Capital Reform

NAFCU SVP of Government Affairs and General Counsel Carrie Hunt, Director of Regulatory Affairs Alicia Nealon and Chief Economist Curt Long highlight the association's regulatory and economic issues with NCUA's revised risk-based capital proposal.

On January 15, 2015, the NCUA Board issued a second proposed rule regarding risk-based capital (RBC) for credit unions that amends their first risk-based capital proposal issued nearly a year prior. (Watch videos of the NCUA board RBC proposal discussion and succeeding briefing.)

Key wins and changes in the proposal are outlined below. NAFCU continues to provide its members with in-depth analysis and tools to help assess how the new proposal will impact their credit unions, including:

In addition, NCUA has provided documents about the new proposed risk-based capital rule linked to in the below "Additional Information & Resources" section of this page.

Key NAFCU victories in the new proposed rule include:

  • Removal of individual minimum capital requirement (IMCR)
  • Removal of interest rate risk (IRR)
  • Raising the threshold for determining "complex credit union," for the purposes of capital requirements, from $50 million to $100 million in assets
  • Dropping the 1.25% Allowance for Loan and Lease Losses (ALLL) cap from the risk-based capital ratio numerator
  • Revisions to a number of risk-weights, including those for Member Business Loans, CUSOs, corporate credit unions, real estate loans and investments
  • A longer implementation period (if finalized, the new requirements would take effect Jan. 1, 2019)

Key changes the proposal would make to NCUA's current capital requirements:

  • Establish a new risk-based capital ratio for federally insured natural person credit unions with over $100 million in assets;
  • Changes the definition of "complex credit union," for the purposes of capital requirements, to include credit unions greater than $100 million in assets;
  • Establish a risk-based capital ratio of 10 percent for well-capitalized credit unions;
  • Establish a risk-based capital ratio of 8 percent for adequately-capitalized credit unions;
  • Revise existing risk weights to reflect recent changes made by other banking regulators under the Basel System;
  • Require higher minimum levels of capital for credit unions with concentrations of assets in real estate loans, commercial loans or non-current loans; and
  • Set forth how NCUA, through its supervisory authority, can address a credit union that does not hold capital that is commensurate with its risk.


As of the deadline at midnight on April 27, NCUA reported it had received 2,167 letters commenting on its second risk-based capital draft, breaking the previous record set just last year when the agency received a then-unprecedented 2,056 letters on its first risk-based capital proposal.  We will remain on top of this important issue and provide our members with the latest developments, analysis, tools and resources. NCUA's proposed rule on risk-based capital remains NAFCU's top regulatory priority, and we will continue to engage NCUA and Congress on this issue.

Of particular note, in March the House Financial Services Committee marked-up and passed a series of bills aimed at regulatory relief for small financial institutions. One of the bills (H.R. 1408) introduced by Reps. Perlmutter and Luetkemeyer would require NCUA to take time to study its second risk-based capital proposal's impact on credit unions' mortgage servicing assets before setting a final RBC rule that covers such assets. NCUA would be required to report study findings to Congress within six months following the enactment of the bill; no final RBC rule that includes mortgage servicing assets could be issued for three months following that date. The bill is now pending consideration in the full House.

NAFCU's Position on Capital Reform

NAFCU recognizes that NCUA addressed several of the key issues, including the risk weighting and implementation period, raised by NAFCU, credit unions and lawmakers in its most recent RBC proposed rule. However, there remain several key issues with the proposed rule and NAFCU still strongly believes this rulemaking is unnecessary and will only impose more regulatory burden on an already extremely well-capitalized industry.

Lack of Legal Authority

NAFCU believes there are several issues related to NCUA's legal authority to issue the rule as proposed, including, the ability to prescribe separate risk-based capital thresholds for well capitalized and adequately capitalized credit unions.

High Cost

NAFCU is also deeply concerned with the cost of this proposal. NCUA's own estimate approximates that it will cost $3.75 million for the agency to adjust its Call Report, update its examination systems and train internal staff to implement the proposed requirements. If this proposal were to be finalized, NCUA also estimates credit unions would incur an ongoing $1.1 million expense to complete the adjusted Call Report fields. While NAFCU is still analyzing the true costs of this proposal, we strongly believe that NCUA's projections do not reflect the actual amount the agency will spend implementing the proposed changes.

High Impact on Credit Union Capital Buffers

Despite NCUA's claim that only a limited number of credit unions will be impacted, this proposal would force credit unions to hold hundreds of millions of dollars in additional reserves to achieve the same capital cushion levels that they currently maintain. Based on our financial analysis, credit unions' capital cushions will suffer a $490 million hit if NCUA promulgates a two-tier approach to RBC. Specifically, in order to satisfy the proposal's "well-capitalized" thresholds, today's credit unions would need to raise an additional $760 million. On the other hand, to satisfy the proposal's "adequately capitalized" thresholds, today's credit unions would need to raise an additional $270 million.

RBC Capital Requirements Graph

Need for a Legislative Solution

Ultimately, NAFCU believes legislative changes are necessary to bring about comprehensive capital reform for credit unions such as allowing credit unions to have access to supplemental capital sources, and making the statutory changes necessary to design a true risk-based capital system for credit unions.

NAFCU has outlined a legislative solution that will institute fundamental changes to the credit union regulatory capital requirements in our Five-Point Plan for Regulatory Relief. The plan, as it relates to capital reform:

  • Directs the NCUA to, along with industry representatives, conduct a study on prompt corrective action and recommend changes;
  • Modernizes capital standards to allow supplemental capital, and direct the NCUA Board to design a risk-based capital regime for credit unions that takes into account material risks; and,
  • Establishes special capital requirements for newly chartered federal credit unions that recognize the unique nature and challenges of starting a new credit union.

Issue Background Information

After its first proposed rule regarding risk-based capital, released in January 2014, NCUA received more than 2,000 comment letters from credit unions and their trades – including NAFCU. Based on those comments, NCUA Board Chairman Debbie Matz announced that a new proposal would be released that would include a longer implementation period and revised risk weights for mortgages, investments, member business loans, credit union service organizations and corporate credit unions, among other changes.

Official comment letter to NCUA on first risk-based capital proposed rule

On May 27, 2014, NAFCU submitted its official comment letter to NCUA on the agency's first proposed risk-based capital regulation. The letter explains our position in detail, including data on how the rule will gravely impair credit unions' ability to compete in the marketplace and serve their members as well as fail to provide additional safety to the industry. We firmly believe that, in this form, the proposed rule poses such widespread, catastrophic consequences that it should be withdrawn.

Recent Media Outreach

NAFCU has stayed at the forefront of this issue and continued to champion credit unions in major media nationwide.

RBC2 Sets New Comment Letter Record, FOM on Tap (Credit Union Journal, April 30, 2015)  

RBC2: 1,900 Letters and Counting (Credit Union Times, April 27, 2015)

NAFCU to NCUA on RBC2: Exit on the Right (Credit Union Times, April 24, 2015)

Risk-Based Capital Proposal An Unnecessary Burden (, March 8, 2015)

CUs, Congress Could Impact Delivery Of Final RBC Rule (, February 23, 2015) 

#352: Will there be RBC3? NAFCU's Carrie Hunt gives her take on Risk Based Capital 2.0... (CUbroadcast, February 19, 2015) 

Only After IRR Can Judgment Be Passed On RBC (, February 18, 2015) 

45 Credit Unions Faced RBC Downgrade in 2009: NAFCU (Credit Union Times, February 6, 2015)

See all of NAFCU's media outreach.

Additional Information & Resources

TALKING POINTS: Download RBC2 talking points (member-only).

REGULATORY ALERT: 15-EA-02: NCUA - RBC2 (member-only) – Download NAFCU's summary of the new proposed risk-based capital rule.

Calculate the impact of the new proposed rule on your credit union

NAFCU Compliance Blog Posts

View entire series of Risk-Based Capital posts

Letters on Risk-Based Capital

Letters to NCUA

U.S. Congress

Updated April 2015