Corporate Credit Unions

NATIONAL CREDIT UNION ADMINISTRATION <CFR>12 CFR Part 704</CFR> <RIN>RIN 3133-AF73</RIN> <SUBJECT>Corporate Credit Unions</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> National Credit Union Administration (NCUA). <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The NCUA Board (Board) is proposing to amend its regulations for corporate credit unions by removing the requirement that a corporate credit union's asset and liability management committee (ALCO) must have at least one member who is also a member of the corporate credit union's board of directors. The proposed rule would also remove filing requirements related to a corporate credit union's annual report and any management letter or other report issued by its independent public accountant. The intended effect is to reduce unnecessary regulatory burden and provide corporate credit unions with greater flexibility. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received by February 9, 2026. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Comments may be submitted in one of the following ways. ( <E T="03">Please send comments by one method only</E> ): • <E T="03">Federal eRulemaking Portal: https://www.regulations.gov.</E> The docket number for this proposed rule is NCUA-2025-1302. Follow the “Submit a comment” instructions. If you are reading this document on <E T="03">federalregister.gov,</E> you may use the green “SUBMIT A PUBLIC COMMENT” button beneath this rulemaking's title to submit a comment to the <E T="03">regulations.gov</E> docket. A plain language summary of the proposed rule is also available on the docket website. • <E T="03">Mail:</E> Address to Melane Conyers-Ausbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. • <E T="03">Hand Delivery/Courier:</E> Same as mailing address. Mailed and hand-delivered comments must be received by the close of the comment period. <E T="03">Public inspection:</E> Please follow the search instructions on <E T="03">https://www.regulations.gov</E> to view the public comments. Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments are public records; they are publicly displayed exactly as received, and will not be deleted, modified, or redacted. Comments may be submitted anonymously. If you are unable to access public comments on the internet, you may contact the NCUA for alternative access by calling (703) 518-6540 or emailing <E T="03">OGCMail@ncua.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Rachel Ackmann, Senior Attorney, Office of General Counsel, at (703) 518-6540 or at 1775 Duke Street, Alexandria, VA 22314 </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Introduction</HD> <HD SOURCE="HD2">A. Background</HD> In 2010, the Board comprehensively revised the regulations governing corporate credit unions to provide longer-term structural enhancements to the corporate system in response to the financial crisis of 2007-2009. <SU>1</SU> <FTREF/> The provisions of the 2010 rule were intended to stabilize the corporate system and improved corporate credit unions' ability to function and provide services to natural person credit unions without undue risk. Since 2010, and as part of the Board's continuous reevaluation of its regulation of corporate credit unions, the Board has amended part 704 on several occasions. <SU>2</SU> <FTREF/> <FTNT> <SU>1</SU>  75 FR 64786 (Oct. 20, 2010). </FTNT> <FTNT> <SU>2</SU>  See <E T="03">e.g.,</E> 80 FR 25932 (May 6, 2015) and 80 FR 57283 (Sept. 23, 2015). </FTNT> In 2017, the Board amended corporate credit union capital standards to change the calculation of capital after a consolidation and to set a retained earnings ratio target. <SU>3</SU> <FTREF/> In October 2020, the Board issued a final rule to amend several provisions relating to corporate credit union investments in credit union service organizations (CUSOs) and other provisions relating to corporate credit union governance. <SU>4</SU> <FTREF/> Finally, in 2021, the Board amended part 704 to clarify that corporate credit unions may purchase subordinated debt instruments issued by consumer credit unions. <SU>5</SU> <FTREF/> <FTNT> <SU>3</SU>  82 FR 55497 (Nov. 22, 2017). </FTNT> <FTNT> <SU>4</SU>  85 FR 17288 (Mar. 27, 2020). </FTNT> <FTNT> <SU>5</SU>  86 FR 10729 (Feb. 23, 2021). </FTNT> <HD SOURCE="HD2">B. Legal Authority</HD> The Board is issuing this proposed rule pursuant to its authority under the Federal Credit Union Act (FCU Act). <SU>6</SU> <FTREF/> Under the FCU Act, the NCUA is the chartering and supervisory authority for federal credit unions (FCUs) and the federal supervisory authority for federally insured credit unions (FICUs). The FCU Act grants the NCUA a broad mandate to issue regulations governing both FCUs and FICUs. Section 120 of the FCU Act is a general grant of regulatory authority and authorizes the Board to prescribe regulations for the administration of the FCU Act. <SU>7</SU> <FTREF/> Section 209 of the FCU Act is a plenary grant of regulatory authority to the NCUA to issue regulations necessary or appropriate to carry out its role as share insurer for all FICUs. <SU>8</SU> <FTREF/> The FCU Act also includes an express grant of authority for the Board to subject federally chartered central, or corporate, credit unions to such rules, regulations, and orders as the Board deems appropriate. <SU>9</SU> <FTREF/> Part 704 of the NCUA's regulations implements the requirements of the FCU Act regarding corporate credit unions. <SU>10</SU> <FTREF/> <FTNT> <SU>6</SU>  12 U.S.C. 1751 <E T="03">et seq.</E> </FTNT> <FTNT> <SU>7</SU>  12 U.S.C. 1766(a). </FTNT> <FTNT> <SU>8</SU>  12 U.S.C. 1789. </FTNT> <FTNT> <SU>9</SU>  12 U.S.C. 1766(a). </FTNT> <FTNT> <SU>10</SU>  12 CFR part 704. </FTNT> <HD SOURCE="HD1">II. Proposed Rule</HD> <HD SOURCE="HD2">A. ALCO Committee Representation</HD> Before the financial crisis of 2007-2009, the Board comprehensively revised part 704 (1997 final rule). <SU>11</SU> <FTREF/> The 1997 final rule required that corporate credit unions operate according to a written asset and liability management policy. Additionally, the 1997 final rule required that each corporate credit union's ALCO have at least one member who is also a member of the board of directors. The board member requirement has not been amended since 1997. <FTNT> <SU>11</SU>  62 FR 12938 (Mar. 19, 1997). </FTNT> The Board now proposes to rescind the requirement for each corporate credit union's ALCO to have at least one member who is also a member of the board of directors. After careful review, the Board believes that this prescriptive approach is unnecessary. The Board's primary policy rationale for this proposed elimination is that this requirement is overly prescriptive and inflexible, and corporate credit union boards should have discretion to determine their ALCO membership. <HD SOURCE="HD2">B. Filing Requirements for a Corporate Credit Union's Annual Report</HD> The 1997 final rule also required that a corporate credit union's supervisory committee get an annual opinion audit of the corporate credit union's financial statements. The supervisory committee was required to submit the audit report to the board of directors. In addition, the supervisory committee had to submit a copy of the audit report and copies of all communications provided to the corporate credit union by the external auditor to the NCUA within 30 calendar days after receipt by the board of directors. <SU>12</SU> <FTREF/> <FTNT> <SU>12</SU>  62 FR 12929 (Mar. 19, 1997). <E T="03">See</E> 12 CFR 704.15(a). </FTNT> In 2010, the Board amended corporate credit union audit requirements by adding additional auditing, reporting, and supervisory committee requirements. <SU>13</SU> <FTREF/> For consistent application of the requirement, the Board required that a corporate credit union file a copy of its annual report with the NCUA within 180 days following the end of the calendar year. <SU>14</SU> <FTREF/> The Board also provided that the NCUA would make a corporate credit union's annual report available for public inspection and that, consistent with good corporate governance, a corporate credit union was required to give the NCUA a copy of any management letter or report issued by its independent public accountant. <SU>15</SU> <FTREF/> Finally, the Board required corporate credit unions to notify the NCUA when filing the annual report late. <SU>16</SU> <FTREF/> <FTNT> <SU>13</SU>  75 FR 73000 (Nov. 29, 2010). </FTNT> <FTNT> <SU>14</SU>  12 CFR 704.15(c)(1). The report must contain the audited comparative financial statements, the independent public accountant's report on those statements, a management report, and, if applicable, the independent public accountant's attestation report on management's assessment of internal control over financial reporting. </FTNT> <FTNT> <SU>15</SU>  12 CFR 704.15(c)(2) and (c)(3). </FTNT> <FTNT> <SU>16</SU>  12 CFR 704.15(c)(5). </FTNT> The Board now proposes to remove several of its filing requirements related to a corporate credit union's annual report. The proposed rule would rescind the requirement to file a copy of an annual report and any management letter or other report issued by its independent public accountant with the NCUA within 180 days after the end of the calendar year. The proposed rule would also rescind the requirement for the NCUA to make the annual report available for public i ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 21k characters. 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