SUPPLEMENTARY INFORMATION:

I. Introduction

A. Background

On October 23, 1986, NCUA published a final rule amending its regulations in 12 CFR part 741, setting forth the requirements for obtaining and maintaining federal share insurance by credit unions.^[1] Among other amendments, the October 23, 1986, final rule established regulations governing the maintenance of share insurance by an FCU converting to a state charter. This regulation, currently located in § 741.7, provides that an FCU “that petitions to convert to a state-chartered federally insured credit union is required to apply to the NCUA Regional Director for continued insurance of its accounts.” ^[2]

On December 2, 2008, NCUA published a final rule to codify the Manual as Appendix B to the regulations in 12 CFR part 701 (captioned—“Organization and Operation of Federal Credit Unions”).^[3] Chapter 4 of the Manual governs charter conversions generally, and section III of that chapter specifically addresses the conversion of an FCU to a state charter. As originally enacted, chapter 4, section III of the Manual tracked the wording of § 741.7 by providing that regional director approval was required for the continuation of federal share insurance subsequent to such conversion. Specifically, former chapter 4, section III.B. of the Manual provided that if “the [FCU] intends to continue federal share insurance after the conversion to a state credit union, it must submit an Application for Insurance of Accounts (NCUA 9600) to the regional director at the time it requests approval of the conversion proposal.” ^[4]

NCUA has twice amended chapter 4, section III.B. of the Manual since its regulatory codification in 2008. These amendments have been prompted by NCUA organizational changes in how the agency carries out its functions and responsibilities. On December 7, 2016, NCUA published a final rule that, among other changes, transferred responsibility for approving continued share insurance following an FCU conversion to the NCUA Office of Consumer Financial Protection and Access.^[5] Another final rule was published on December 20, 2017, to reflect further NCUA reorganization.^[6] This final rule transferred approval authority to NCUA's Office of Credit Union Resources and Expansion (CURE).

NCUA inadvertently failed to make conforming changes to § 741.7 as part of the 2016 and 2017 final rules. As a result, § 741.7 has been effectively superseded by these amendments to the Manual. The regulation is outdated, referring to a process for the approval of continued share insurance following an FCU's conversion that is no longer applicable. To address these concerns, NCUA proposes to remove § 741.7.

B. Legal Authority

The Board is issuing this proposed rule pursuant to its authority under the FCU Act.^[7] Under the FCU Act, NCUA is the chartering and supervisory authority for FCUs and the federal supervisory authority for federally insured credit unions (FICUs). The FCU Act grants 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.^[8] Section 209 of the FCU Act is a plenary grant of regulatory authority to NCUA to issue regulations necessary or appropriate to carry out its role as share insurer for all FICUs.^[9]

II. Proposed Rule

The proposed removal of § 741.7 would address several concerns. As discussed, the provision is outdated, having been superseded by the changes made to the Manual. An FCU wishing to retain federal share insurance after converting to a state charter is no longer required to seek approval from the regional director, as provided in § 741.7, but must instead submit its request to CURE. The removal of § 741.7 would help ensure that NCUA's regulations are up-to-date and eliminate potential confusion regarding the approval process for continued share insurance following an FCU's conversion.

In addition, the fact that the Manual and § 741.7 address the same issue is reflective of the fact that, prior to 2008, the Manual was not codified in the Code of Federal Regulations. However, upon the regulatory codification of the Manual, the two provisions became unnecessarily duplicative. As exemplified by § 741.7, such duplication runs the risk of an inadvertent inconsistency being introduced when one of the provisions is amended and a conforming change is not made to the other. The removal of § 741.7 would eliminate this redundancy and the possibility of additional inconsistencies being created in the regulations.

NCUA emphasizes the technical, non-substantive nature of the proposed regulatory change. The proposed rule would not amend the existing process for an FCU seeking to maintain share insurance following its conversion to a state charter. Such process will continue to be governed by chapter 4 of the Manual. ( printed page 66536)

III. Regulatory Procedures

A. Providing Accountability Through Transparency Act of 2023

The Providing Accountability Through Transparency Act of 2023 (5 U.S.C. 553(b)(4)) (Act) requires that a notice of proposed rulemaking include the internet address of a summary of not more than 100 words in length of a proposed rule, in plain language, that shall be posted on the internet website under section 206(d) of the E-Government Act of 2002 (44 U.S.C. 3501 note) (commonly known as regulations.gov).

In summary, the Board solicits public comment on a proposal to remove a regulatory provision regarding the process for maintaining federal share insurance following the conversion of an FCU to a state charter. The provision is unnecessarily duplicative of a similar provision contained in the Manual, and is outdated, having been superseded by amendments to the Manual.

The proposal and the required summary can be found at https://www.regulations.gov.

B. Executive Orders 12866, 13563, and 14192

Pursuant to Executive Order 12866 (“Regulatory Planning and Review”), a determination must be made whether a regulatory action is significant and therefore subject to review by the Office of Information and Regulatory Affairs (OIRA), within the Office of Management and Budget (OMB) in accordance with the requirements of the Executive Order.^[10] Executive Order 13563 (“Improving Regulation and Regulatory Review”) supplements and reaffirms the principles, structures, and definitions governing contemporary regulatory review established in Executive Order 12866.^[11] This proposed rule was drafted and reviewed in accordance with Executive Order 12866 and Executive Order 13563. OIRA has determined that this proposed rule is not a “significant regulatory action” as defined by section 3(f) of Executive Order 12866.

Executive Order 14192 (“Unleashing Prosperity Through Deregulation”) requires that any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least 10 prior regulations.^[12] This proposed rule is not an Executive Order 14192 regulatory action because this rule is not significant under Executive Order 12866. This proposed rule is expected to be an Executive Order 14912 deregulatory action.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act ^[13] generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. If the agency makes such a certification, it shall publish the certification at the time of publication of either the proposed rule or the final rule, along with a statement providing the factual basis for such certification.^[14] For purposes of this analysis, NCUA considers small credit unions to be those having under $100 million in assets.^[15] The Board fully considered the potential economic impacts of the regulatory amendments on small credit unions.

The proposed rule is exclusively concerned with the removal of the obsolete § 741.7, which has been superseded by amendments made to the Manual. The proposal would not make any substantive changes to existing regulatory requirements. To the extent the proposed rule has any economic effect, it would be to relieve credit unions of the costs borne in attempting to reconcile apparently contradictory regulatory provisions. Any such costs are likely minimal. Accordingly, NCUA certifies the proposed rule would not have a significant economic impact on a substantial number of small credit unions.

D. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA) generally provides that an agency may not conduct or sponsor, and not withstanding any other provision of law, a person is not required to respond to, a collection of information, unless it displays a currently valid Office of Management and Budget control number. The PRA applies to rulemakings in which an agency creates a new or amends existing information collection requirements. For purposes of the PRA, an information-collection requirement may take the form of a reporting, recordkeeping, or a third-party disclosure requirement. NCUA has determined that the changes in the proposed rule do not create a new information collection or revise an existing information collection as defined by the PRA.

E. Executive Order 13132 on Federalism

Executive Order 13132 encourages certain agencies to consider the impact of their actions on state and local interests.^[16] NCUA, an agency as defined in 44 U.S.C. 3502(5), complies with the executive order to adhere to fundamental federalism principles. While the scope of the proposal involves FCUs converting to a state charter, the proposed rule would not alter existing requirements governing such conversions. As noted, the proposed rule is exclusively concerned with the removal of an obsolete regulatory provision. Therefore, to the extent the proposed would have any impact on credit unions, it would be to provide greater clarity regarding the applicable requirements governing conversion to a state charter. The proposed rule would not have a substantial direct effect on the states, the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA welcomes comments on ways to eliminate, or at least minimize, any potential impact in this area.

F. Assessment of Federal Regulations and Policies on Families

NCUA has determined that this proposed rule would not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999.^[17] As noted, the proposed rule removes an outdated regulatory provision that has been superseded by subsequent amendments to other codified provisions. The potential positive effect on family well-being, including financial well-being is, at most, indirect.

For the reasons stated in the preamble, the Board proposes to amend 12 CFR part 741, as follows:

1. The authority citation for part 741 continues to read as follows:

Authority: 12 U.S.C. 1757, 1766(a), 1781-1790, 1790d, 3331 et seq;31 U.S.C. 3717.

2. Remove and reserve § 741.7.

[FR Doc. 2026-21508 Filed 10-20-26; 8:45 am]

BILLING CODE 7535-01-P