NCUA Compliance Deadline: Prompt Corrective Action – Risk-Based Capital

Compliance Deadlines Add to Calendar 2019-01-01 12:00:00 2019-01-01 12:00:00 NCUA Compliance Deadline: Prompt Corrective Action – Risk-Based Capital The National Credit Union Administration (NCUA) Board has finalized amendments to Part 702 of its capital adequacy regulations to, among other things, establish risk-based capital requirements for “complex” federally insured credit unions. NCUA’s new final capital adequacy rules establish a new method for computing the agency’s risk-based requirement that would include a risk-based capital (RBC) ratio measure for complex credit unions. The final rule sets forth ten categories of risk-weights for various types of assets based on the risk associated with particular investments. For example, cash would be assigned a zero percent risk weight while riskier assets such as mortgage servicing and CUSO activities would have substantially higher risk-weights. The final rule makes the following key changes to the agency’s existing capital requirements: 1) establishes a new RBC 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; 2) establishes a RBC ratio of 10 percent for well-capitalized credit unions; 3) establishes a RBC ratio of 8 percent for adequately-capitalized credit unions; 4) revises existing risk weights to reflect recent changes made by other banking regulators under the Basel System; 5) requires higher minimum levels of capital for credit unions with concentrations of assets in real estate loans, commercial loans or non-current loans; and 6) sets forth how, through its supervisory authority, NCUA can address a credit union that does not hold capital that is commensurate with its risks. Note: On August 2, 2018, NCUA issued a proposed rule to delay the effective date to January 1, 2020, as well as to raise the asset threshold for complex credit unions to $500 million. Final Regulation – 15-EF-15 Compliance Blog – Risk-Based-Capital Download the latest full Compliance Calendar, including proposed regulations, past deadlines and more. Location NAFCU digital@nafcu.org America/New_York public

The National Credit Union Administration (NCUA) Board has finalized amendments to Part 702 of its capital adequacy regulations to, among other things, establish risk-based capital requirements for “complex” federally insured credit unions.

NCUA’s new final capital adequacy rules establish a new method for computing the agency’s risk-based requirement that would include a risk-based capital (RBC) ratio measure for complex credit unions.

The final rule sets forth ten categories of risk-weights for various types of assets based on the risk associated with particular investments. For example, cash would be assigned a zero percent risk weight while riskier assets such as mortgage servicing and CUSO activities would have substantially higher risk-weights. The final rule makes the following key changes to the agency’s existing capital requirements: 1) establishes a new RBC 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; 2) establishes a RBC ratio of 10 percent for well-capitalized credit unions; 3) establishes a RBC ratio of 8 percent for adequately-capitalized credit unions; 4) revises existing risk weights to reflect recent changes made by other banking regulators under the Basel System; 5) requires higher minimum levels of capital for credit unions with concentrations of assets in real estate loans, commercial loans or non-current loans; and 6) sets forth how, through its supervisory authority, NCUA can address a credit union that does not hold capital that is commensurate with its risks. Note: On August 2, 2018, NCUA issued a proposed rule to delay the effective date to January 1, 2020, as well as to raise the asset threshold for complex credit unions to $500 million.

Final Regulation – 15-EF-15

Compliance Blog – Risk-Based-Capital

Download the latest full Compliance Calendar, including proposed regulations, past deadlines and more.