Capital Reform

On October 15, 2015, the NCUA Board voted 2-1 to approve a final risk-based capital rule which will take effect January 1, 2019. NAFCU has consistently opposed this rulemaking and urged its withdrawal. We have long warned about the impact this rulemaking will have on the credit union industry – in particular the regulatory burden and costs it will impose. Given NCUA’s insistence on moving forward with this rule, NAFCU worked steadfastly during 2014 and 2015 to make a bad rule better.  As a result of our efforts, the final rule recalibrates many risk weights to better align with banks’ requirements, removes interest-rate risk from the calculation of the risk-based capital ratio, and extends the implementation date.

NAFCU's Position on Capital Reform

To create a true and fair risk-based capital system for credit unions, NAFCU fundamentally believes that legislative reforms are necessary.  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.

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:

Key Changes to NCUA's Capital Rules

The final rule makes the following key changes to the agency’s current capital requirements:

  • Replaces Part 702's risk-based net worth (RBNW) with 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;
  • Establishes a risk-based capital ratio of 10 percent for well-capitalized credit unions;
  • Establishes a risk-based capital ratio of 8 percent for adequately-capitalized credit unions;
  • Revises existing risk weights to reflect recent changes made by other banking regulators under the Basel System;
  • Requires higher minimum levels of capital for credit unions with concentrations of assets in real estate loans, commercial loans or non-current loans; and
  • Sets forth how NCUA, through its supervisory authority, can address a credit union that does not hold capital that is commensurate with its risk.

NAFCU issued a Final Regulation comprehensively analyzing RBC's requirements as well as summarizing the key compliance expectations for credit unions. Additionally, NAFCU published a series of blog posts highlighting and synthesizing the final RBC rule.

NAFCU-Sought Changes to Risk-Based Capital

Since the NCUA Board initially proposed RBC in January 2014, NAFCU and our member credit unions have continually advocated for significant changes. The final rule includes the following key changes:

  • Removes Individual Minimum Capital Requirement;
  • Removes interest rate risk (IRR) from consideration in the RBC calculation;
  • Raises the threshold for determining  “complex credit union,” for the purposes of capital requirements, from $50 million to $100 million in assets;
  • Drops the 1.25 percent Allowance for Loan and Lease Losses (ALLL) cap from the risk-based capital ratio numerator;
  • Revises a number of risk-weights, including those for Member Business Loans, CUSOs, corporate credit unions, real estate loans and investments; and
  • Provides for an extended implementation period until January 1, 2019.
  • Incorporates a “Non-Significant Equity Exposure” risk-weight of 100 percent for non-consolidated investments in CUSOs, perpetual paid in corporate capital, among other, when the total of equity exposures is less than 10 percent of the credit union’s capital elements of the risk-based capital numerator;
  • Adds a section for “Charitable Donation Accounts,” assigning it a risk weight of 100 percent;
  • Clarifies that “excluded goodwill” and “excluded other intangible assets” applies to mergers or combinations completed on or before 60 days after publication of the final rule in the Federal Register, and extending the expiration of this definition to January 1, 2029.

To learn more about the issues NAFCU fought for and against in the RBC rule, please read the official comments submitted to NCUA on the agency's first and second proposal.

Congressional Action

On September 12, 2017, Representatives Bill Posey (R-FL) and Denny Heck (D-WA) reintroduced H.R. 3736, a bill that would require NCUA to "stop and study" the NCUA's RBC rule. The bill would require NCUA to submit its study on the rule to Congress, along with legislative recommendations to improve the credit union capital system. If the bill is passed, the agency would not be able to implement the RBC rule until 120 days after the report goes to Congress. The House Financial Services Committee approved a previous version of the bill in the 114th Congress.

On November 23, 2015, NCUA sent a report on its recently adopted risk-based capital rule to the House Financial Services Committee in the 228-page report, NCUA defends the agency’s legal authority to create a two-tier risk-based capital system, also questioned in H.R. 2769. In addition, the report recommends that Congress allow well-managed credit unions to count supplemental capital as net worth and suggests other technical legislative changes affecting credit union capital requirements.

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.

Recent Media Outreach

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

NCUA Downplays RBC2 Effect on Credit Unions (Credit Union Times, October 24, 2015)

With RBC2 Final, NAFCU Focuses on Legislative Solution (Credit Union Times, October 19, 2015)

NCUA's Risk-Based Capital Rule Could Set Stage for Supplemental Capital Push (American Banker, October 16, 2015)

Washington Wrap: 'Wall Street regulates Congress' (SNL Financial, October 16, 2015)

NCUA Board, In 2-1 Vote, Approves RBC (, October 16, 2015)

RBC Vote Could Prompt Tough Reaction by Congress (Credit Union Journal, October 15, 2015)

NAFCU Vows to Work to Make 'Bad Rule Better' (, October 15, 2015)

NCUA: RBC2 Only Affects 16 Credit Unions (Credit Union Times, October 15, 2015)

See all of NAFCU's media outreach.

Additional Information & Resources

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 November 2017