grants a waiver. If the
premises are unimproved land or
unimproved real property, however, the
time period is extended to six years
from the date of acquisition.18 As noted
above, in response to the March 2013
proposal, one commenter suggested that
the Board extend the time frames for the
partial occupation requirement.
The Board proposes to simplify this
aspect of the fixed assets rule by
establishing a single time period for
partial occupancy of any premises
acquired for future expansion. The
proposed rule would permit FCUs up to
five years from the date of acquisition to
meet the partial occupancy requirement,
regardless of whether the premises are
improved or unimproved property. This
extends the current time period for
improved premises by two years. This
reduces the current time period for
unimproved land or unimproved real
property by one year, but the Board
believes that five years is sufficient time
to meet this requirement even for raw
land. The Board notes that the proposed
five-year time frame is consistent with
requirements for real estate acquired by
banks for future expansion.19
The proposed rule retains the current
waiver process for FCUs that require
additional time to partially occupy
premises acquired for future expansion.
The Board, however, proposes to
streamline one aspect of the current
waiver process. Currently, an FCU must
submit its request for a waiver from the
partial occupancy requirement within
30 months after the property is
acquired. The Board, however,
understands that in some circumstances
it may be difficult for FCUs to satisfy
this requirement, particularly in the
unimproved land context as
construction-related delays are difficult
to anticipate and could occur after the
30 months have expired. Accordingly,
the Board proposes to eliminate the 30month requirement for partial
occupancy waiver requests and allow
FCUs to apply for a waiver beyond that
time frame as appropriate.

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18 12 CFR 701.36(d)(2); see also 12 CFR 701.36(b)
(‘‘Partially occupy means occupation, on a full-time
basis, of a portion of the premises that is: (1)
Consistent with the federal credit union’s usage
plan for the premises; (2) significant enough that
the federal credit union is deriving practical utility
from the occupied portion, relative to the scope of
the usage plan; and (3) sufficient to show that the
federal credit union will fully occupy the premises
within a reasonable time.’’)
19 See 12 CFR 34.84.

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Request for Comment on Full
Occupancy of Premises Acquired for
Future Expansion
As discussed above, the current rule
does not set a specific time period
within which an FCU must achieve full
occupation of premises acquired for
future expansion. However, partial
occupancy of the premises is required
within five years (as proposed) and
must be sufficient to show, among other
things, that the FCU will fully occupy
the premises within a reasonable time
and consistent with its plan for the
premises. This proposal does not amend
the full occupancy provision of the
current rule, but the Board welcomes
public comment on this aspect of the
fixed assets rule.
C. NCUA’s Supervisory Review
Should this rule become finalized as
proposed, when NCUA examines an
FCU with fixed assets in excess of five
percent of its shares and retained
earnings, NCUA will evaluate whether
or not the FCU’s FAM program is sound.
This analysis will be similar to that
conducted during the current waiver
process, but will instead become part of
the routine examination of the FCU.
NCUA’s supervisory review of an FCU’s
FAM program may include the
following considerations:
• To determine if an FCU has
established a reasonable policy limit on
the aggregate amount of its fixed assets,
NCUA will evaluate the impact on
earnings and net worth levels. High
levels of non-earning assets may lower
income and increase operating expenses
(such as depreciation and maintenance
expenses). Reduced earnings, in turn,
can jeopardize the FCU’s ability to
establish or maintain sound net worth
levels. FCUs are not in compliance with
the provisions of this rule if they cannot
demonstrate that operating at higher
levels of fixed assets to expand the
FCU’s services does not pose a material
reduction to the FCU’s ability to
establish or maintain sound net worth
levels. Minor acquisitions of equipment
in the normal course of business will
not result in supervisory scrutiny even
for FCUs that exceed the five percent
aggregate limit, unless the FCU is
otherwise experiencing significant
earnings problems.
• The FCU’s FAM policy must be
consistent with the FCU’s overall
strategic plan, risk tolerance, and
financial condition. The FCU’s policy
and associated financial projections and
board resolutions must also document
sensitivity to material assumptions. This
analysis must be supported by
reasonable growth projections that are

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Federal Register / Vol. 79, No. 154 / Monday, August 11, 2014 / Proposed Rules
consistent with contemporary observed
growth trends.
• NCUA will consider it unsafe and
unsound if an FCU’s investments in
unique or special-purpose real property
with very limited marketability result in
it operating at fixed assets levels above
the five percent aggregate limit.
If an FCU does not meet the
requirements of the rule, fails to comply
with its FAM program, or has an unsafe
program or levels of fixed assets, NCUA
may, in the discretion of the appropriate
Regional Director,20 prohibit an FCU
from making any further fixed assets
acquisitions and require the FCU to
reduce fixed assets levels if doing so
would not pose a safety and soundness
concern.
III. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act
requires NCUA to prepare an analysis to
describe any significant economic
impact a proposed rule may have on a
substantial number of small entities
(primarily those under $50,000,000 in
assets). This proposed rule would
provide regulatory relief to help FCUs
better manage their investments in fixed
assets. NCUA has determined this
proposed rule will not have a significant
economic impact on a substantial
number of small credit unions.

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Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) applies to rulemakings in which
an agency by rule creates a new
paperwork burden on regulated entities
or modifies an existing burden.21 For
purposes of the PRA, a paperwork
burden may take the form of either a
reporting or a recordkeeping
requirement, both referred to as
information collections. NCUA
recognizes that this proposed rule
requires FCUs to comply with certain
requirements that constitute an
information collection within the
meaning of the PRA. Under this rule,
FCUs that wish to exceed the five
percent aggregate limit on investments
in fixed assets may do so provided they
implement a FAM program which
includes a written policy. However, the
proposed amendments would also
relieve FCUs from the current
requirement to obtain a waiver to
20 ‘‘Regional Director’’ means the representative
of the Administration in the designated
geographical area in which the office of the FCU is
located or, for FCUs with $10 billion or more in
assets, the Director of the Office of National
Examinations and Supervision. 12 CFR 700.2.
21 44 U.S.C. 3507(d); 5 CFR part 1320.

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exceed the five percent aggregate limit
on investments in fixed assets.
According to NCUA records, in 2013,
there were 259 FCUs subject to the fixed
assets rule with a fixed assets ratio
above five percent. Of those, 83 requests
sought a waiver of the five percent
aggregate limit in 2013. For purposes of
this analysis, based on 2013 experience,
NCUA believes it is reasonable to
estimate 83 FCUs will be required to
draft a fixed assets policy each year in
lieu of creating a waiver request, and an
average of 176 FCUs (259 minus the 83
which would be drafting a policy)
would have a requirement to review a
fixed asset policy each year.
Accordingly, information collection
obligations imposed by the proposed
rule are analyzed below:
Estimate of initial burden for
implementing written fixed assets
policy.
Number of FCUs requesting a waiver of
the 5% limit in 2013: 83
Frequency for creating fixed asset
policy: Annual
Initial hour burden: 24
83 FCUs × 24 hours = 1,992 hours initial
burden
Estimate of ongoing burden to
maintain written fixed assets policy.
FCUs needing to review/update existing
fixed asset policies: 176
Frequency for reviewing fixed asset
policy: Annual
Review hour burden: 2
176 FCUs × 2 hours = 352 hours annual
burden
However, the proposed amendments
would also relieve FCUs from the
current requirement to request a waiver
if the FCU exceeds the five percent
aggregate limit on fixed assets. NCUA
estimates the reduced burden by
eliminating the waiver requirement will
more than offset the annual burden
imposed by implementing and
maintaining a fixed assets policy. The
research and documentation required
under the current regulation is
substantially the same as the proposed
regulation (both require approximately
24 hours). Under both the current and
proposed regulations, FCUs are required
to project future fixed asset ratios
resulting from the fixed asset purchases,
evaluate the changes to balance sheet
and income projections and
demonstrate prudence in securing the
asset at a reasonable cost. These
activities would be substantially
unchanged through the proposed
revision, with the exception that the
final document of record will be a
policy instead of a waiver request. In
addition, the current regulation also
requires the FCU to draft a waiver

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46731

request memo which would be used to
submit the waiver for NCUA’s
consideration. This effort, which is
estimated to create 4 hours burden,
would no longer be required under the
proposed regulation.
Estimate the reduced burden by
eliminating the waiver requirement.
Estimated FCUs which will no longer be
required to prepare a waiver request
and file a waiver request: 83
Frequency of waiver request: Annual
Reduced hour burden: 4
83 FCUs × 4 hours = 332 hours annual
reduced burden
In accordance with the requirements
of the PRA, NCUA intends to obtain a
modification of its OMB Control
Number, 3133–0040, to support these
changes. NCUA is submitting a copy of
the proposed rule to OMB, along with
an application for a modification of the
OMB Control Number.
The PRA and OMB regulations
require that the public be provided an
opportunity to comment on the
paperwork requirements, including an
agency’s estimate of the burden of the
paperwork requirements. The Board
invites comment on: (1) Whether the
paperwork requirements are necessary;
(2) the accuracy of NCUA’s estimates on
the burden of the paperwork
requirements; (3) ways to enhance the
quality, utility, and clarity of the
paperwork requirements; and (4) ways
to minimize the burden of the
paperwork requirements.
Comments should be sent to the
NCUA Contact and the OMB Reviewer
listed below:
NCUA Contact: Tracy Crews, National
Credit Union Administration, 1775
Duke Street, Alexandria, Virginia
22314–3428, Fax No. 703–837–2861,
Email: [email protected].
OMB Contact: Office of Management
and Budget, ATTN: Desk Officer for the
National Credit Union Administration,
Office of Information and Regulatory
Affairs, Washington, DC 20503.
Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests. 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. Because the fixed assets
regulation applies only to federal credit
unions, this proposed rule would 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

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Federal Register / Vol. 79, No. 154 / Monday, August 11, 2014 / Proposed Rules

responsibilities among the various
levels of government. As such, NCUA
has determined that this rule does not
constitute a policy that has federalism
implications for purposes of the
executive order.
Assessment of Federal Regulations and
Policies on Families
NCUA has determined that this rule
will not affect family well-being within
the meaning of Section 654 of the
Treasury and General Government
Appropriations Act of 1999.22
List of Subjects in 12 CFR Part 701
Credit unions, Reporting and
recordkeeping requirements.
By the National Credit Union
Administration Board, on July 31, 2014.
Gerard Poliquin,
Secretary of the Board.

For the reasons stated above, NCUA
proposes to amend 12 CFR part 701 as
follows:
PART 701—ORGANIZATION AND
OPERATIONS OF FEDERAL CREDIT
UNIONS
1. The authority citation for part 701
continues to read as follows:

■

Authority: 12 U.S.C. 1752(5), 1755, 1756,
1757, 1758, 1759, 1761a, 1761b, 1766, 1767,
1782, 1784, 1786, 1787, 1789. Section 701.6
is also authorized by 15 U.S.C. 3717. Section
701.31 is also authorized by 15 U.S.C. 1601
et seq.; 42 U.S.C. 1981 and 3601–3610.
Section 701.35 is also authorized by 42
U.S.C. 4311–4312.

2. In § 701.36, revise paragraphs (c)
and (d)(2) to read as follows:

■

§ 701.36 Federal credit union ownership of
fixed assets.

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*

*
*
*
*
(c) Limits on investment in fixed
assets. If a federal credit union has
$1,000,000 or more in assets, the
aggregate of all its investments in fixed
assets must not exceed five percent of
its shares and retained earnings, unless
it has implemented an effective fixed
assets management (FAM) program, and
the federal credit union’s board of
directors has analyzed and determined
that the investment in fixed assets in
excess of the five percent limit is
appropriate, safe and sound, and
supported by its FAM program. An
aggregate investment in fixed assets that
exceeds five percent of a federal credit
union’s shares and retained earnings is
generally considered unsafe and
unsound and requires a sufficiently
robust FAM program to mitigate
supervisory concerns. A federal credit
22 Public

Law 105–277, 112 Stat. 2681 (1998).

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union that does not meet the
requirements of this paragraph or fails
to comply with its FAM program may,
in the discretion of the Regional
Director, be subject to the full extent of
NCUA’s supervisory authority,
including prohibition of any additional
investments in fixed assets or
divestiture of fixed assets. A federal
credit union’s FAM program must be
annually reviewed by its board of
directors and include the following:
(1) Written board policy. The federal
credit union’s board of directors must
adopt a written FAM policy, which, at
a minimum, must:
(i) Establish a prudent limit on the
aggregate amount of the federal credit
union’s investments in fixed assets;
(ii) Demonstrate adequate
consideration for preserving the federal
credit union’s earnings and net worth;
and
(iii) Demonstrate consistency with the
federal credit union’s overall strategic
plan, risk tolerance, and financial
condition.
(2) Board oversight. Except for minor
acquisitions of equipment in the normal
course of business, the federal credit
union must obtain approval from its
board of directors prior to making an
investment in fixed assets that would
exceed, in the aggregate, five percent of
its shares and retained earnings. A
board resolution approving or
disapproving the investment, at a
minimum, must reflect:
(i) The board’s analysis of the purpose
for the investment;
(ii) The board’s analysis, supported by
reasonable growth assumptions, of the
federal credit union’s pro-forma balance
sheet and income statement projections;
and
(iii) For an investment in real
property, the board’s consideration of
the future marketability of the premises,
in the event the federal credit union
needs or wants to sell the premises in
the future.
(3) Internal controls. The federal
credit union must establish ongoing
internal controls to monitor and
measure its investments in fixed assets.
(d) * * *
(1) * * *
(2) If a federal credit union acquires
premises for future expansion,
including unimproved land or
unimproved real property, it must
partially occupy them within a
reasonable period, but no later than five
years after the date of acquisition.
NCUA may waive the partial occupation
requirements. To seek a waiver, a
federal credit union must submit a
written request to its Regional Office
and fully explain why it needs the

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waiver. The Regional Director will
provide the federal credit union a
written response, either approving or
disapproving the request. The Regional
Director’s decision will be based on
safety and soundness considerations.
*
*
*
*
*
[FR Doc. 2014–18524 Filed 8–8–14; 8:45 am]
BILLING CODE 7535–01–P

FEDERAL TRADE COMMISSION
16 CFR Part 310
Telemarketing Sales Rule
Federal Trade Commission.
ACTION: Rule Review, Request for public
comments.
AGENCY:

The Commission requests
public comment on its Telemarketing
Sales Rule (‘‘TSR’’ or ‘‘Rule’’). The
Commission is soliciting comments as
part of the FTC’s systematic review of
all current Commission regulations and
guides.
DATES: Comments must be received on
or before October 14, 2014.
ADDRESSES: Interested parties may file a
comment online or on paper by
following the instructions in the
Request for Comment part of the
SUPPLEMENTARY INFORMATION section
below. Write ‘‘Telemarketing Sales Rule
Regulatory Review, 16 CFR Part 310,
Project No. R411001,’’ on your comment
and file your comment online at
https://ftcpublic.commentworks.com/
ftc/telemarketingsalesnprm by following
the instructions on the web-based form.
If you prefer to file your comment on
paper, mail your comment to the
following address: Federal Trade
Commission, Office of the Secretary,
600 Pennsylvania Avenue NW., Suite
CC–5610 (Annex B), Washington, DC
20580, or deliver your comment to the
following address: Federal Trade
Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW.,
5th Floor, Suite 5610 (Annex B),
Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT:
Karen S. Hobbs or Craig Tregillus,
Division of Marketing Practices, Bureau
of Consumer Protection, Federal Trade
Commission, 600 Pennsylvania Avenue
NW., Washington, DC 20580, (202) 326–
3587 or (202) 326–2970.
SUPPLEMENTARY INFORMATION:
SUMMARY:

I. Background
Enacted in 1994, the Telemarketing
and Consumer Fraud and Abuse
Prevention Act (‘‘Telemarketing Act’’ or

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