(Jan. 22, 2021) The new president’s administration was at work reworking the federal regulatory process on the same day that Joe Biden took the oath of office, issuing a “regulatory freeze” order and taking other action.
The regulatory moratorium requires that no new rules be proposed or issued by federal regulatory agencies until a Biden-appointed official has reviewed or approved the rule. The order also requires that all new rules or proposals sent to the Federal Register but not yet published be immediately withdrawn, and that agencies “consider” postponing for 60 days the effective dates of those rules, and also consider reissuing the rules for 30-day comment periods.
However, the impact of the freeze on NCUA actions is not clear. The Trump administration issued a similar freeze four years ago, and the agency asserted that, as an independent agency it did not have to comply. However, the agency agreed to go along with the moratorium (or, as NCUA put it in 2017, “adhere to its spirit”).
There could be much on the line for the agency if the freeze goes into effect for its recent actions, especially those on Jan. 14 when the NCUA Board issued:
- a final rule (effective Jan. 1, 2022) on corporate credit unions’ purchase of subordinated debt (approved 3-0 by the board);
- a proposal, with a 30-day comment period, on lending by credit union service organizations (CUSOs, issued on a 2-1 vote with Board Member Todd Harper dissenting);
- a proposal to add an “S” component (for market risk sensitivity) to the CAMEL rating system (approved 3-0);
- a proposal, with a 30-day comment period, to raise from $50 million to $500 million the asset threshold for defining a credit union as “complex” for purposes of being subject to any risk-based net worth requirement in agency regulations (approved 2-1, Harper dissenting);
- an advance notice of proposed rulemaking (ANPR), with a 60-day comment period, on two approaches to simplify risk-based capital requirements (approved, 2-1, again with Harper dissenting).
None of those actions have yet been published in the Federal Register, which serves as the federal government’s official public notice of its regulatory actions.
Such regulatory freezes do not generally apply to independent agencies such as NCUA (or the FDIC, for example).
Legal analysis from four years ago also noted that such freezes are routine and only apply to executive departments and agencies, and not independent agencies (which make up most of the financial regulators). NCUA, in its own analysis in 2017, agreed with that view and said it would continue to move forward with rules already approved and slated to take effect after that moratorium went into effect. In 2017, that included a new rule on membership eligibility for federal credit unions and an advance notice of proposed rulemaking on capital proposals.
Aside from the moratorium, Congress also has a tool for overturning federal rules through the Congressional Review Act (CRA). Through the statute, Congress may overturn rules issued by federal agencies through special procedures, typically tied to 60 “legislative days” (days that Congress is in session) to take action on a rule once it is issued by an agency. However, it is also unclear if Congress would consider any of the rules finalized by NCUA under the act.