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As the NCUA considers alternatives to simplify its risk-based capital (RBC) rule, NAFCU's new Economic & CU Monitor report – now available for download – provides insights into credit unions' perspective on the two possible simplification mechanisms.

The NCUA in 2019 approved delaying the implementation of its RBC rule by two years to Jan. 1, 2022, and NAFCU has led efforts to ensure credit unions and their members benefit from a modern capital regime, working closely with policymakers on Capitol Hill and at the agency.

The advance notice of proposed rulemaking (ANPR) issued by the NCUA in January proposes two approaches to simplify the RBC rule:

• replacing the RBC rule with a risk-based leverage ratio (RBLR), which uses risk attribute thresholds to define “complex” credit unions; and
• adopting a complex credit union leverage ratio (CCULR) which would leave the 2015 RBC rule unchanged but allow eligible complex federally-insured credit unions to opt-in to the CCULR to meet the RBC requirements.

NAFCU's Monitor survey revealed that, based on the conceptual information provided in the ANPR, neither option has garnered a majority of support among respondents. When asked what the most effective approach to RBC simplification would be, top responses included:

• prioritizing simplification of the RBC calculation; and
• avoiding a "capital cliff," where a small increase in a certain type of asset triggers a large increase in the capital requirement.

Credit unions are encouraged to provide NAFCU with additional feedback on the ANPR via its Regulatory Alert or email.

Also included in the latest Economic & CU Monitor are results from the Credit Union Sentiment Index (CUSI), an index based on NAFCU member responses to eight questions on growth and earnings outlook, lending conditions and regulatory burden.

The CUSI rose in January after two months of decline as respondents reported strong outlooks on growth, earnings, and lending. However, respondents' outlook on regulatory burden continued to fall, nearing its lowest point on record.

NAFCU relies on survey responses to provide its members a glimpse of trends affecting the credit union industry as a whole and inform its advocacy efforts. Next month's survey is focused on branching; responses are due March 10.

For more on NAFCU's award-winning research team, check out the association's Macro Data Flash reports for insights into interest rates, auto sales, home market.