The National Credit Union Administration ("NCUA") board proposed a rule that would establish a simplified method of measuring capital adequacy for credit unions classified as complex (those with over $500 million in total assets).
The proposed rule would update the NCUA's October 2015 risk-based capital final rule, "including addressing asset securitizations issued by credit unions, clarifying the treatment of off-balance sheet exposures, deducting certain mortgage servicing assets from a complex credit union's risk-based capital numerator, updating several derivative-related definitions, and clarifying the definition of a consumer loan."
Under the proposed rule (which the NCUA board states is based on the principles of the community bank leverage ratio framework established in a final rule from the federal banking agencies in 2019), a complex credit union would be eligible to opt into the complex credit union leverage ratio ("CCULR") framework, if it (i) maintained a minimum net worth ratio, initially established at nine percent on January 1, 2022, and gradually increased to 10 percent by January 1, 2024, and (ii) satisfied other criteria.
Credit unions opting into the CCULR framework would not be required to calculate a risk-based capital ratio pursuant to the NCUA Board's 2015 capital rule. The proposed rule would amend that rule to, among other things (i) address asset securitizations that are issued by credit unions, (ii) explain the treatment of off-balance sheet exposures, (iii) remove from a complex credit union's risk-based capital numerator certain mortgage servicing assets, (iv) update certain definitions relating to derivatives and (v) clarify how a consumer loan is defined.
Comments on the proposed rule are due within 60 days of publication in the Federal Register.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
