WSR 98-23-061

EXPEDITED REPEAL

DEPARTMENT OF

FINANCIAL INSTITUTIONS

[Filed November 16, 1998, 10:26 a.m.]

The Following Sections are Proposed for Expedited Repeal: Chapter 208-464 WAC, Credit union member business loans; and chapter 208-480 WAC, Real estate appraisals.

Rules Proposed for Expedited Repeal Meet the Following Criteria: Other rules of the agency or of another agency govern the same activity as the rule, making the rule redundant.

Any person who objects to the repeal of the rule must file a written objection to the repeal within thirty days after publication of this preproposal statement of inquiry.

Address Your Objection to: J. Parker Cann, Director of Credit Unions, Department of Financial Institutions (DFI), P.O. Box 41200, Olympia, WA 98504-1200, phone (360) 902-8778, fax (360) 704-6978, e-mail pcann@dfi.wa.gov.

Reason the Expedited Repeal of the Rule is Appropriate: Explanation for Repeal of DFI's MBL and Appraisal Rules: Because National Credit Union Administration (NCUA) rules govern member business loans (MBL) and appraisals, and supersede DFI's existing MBL and appraisal rules for credit unions, as discussed in more detail below, the DFI intends to repeal its MBL and appraisal rules through this rule-making proceeding. The DFI's MBL and appraisal rules are set forth in chapters 208-464 and 208-480 WAC, respectively.

Preemption by NCUA's MBL and Appraisal Rules: All Washington state-chartered credit unions (WASCUs) are federally insured by the National Credit Union Share Insurance Fund (NCUSIF), administered by the NCUA. RCW 31.12.407. Among other requirements, the NCUA requires all insured credit unions to comply with its MBL and appraisal rules. 12 C.F.R. Section 741.203; Part 723 (MBL rules) (recently adopted at 63 Federal Register 51793, September 29, 1998); Section 722 (appraisal rules).

The NCUA's MBL and appraisal rules preempt the application of any less restrictive state laws to federally insured, state credit unions, including the DFI's MBL and appraisal rules. As a result of this preemption, the DFI's existing MBL and appraisal rules do not apply to any WASCUs, unless nonfederally insured credit unions are permitted to do business in this state in the future under RCW 31.12.408.

Superseding NCUA's MBL Rules: However, state MBL rules may, upon a determination by the NCUA board, supersede the NCUA's MBL rules. 12 C.F.R. Section 741.203(a). Although in the past the NCUA would not reach such a determination unless the state MBL rules were virtually identical to the NCUA's, the NCUA has recently given signals that it is willing to relax its standards. The DFI believes that it should adopt new MBL rules that are more flexible than its existing MBL rules, for submission to the NCUA board for such a determination. More flexible rules will allow credit unions to better serve the needs of their members. Because DFI's existing MBL rules need to be extensively revised, DFI believes that it would be more convenient to adopt new MBL rules, rather than amend its existing MBL rules.

New MBL Rules: On the date of filing of this form CR-101XR, the DFI is filing a preproposal statement of inquiry, form CR-101, to adopt new MBL rules.

Continuing Safety and Soundness Restriction on Aggregate MBL as Multiple of Reserves: Notwithstanding the proposed repeal of WAC 208-464-030, a section in DFI's existing MBL rules, the DFI has taken the position that as a matter of safety and soundness the aggregate amount of a credit union's MBL (as defined by the Federal Credit Union Act, as recently amended by H.R. 1151) may not exceed an amount equal to three times its reserves, without the written permission of the DFI.

Appraisal Rules Applicable to Nonfederally Insured Credit Unions: If nonfederally insured credit unions are permitted to do business in this state in the future under RCW 31.12.408, the DFI may as appropriate adopt appraisal rules applicable to such credit unions or, as a condition of approval for such credit unions to operate in this state, require such credit unions to agree to comply with the NCUA appraisal rules as if they were state rules.

November 13, 1998

John L. Bley

Director