1. Short title
This Act may be cited as the “Regulatory Relief for Credit Unions Act of 2013”.
Regulatory Relief for Credit Unions Act of 2013
A BILL
To improve the regulation of credit unions and depository institutions and to provide regulatory relief, and for other purposes.
2. Enhancing the authority of the National Credit Union Administration
Review of Bureau regulations—
In general— Section 120 of the Federal Credit Union Act (12 U.S.C. 1766) is amended by adding at the end the following:
“(k) Review of Bureau regulations—If the Board determines that a regulation issued by the Bureau would create an undue hardship when applied to credit unions, the Board may—
“(1) delay the application of the regulation to credit unions until such time as the Board determines such application would not create an undue hardship; and
“(2) modify such regulation, as applied to credit unions, so long as the Board determines that such modification still meets the Bureau’s objective in issuing the regulation.”
Bureau defined— Section 101 of the Federal Credit Union Act (12 U.S.C. 1752) is amended by adding at the end the following new paragraph:
“(10) The term Bureau means the Bureau of Consumer Financial Protection.”
Use of State regulations by Federal credit unions— Section 120 of the Federal Credit Union Act (12 U.S.C. 1766), as amended by subsection (a), is further amended by adding at the end the following:
“(l) Use of State regulations
“(1) Application—With respect to a State law applicable to a State credit union, a Federal credit union may apply to the Board for permission to comply with such regulation in lieu of the applicable Federal regulation (if any), for purposes of the credit union’s branches located in such State. Such permission shall only apply to the State for which the permission is given, and the Federal credit union may not comply with such regulation in any other State in lieu of the applicable Federal regulation.
“(2) Determination—The Board may approve an application received under paragraph (1) if the Board determines that having the Federal credit union’s branches in such State comply with the particular State law would—
“(A) improve the credit unions’s ability to serve members and lend in that particular State; and
“(B) not endanger the safety and soundness of the credit union.
“(3) Exception—Notwithstanding paragraph (1), a Federal credit union may not apply to the Board for permission to comply with any provision of a State law if such law would conflict with the requirements of section 107A.”
3. Improved capital standards and leverage ratios for credit unions
by redesignating subsection (o) as subsection (p);
by inserting after subsection (n) the following:
“(o) Revised capital standards
“(1) Two-tier system—The Board shall implement a two-tier system of net worth ratios for credit unions, consisting of a risk-based net worth ratio and a net worth capital ratio. Net worth categories in this section shall take into account the simplicity or complexity of credit unions in terms of risk profile.
“(2) Use of leverage ratios—The Board shall establish standards under this section with respect to leverage ratios of a credit union to the same extent as are provided for net worth ratios of a credit union. Such standards shall take into account the unique nature of credit unions and, to the extent practicable, be comparable to, but not necessarily identical to, the leverage ratio standards under section 38 of the Federal Deposit Insurance Act.”
in subsection (p), as so redesignated, by amending paragraph (2) to read as follows:
“(2) Net worth—The term net worth—
“(A) with respect to any insured credit union, means the retained earnings balance of the credit union, as determined under generally accepted accounting principles, together with—
“(i) any amounts that were previously retained earnings of any other credit union with which the credit union has combined; and
“(ii) components of equity under generally accepted accounting principles not included in retained earnings, as determined by the Board;
“(B) with respect to any insured credit union, includes, at the Board’s discretion and subject to rules and regulations established by the Board, assistance provided under section 208 of this title to facilitate a least-cost resolution consistent with the best interests of the credit union system; and
“(C) with respect to a low income credit union, includes secondary capital accounts, subject to limitations set by the Board to address the safe and sound use of secondary capital to carry out the purpose of this section, that are—
“(i) uninsured; and
“(ii) subordinate to all other claims against the credit union, including the claims of creditors, shareholders, and the Fund.”
Amendments to net worth categories—
Section 216(c)(1) of the Federal Credit Union Act is amended as follows:
Well capitalized— In subparagraph (A), by striking clauses (i) and (ii) and inserting the following:
“(i) it has a risk-based net worth ratio of not less than 10 percent; or
“(ii) is considered to be well capitalized by any other standard, as determined by the Board.”
Adequately capitalized— In subparagraph (B), by striking clauses (i) and (ii) and inserting the following:
“(i) it has a risk-based net worth ratio of not less than 8 percent; or
“(ii) is considered to be adequately capitalized by any other standard, as determined by the Board.”
Undercapitalized— In subparagraph (C), by striking clauses (i) and (ii) and inserting the following:
“(i) it has a risk-based net worth ratio of not less than 6 percent; or
“(ii) is considered to be undercapitalized by any other standard, as determined by the Board.”
Significantly undercapitalized— Subparagraph (D) is amended to read as follows:
“(D) Significantly undercapitalized—An insured credit union is “significantly undercapitalized” if—
“(i) it has a net worth ratio of less than 3.25 percent;
“(ii) it has a net worth ratio of less than 4.25 percent, and either—
“(I) fails to submit an acceptable net worth restoration plan within the time allowed under subsection (f); or
“(II) materially fails to implement a net worth restoration plan approved by the Board; or
“(iii) it has a risk-based net worth ratio of less than 6 percent.”
Relevant Capital Measures— Section 216(c)(2) of the Federal Credit Union Act is amended—
by striking “, for purposes of section 38(c) of the Federal Deposit Insurance Act,”;
by striking “(as those terms are used in section 38),”; and
by inserting “or relevant capital measures as defined by the Board” after “leverage limit” each place such term appears.
Adjustment of levels— Section 216(c)(2)(A) of the Federal Credit Union Act is amended—
by striking “Federal banking agencies increase or decrease” and inserting “Federal Deposit Insurance Corporation increases or decreases”; and
by striking “level for” and inserting “levels for”.
Adjusting net worth levels— Section 216(c)(2)(A) of the Federal Credit Union Act is amended by striking “not more than the difference between the required minimum level most recently established by the Federal banking agencies and 4 percent of total assets (with respect to institutions regulated by those agencies)” and inserting “the increase or decrease made by the Federal Deposit Insurance Corporation”.
Consultation With Federal Deposit Insurance Corporation— Section 216(c)(2)(B)(i) of the Federal Credit Union Act is amended by striking “Federal banking agencies” and inserting “Federal Deposit Insurance Corporation”.
Amendments relating to risk-Based net worth requirements— Section 216(d) of the Federal Credit Union Act is amended—
in paragraph (1)—
by striking “that are complex, as defined by the Board”; and
by inserting “, as defined by the Board” before the period at the end;
by amending paragraph (2) to read as follows:
“(2) Standard—The Board shall design the risk-based net worth requirement to take account of any material risks, as defined by the Board, applicable to insured credit unions that are taken account of by comparable standards applicable to institutions insured by the Federal Deposit Insurance Corporation.”
in the heading for such subsection, by striking “for Complex Credit Unions”.
Treatment based on other criteria— Section 216(h)(1) of the Federal Credit Union Act is amended to read as follows:
“(1) the Board may not reclassify an insured credit union into a lower net worth category due solely to interest rate risk, or treat an insured credit union as if it were in a lower net worth category, for reasons not pertaining to the safety and soundness of that credit union; and”
Definitions relating to net worth—
Net worth ratio— Section 216(p) of the Federal Credit Union Act, as redesignated by subsection (a), is amended in paragraph (3)—
by inserting “minus its deposit in the Fund,” after “net worth of credit union”; and
by inserting “minus its deposit in the Fund” after “total assets of the credit union”.
Risk-based net worth ratio— Section 216(p) of the Federal Credit Union Act, as redesignated by subsection (a), is amended by inserting after paragraph (4) the following new paragraph:
“(5) Risk-based net worth ratio—The term risk-based net worth ratio means, with respect to any credit union—
“(A) the ratio of the net worth of the credit union, plus any loan loss reserves (subject to limitations established by the Board), and minus the credit union’s deposit in the Fund, to
“(B) the risk assets of the credit union, as defined by the Board.”
Amendments relating to net worth restoration plans—
Temporary waiver of net worth restoration plan requirement in response to disasters— Subsection 216(f)(1) of the Federal Credit Union Act is amended by striking “Each insured credit union” and inserting “Except as determined by the Board in the case of a credit union that becomes or remains no less than undercapitalized due to the impact of a major natural or man-made disaster, each insured credit union”.
Net worth restoration requirement for credit unions that are not well capitalized— Section 216(e) of the Federal Credit Union Act is amended to read as follows:
“(e) Net worth restoration plan requirement applicable to credit unions that are not well capitalized—The Board may require an insured credit union that is not well capitalized to submit a net worth restoration plan, as required under subsection (f), if—
“(1) material safety and soundness concerns caused the credit union to become less than well capitalized; and
“(2) the safety and soundness concerns remain unresolved.”
Board action may include order to credit union— Section 216(i)(1)(B) of the Federal Credit Union Act is amended—
by inserting “order the credit union to” before “take such other action”; and
by inserting “, in the discretion of the Board,” after “as the Board”.
Substitution of 90 calendar days— Section 216(i)(3)(A) of the Federal Credit Union Act is amended—
by striking “calendar quarter” and inserting “90 calendar days”; and
by inserting “first” after “the date on which the credit union”.
Clarification of coordination requirement— Section 216(l)(3)(A)(ii) of the Federal Credit Union Act is amended by inserting before the semicolon the following: “, if the Board determines that such action by the official will carry out the purpose of this section”.
Study on reform of prompt corrective action—
Study— The National Credit Union Administration Board shall carry out a study of problems associated with the current prompt corrective action regime. In carrying out such study, the Board shall consult with qualified industry and National Credit Union Administration representatives.
Report— Not later than the end of the 1-year period beginning on the date of the enactment of this Act, the Board shall issue a report to the Congress containing all findings and determinations made in carrying out the study required under paragraph (1), including any specific legislative recommendations recommended by the Board.
4. Review of credit union regulations
Cost-Benefit Analysis—
National Credit Union Administration— Section 120 of the Federal Credit Union Act (12 U.S.C. 1766), as amended by section 2, is further amended by adding at the end the following:
“(m) Cost-Benefit Analyses
“(1) Pre-issuance—Each regulation issued by the Board shall include a thorough cost-benefit analysis that details the estimated cost to a credit union of complying with such regulation compared to the measurable benefit the regulation may have. Any information provided to the Board from credit unions for purposes of the Board’s analysis shall be on a voluntary basis.
“(2) 3-year review—At the end of the 3-year period following the date on which the Board issues a final regulation, the Board shall—
“(A) carry out a review of the actual cost to a credit union of complying with the regulation; and
“(B) issue a report to the Congress containing the results of such review.
“(3) Rule revision—If, in carrying out a review under paragraph (2), the Board determines that the actual cost of complying with a regulation is more than 20 percent higher than the Board initially estimated, the Board shall revise the rule.”
Bureau of Consumer Financial Protection— Section 1022 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5512) is amended by adding at the end the following:
“(e) Regulations applicable to credit unions
“(1) Cost-benefit analyses
“(A) Pre-issuance—Each regulation issued by the Bureau shall, to the extent the rule applies to a credit union, include a thorough cost-benefit analysis that details the estimated cost to a credit union of complying with such regulation compared to the measurable benefit the regulation may have. Any information provided to the Bureau from credit unions for purposes of its analysis shall be on a voluntary basis.
“(B) 3-year review—At the end of the 3-year period following the date on which the Bureau issues a final regulation that applies to a credit union, the Bureau shall—
“(i) carry out a review of the actual cost to a credit union of complying with the regulation; and
“(ii) issue a report to the Congress containing the results of such review.
“(C) Rule revision—If, in carrying out a review under subparagraph (B), the Bureau determines that the actual cost of complying with a regulation is more than 20 percent higher than the Bureau initially estimated, the Bureau shall revise the rule.
“(2) Additional considerations—In proposing any regulation that applies to credit unions, the Bureau shall—
“(A) consider the impact of such regulation on—
“(i) all federally insured credit unions; and
“(ii) consumers in rural areas; and
“(B) consult with the National Credit Union Administration and other appropriate Federal agencies, both prior to proposing such regulation and during the comment process for such regulation, regarding consistency with prudential, market, and systemic objectives of such Administration and other agencies.
“(3) Objections
“(A) In general—If, during the consultation process described in paragraph (2)(B), the National Credit Union Administration or another agency provides the Bureau with a written objection to the proposed regulation, or a portion thereof, the Bureau shall include with the final regulation a description of the objection and the basis for the Bureau’s decision, if any, regarding such objection.
“(B) Construction—Nothing in this subsection shall be construed as altering or limiting the procedures under section 1023 that may apply to any regulation prescribed by the Bureau.”
5. Modernizing the Central Liquidity Facility
Study— The Comptroller General of the United States shall, in consultation with the National Credit Union Administration, carry out a study of the Central Liquidity Facility that examines the need for any improvements or modernizing needed of such Facility.
Report— Not later than the end of the 180-day period beginning on the date of the enactment of this Act, the Comptroller General shall issue a report to the Congress containing all of the findings and determinations made in carrying out the study required under subsection (a), including any legislative recommendations the Comptroller General may have for modernizing the Central Liquidity Facility.
6. Modernizing credit union investment options
Investments in securities by Federal credit unions— Section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is amended—
by striking “A Federal credit union” and inserting the following:
“(a) In general—A Federal credit union”
by adding at the end the following new subsection:
“(b) Investment for the credit union’s own account
“(1) In general—A Federal credit union may purchase and hold for its own account such investment securities of investment grade as the Board may authorize by regulation, subject to such limitations and restrictions as the Board may prescribe.
“(2) Percentage limitations
“(A) Single person—The total amount of investment securities of any single person held by a Federal credit union for the credit union’s own account may not exceed 10 percent of the net worth of the credit union.
“(B) Aggregate investments—The aggregate amount of investment securities held by a Federal credit union for the credit union’s own account may not exceed 10 percent of the total assets of the credit union.
“(3) Definitions—For purposes of this subsection:
“(A) Investment grade—The term investment grade means, with respect to an investment security purchased by a credit union for its own account, an investment security that at the time of such purchase meets the credit criteria established by the Board and reflects the applicable market standards.
“(B) Investment security
“(i) In general—The term investment security means marketable obligations evidencing the indebtedness of any person in the form of bonds, notes, or debentures and other instruments commonly referred to as investment securities.
“(ii) Further definition by board—The Board may further define the term investment security.
“(4) Clarification of prohibition on stock ownership—No provision of this subsection shall be construed as authorizing a Federal credit union to purchase shares of stock of any corporation for the credit union’s own account, except as otherwise permitted by law.”
Mortgage servicing rights— Section 107(a) of the Federal Credit Union Act, as amended by this section, is further amended by adding at the end the following:
“(18) Federal credit unions may purchase mortgage servicing rights as an investment, including purchases of mortgage servicing rights from other credit unions subject to limits established by the Board.”
7. National Credit Union Share Insurance Fund parity with Federal Deposit Insurance Corporation
Section 207(k)(1) of the Federal Credit Union Act (12 U.S.C. 1787(k)(1)) is amended—
in subparagraph (A)—
by inserting after “deposits in the name of the member” the following: “or held in the member’s account on behalf of another person”; and
by striking “the member” and inserting “the person”; and
in subparagraph (C), by striking “or in joint tenancy.” and inserting the following: “in joint tenancy, or where a member holds funds for the use of a nonmember. Coverage for an account established by a member shall be consistent with that of the Federal Deposit Insurance Corporation, regardless of the membership status of the owner of the funds that are deposited in an account established by a member.”.
8. Enhancing the authority of the appropriate Federal banking agencies
In general— The Consumer Financial Protection Act of 2010 (12 U.S.C. 5481 et seq.) is amended by inserting after section 1023 the following:
“1023A. Review of Bureau regulations on depository institutions
“If the appropriate Federal banking agency determines that a regulation issued by the Bureau would create an undue hardship when applied to a class of depository institutions regulated by such agency, the agency may—
“(1) delay the application of the regulation to the class of depository institutions until such time as the agency determines such application would not create an undue hardship; and
“(2) modify such regulation, as applied to the class of depository institutions, so long as the agency determines that such modification still meets the Bureau’s objective in issuing the regulation.”
Technical amendment— The table of contents for the Dodd-Frank Wall Street Reform and Consumer Protection Act is amended by inserting after the item relating to section 1023 the following new item:
9. Review of depository institution regulations
Cost-Benefit Analysis—
Pre-issuance— Each regulation issued by an appropriate Federal banking agency shall include a thorough cost-benefit analysis that details the estimated cost to a depository institution of complying with such regulation compared to the measurable benefit the regulation may have. Any information provided to an agency from a depository institution for purposes of the agency’s analysis shall be on a voluntary basis.
3-year review— At the end of the 3-year period following the date on which the agency issues a final regulation, the agency shall—
carry out a review of the actual cost to a depository institution of complying with the regulation; and
issue a report to the Congress containing the results of such review.
Rule revision— If, in carrying out a review under paragraph (2), the agency determines that the actual cost of complying with a regulation is more than 20 percent higher than the agency initially estimated, the agency shall revise the rule.
Definitions— For purposes of this subsection, the terms appropriate Federal banking agency and depository institution have the meaning given such terms, respectively, under section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
Bureau of Consumer Financial Protection— Section 1022 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5512), as amended by section 4, is further amended by adding at the end the following:
“(f) Regulations applicable to depository institutions
“(1) Cost-benefit analyses
“(A) Pre-issuance—Each regulation issued by the Bureau shall, to the extent the rule applies to a depository institution, include a thorough cost-benefit analysis that details the estimated cost to a depository institution of complying with such regulation compared to the measurable benefit the regulation may have. Any information provided to the Bureau from depository institutions for purposes of its analysis shall be on a voluntary basis.
“(B) 3-year review—At the end of the 3-year period following the date on which the Bureau issues a final regulation that applies to a credit union, the Bureau shall—
“(i) carry out a review of the actual cost to a depository institution of complying with the regulation; and
“(ii) issue a report to the Congress containing the results of such review.
“(C) Rule revision—If, in carrying out a review under subparagraph (B), the Bureau determines that the actual cost of complying with a regulation is more than 20 percent higher than the Bureau initially estimated, the Bureau shall revise the rule.
“(2) Additional considerations—In proposing any regulation that applies to depository institutions, the Bureau shall—
“(A) consider the impact of such regulation on—
“(i) community-based depository institutions; and
“(ii) consumers in rural areas; and
“(B) consult with the appropriate Federal banking agencies, both prior to proposing such regulation and during the comment process for such regulation, regarding consistency with prudential, market, and systemic objectives of such agencies.
“(3) Objections
“(A) In general—If, during the consultation process described in paragraph (2)(B), an agency provides the Bureau with a written objection to the proposed regulation, or a portion thereof, the Bureau shall include with the final regulation a description of the objection and the basis for the Bureau’s decision, if any, regarding such objection.
“(B) Construction—Nothing in this subsection shall be construed as altering or limiting the procedures under section 1023 that may apply to any regulation prescribed by the Bureau.”