Proposed Rule2025-23857
Suretyship and Guaranty; Segregated Deposit and Collateral
Primary source
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Published
December 29, 2025
Issuing agencies
National Credit Union Administration
Abstract
The NCUA Board (Board) seeks comment on a proposed rule to remove the segregated deposit and collateral requirements when a federally insured credit union (FICU) acts as a surety and guarantor. Removing this regulation will provide FICUs with greater flexibility to design products that meet member needs. FICUs would remain subject to the other requirements regarding surety and guaranty agreements.
Full Text
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<title>Federal Register, Volume 90 Issue 245 (Monday, December 29, 2025)</title>
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[Federal Register Volume 90, Number 245 (Monday, December 29, 2025)]
[Proposed Rules]
[Pages 60586-60588]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23857]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AF80
Suretyship and Guaranty; Segregated Deposit and Collateral
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
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SUMMARY: The NCUA Board (Board) seeks comment on a proposed rule to
remove the segregated deposit and collateral requirements when a
federally insured credit union (FICU) acts as a surety and guarantor.
Removing this regulation will provide FICUs with greater flexibility to
design products that meet member needs. FICUs would remain subject to
the other requirements regarding surety and guaranty agreements.
DATES: Comments must be received by February 27, 2026.
ADDRESSES: Comments may be submitted in one of the following ways.
(Please send comments by one method only):
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
The docket number for this proposed rule is NCUA-2025-1434. Follow the
``Submit a comment'' instructions. If you are reading this document on
<a href="http://federalregister.gov">federalregister.gov</a>, you may use the green ``SUBMIT A PUBLIC COMMENT''
button beneath this rulemaking's title to submit a comment to the
<a href="http://regulations.gov">regulations.gov</a> docket. A plain language summary of the proposed rule
is also available on the docket website.
<bullet> Mail: Address to Melane Conyers-Ausbrooks, Secretary of
the Board, National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia 22314-3428.
<bullet> Hand Delivery/Courier: Same as mailing address.
Mailed and hand-delivered comments must be received by the close of
the comment period.
Public inspection: Please follow the search instructions on <a href="https://www.regulations.gov">https://www.regulations.gov</a> 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
<a href="/cdn-cgi/l/email-protection#0e41494d436f67624e606d7b6f20696178"><span class="__cf_email__" data-cfemail="ace3ebefe1cdc5c0ecc2cfd9cd82cbc3da">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Keisha Brooks, Attorney-Advisor,
Office of General Counsel, at (703) 518-6540 or at 1775 Duke Street,
Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
Federal Credit Unions (FCUs) may only engage in activities that are
expressly authorized either by statute or within the FCU's incidental
powers. The Federal Credit Union Act (FCU Act) explicitly grants FCUs
the power to, among other activities, make loans to members and to
provide letters of credit on behalf of members.\1\ The accompanying
incidental powers provision states that each FCU may ``exercise such
incidental powers as shall be necessary or requisite to enable it to
carry on effectively the business for which it is incorporated.'' \2\
The FCU Act defines the business for which each FCU is incorporated:
``promoting thrift among its members and creating a source of credit
for provident or productive purposes.'' \3\ Section 701.20, established
in 2004, recognizes the ability of FCUs to enter into suretyship and
guaranty agreements for their members as an incidental power, providing
additional flexibility to meet member needs.\4\ For example, the
regulation allows FCUs to become one party in a three-way lending
relationship, where the FCU agrees to take responsibility for repayment
if the member is unable to meet the lending obligation.
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\1\ 12 U.S.C. 1757(5), 1757a.
\2\ 12 U.S.C. 1757(17).
\3\ 12 U.S.C. 1752(1).
\4\ 69 FR 8547, Feb. 25, 2004.
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Section 701.20 defines these arrangements and, to promote safety
and soundness, requires that the FCU's obligation be for a fixed amount
and duration, that the FCU's performance of the agreement creates an
authorized loan that complies with the applicable lending regulations,
and that it obtains a segregated deposit from the member sufficient to
cover the potential liability.
As provided in Sec. 741.221 of the NCUA regulations, these
requirements also apply to federally insured state credit unions
(FISCUs) that are authorized under state law to enter into suretyship
and guaranty agreements.\5\ The rule was amended in 2019 as part of a
regulatory reform initiative to reduce burden and improve clarity by
updating internal cross-references.\6\
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\5\ 12 CFR 741.221.
\6\ 84 FR 10975 (Mar. 25, 2019).
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B. Legal Authority
The Board has the legal authority to issue this proposed rule
pursuant to its plenary rulemaking authority under the FCU Act and its
specific rulemaking authority under the various acts the Board
administers.\7\ Under the FCU Act, the NCUA is the chartering and
supervisory authority for FCUs and the federal supervisory authority
for FICUs.\8\ The FCU Act grants the NCUA a broad mandate to issue
regulations governing both FCUs and all FICUs. Section 120 of the FCU
Act is a general grant of regulatory authority and authorizes the Board
to prescribe rules and regulations for the administration of the FCU
Act.\9\ Section 207 of the FCU Act is a specific grant of authority
over share insurance coverage, conservatorships, and liquidations.\10\
Section 209 of the FCU Act is a plenary grant of regulatory authority
to the Board to issue rules and regulations necessary or appropriate to
carry out its role as share insurer for all FICUs.\11\ Accordingly, the
FCU Act grants the Board broad rulemaking authority to ensure that the
credit union industry and the National Credit Union Share Insurance
Fund remain safe and sound.
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\7\ 12 U.S.C. 1766, 1789.
\8\ 12 U.S.C. 1752-1775.
\9\ 12 U.S.C. 1766(a).
\10\ 12 U.S.C. 1787(b)(1).
\11\ 12 U.S.C. 1789(a)(11).
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II. Proposed Rule
As part of its deregulatory initiative, the Board proposes to
remove paragraphs (c)(3) and (d) of Sec. 701.20, which impose
segregated deposit and collateral requirements when FICUs act as a
surety and guarantor. Under these provisions, depending on the nature
of the collateral, an FCU must have a perfected security interest in
collateral equal to 100 or 110 percent of the obligation. The 100
percent collateral category includes cash; obligations of the United
States or its agencies; obligations fully guaranteed by the United
States or its agencies as to principal and interest; and notes, drafts,
bills of exchange, and bankers' acceptances that are eligible for
rediscount or purchase by a Federal Reserve Bank.\12\ The 110 percent
collateral category includes real estate and marketable securities.\13\
Section 741.221 of the NCUA regulations applies these requirements to
FISCUs
[[Page 60587]]
that are authorized under state law to act as a surety or guarantor.
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\12\ 12 CFR 701.20(d)(2).
\13\ 12 CFR 701.20(d)(3).
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The Board is now of the view that removing these segregated deposit
and collateral requirements will provide FICUs the flexibility to
design products that meet member needs. These proposed changes are
intended to simplify the regulatory framework and reduce unnecessary
compliance burdens.
It is not always necessary to have a segregated deposit that fully
covers the liability. For example, current regulations require a FICU
acting as a surety or guarantor to create an authorized loan that
complies with the applicable NCUA lending regulations.\14\ The NCUA's
commercial lending regulations adopted in 2016 include collateral
requirements that reflect a broad principles-based regulatory approach
for FICUs engaged in member business lending activities.\15\ These
principles are predicated on the Board's expectation that credit unions
will maintain prudent risk management practices and sufficient capital
to mitigate the risks associated with their commercial lending
activities.\16\ Maintaining this additional requirement for a
segregated deposit associated with suretyship or guaranty agreements
adds complexity to these transactions. FICUs are best positioned to
determine the amount and types of collateral they are willing to accept
to cover the risk.
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\14\ See 12 CFR 701.20(c)(2), 741.203, 741.221.
\15\ See Final Rule, Member Business Loans; Commercial Lending,
81 FR 13530, 13533 (Mar. 14, 2016); 12 CFR part 723. For FISCUs, a
state regulator may adopt state-specific rules if the state rule
covers at least all provisions in part 723 and is no less
restrictive as determined by the NCUA. FISCUs in states with an
NCUA-approved state rule may comply with the state rule and need not
comply with part 723. See 12 CFR 723.10, 741.203.
\16\ See Final Rule, Member Business Loans; Commercial Lending,
81 FR 13530, 13533 (Mar. 14, 2016).
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The Board invites comment on all aspects of this proposed rule.
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 <a href="http://regulations.gov">regulations.gov</a>). The
Act, under its terms, applies to notices of proposed rulemaking and
does not expressly include other types of documents that the Board
publishes voluntarily for public comment, such as notices and interim-
final rules that request comment despite invoking ``good cause'' to
forgo such notice and public procedure. The Board, however, has elected
to address the Act's requirement in these types of documents in the
interests of administrative consistency and transparency. In summary,
the Board seeks comment on a proposed rule to remove the segregated
deposit and collateral requirements when a FICU acts as a surety and
guarantor. Removing this regulation will give FICUs the flexibility to
design products that meet member needs. FICUs would remain subject to
the other requirements regarding surety and guaranty agreements.
The proposal and the required summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
B. Executive Orders 12866, 13563, and 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), as amended by Executive Order 14215, a determination must be
made whether a regulatory action is significant and therefore subject
to review by the Office of Management and Budget (OMB) in accordance
with the requirements of the Executive Order.\17\ 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.\18\ This proposed rule was drafted and reviewed in accordance
with Executive Order 12866 and Executive Order 13563. This proposed
rule will reduce a burden by removing the segregated deposit and
collateral requirements for FICU suretyship and guaranty arrangements
and is consistent with Executive Order 13563. OMB has determined that
this proposed rule is not a ``significant regulatory action'' as
defined in section 3(f) of Executive Order 12866.
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\17\ 58 FR 51735 (Oct. 4, 1993).
\18\ 76 FR 3821 (Jan. 21, 2011).
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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.\19\ This proposed rule is expected to be a deregulatory
action for purposes of Executive Order 14192.
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\19\ 90 FR 9065 (Feb. 6, 2025).
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C. The Regulatory Flexibility Act
The Regulatory Flexibility Act \20\ 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.\21\ For purposes of this
analysis, the NCUA considers small credit unions to be those having
under $100 million in assets.\22\ The Board fully considered the
potential economic impacts of the regulatory amendments on small credit
unions.
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\20\ 5 U.S.C. 601 et seq.
\21\ 5 U.S.C. 605(b).
\22\ 80 FR 57512 (Sept. 24, 2015).
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To the extent that the proposed rule would have any economic
impacts, they will be deregulatory in nature. The current rule
authorizes FCUs to enter into suretyship and guaranty agreements. The
proposed rule would remove the segregated deposit and collateral
requirements for FCUs to enter into such agreements. To the extent
FISCUs are authorized to enter into surety and guaranty agreements
under state law, FISCUs would similarly benefit from the removal. It is
unlikely that small credit unions will participate in either of these
activities. While these requirements might impose some economic costs
or create an economic benefit for FICUs, they are unlikely to be
significant.
Accordingly, the 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. The NCUA has determined that the
changes
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addressed in this notice 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. The NCUA, an
agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the
executive order to adhere to fundamental federalism principles. This
proposed rule would apply to all FICUs, including FISCUs.
The NCUA expects that any effect on states or on the distribution
of power and responsibilities among the various levels of government
will be minor. These proposed changes are not intended to affect the
division of responsibilities between the NCUA and state regulatory
authorities with oversight of FISCUs. The proposed rule would remove
the segregated deposit and collateral requirements imposed by Sec.
701.20 when FCUs or FISCUs act as a surety and guarantor. FISCUs would
remain subject to the other requirements, including compliance with
applicable NCUA and state lending regulations.
The proposed rulemaking may, therefore, have some 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. However, to the extent the rule has any
such effects, it will be to relieve FISCUs of a regulatory burden.
F. Assessment of Federal Regulations and Policies on Families
The 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. The proposed rule relates
to the collateral requirements for FICUs to enter into surety and
guaranty agreements, and any effect on family well-being is expected to
be indirect. The proposed regulatory changes are exclusively concerned
with removing the unnecessary segregated deposit and collateral
requirements specific to such agreements. Any potential positive effect
on family well-being, including financial well-being is, at most,
indirect.
List of Subjects in 12 CFR Part 701
Advertising, Aged, Civil rights, Credit, Credit unions, Fair
housing, Individuals with disabilities, Insurance, Marital status
discrimination, Mortgages, Religious discrimination, Reporting and
recordkeeping requirements, Sex discrimination, Signs and symbols,
Surety bonds.
By the National Credit Union Administration Board, this 19th day
of December, 2025.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons stated in the preamble, the NCUA Board proposes to
amend 12 CFR part 701, as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
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, 1785, 1786, 1787, 1788, 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.
Sec. 701.20 [Amended]
0
2. Amend Sec. 701.20 by:
0
a. Removing paragraphs (c)(3) and (d) and
0
b. Revising paragraph (c) to read as follows:
Sec. 701.20 Suretyship and guaranty.
* * * * *
(c) * * *
(1) The federal credit union limits its obligations under the
agreement to a fixed dollar amount and a specified duration and
(2) The federal credit union's performance under the agreement
creates an authorized loan that complies with the applicable lending
regulations, including the limitations on loans to one member or
associated members or officials for purposes of Sec. Sec.
701.21(c)(5), (d); 723.4(c).
[FR Doc. 2025-23857 Filed 12-23-25; 8:45 am]
BILLING CODE 7535-01-P
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