Conversion to State-Chartered Credit Union

Issuing agencies

Abstract

The NCUA Board (Board) solicits public comment on a proposal to remove a regulatory provision regarding the process for maintaining federal share insurance following the conversion of a federal credit union (FCU) to a state charter. The provision is unnecessarily duplicative of a similar provision contained in NCUA's Chartering and Field of Membership Manual (Manual), and is outdated, having been superseded by amendments to the Manual.

Full Text

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<title>Federal Register, Volume 91 Issue 202 (Wednesday, October 21, 2026)</title>
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[Federal Register Volume 91, Number 202 (Wednesday, October 21, 2026)]
[Proposed Rules]
[Pages 66534-66537]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-21508]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 741

RIN 3133-AG26


Conversion to State-Chartered Credit Union

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: The NCUA Board (Board) solicits public comment on a proposal 
to remove a regulatory provision regarding the process for maintaining 
federal share insurance following the conversion of a federal credit 
union (FCU) to a state charter. The provision is unnecessarily 
duplicative of a similar provision contained in NCUA's Chartering and 
Field of Membership Manual (Manual), and is outdated, having been 
superseded by amendments to the Manual.

DATES: Comments must be received by December 21, 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-

[[Page 66535]]

2026-1887. 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 
NCUA for alternative access by calling (703) 518-6540 or emailing 
<a href="/cdn-cgi/l/email-protection#064941454b676f6a466865736728616970"><span class="__cf_email__" data-cfemail="eea1a9ada38f8782ae808d9b8fc0898198">[email&#160;protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Ariel Pereira, Senior Attorney, Office 
of General Counsel, at (703) 518-6540, or at 1775 Duke Street, 
Alexandria, VA 22314.

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 
Sec.  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\
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    \1\ 51 FR 37549 (Oct. 23, 1986).
    \2\ The regulatory provision was originally designated as Sec.  
741.8 but was subsequently redesignated several times, most recently 
through a 1995 final rule, where it was designated as 12 CFR 741.7. 
60 FR 58502 (Nov. 28, 1995).
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    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 Sec.  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\
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    \3\ 73 FR 73392 (Dec. 2, 2008).
    \4\ Id.
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    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).
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    \5\ 81 FR 88412 (Dec. 7, 2016). The office was subsequently 
renamed the Office of Consumer Financial Protection.
    \6\ 82 FR 60290 (Dec. 20, 2017).
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    NCUA inadvertently failed to make conforming changes to Sec.  741.7 
as part of the 2016 and 2017 final rules. As a result, Sec.  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 
Sec.  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\
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    \7\ 12 U.S.C. 1751 et seq.
    \8\ 12 U.S.C. 1766(a).
    \9\ 12 U.S.C. 1789.
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II. Proposed Rule

    The proposed removal of Sec.  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 Sec.  741.7, 
but must instead submit its request to CURE. The removal of Sec.  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 Sec.  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 Sec.  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 Sec.  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.

[[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 <a href="http://regulations.gov">regulations.gov</a>).
    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 <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''), 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.
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    \10\ 58 FR 51735 (Oct. 4, 1993).
    \11\ 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.\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.
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    \12\ 90 FR 9065 (Feb. 6, 2025).
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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.
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    \13\ 5 U.S.C. 601 et seq.
    \14\ 5 U.S.C. 605(b).
    \15\ 80 FR 57512 (Sept. 24, 2015).
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    The proposed rule is exclusively concerned with the removal of the 
obsolete Sec.  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.
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    \16\ 64 FR 43255 (Aug. 10, 1999).
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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.
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    \17\ Public Law 105-277, 112 Stat. 2681 (1998).
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List of Subjects in 12 CFR Part 741

    Bank deposit insurance, Credit, Credit unions, Reporting and 
recordkeeping requirements.

    By the National Credit Union Administration Board, this 19th day 
of October, 2026.
Melane Conyers-Ausbrooks,
Secretary of the Board.
    For the reasons stated in the preamble, the Board proposes to amend 
12 CFR part 741, as follows:

[[Page 66537]]

PART 741--REQUIREMENTS FOR INSURANCE

0
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.


Sec.  741.7  [Removed and reserved]

0
2. Remove and reserve Sec.  741.7.

[FR Doc. 2026-21508 Filed 10-20-26; 8:45 am]
BILLING CODE 7535-01-P


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