January 08, 2021

Risk-based capital, net worth, more on NCUA Board agenda next week

NCUAThe NCUA Board has a full agenda for its meeting next week, including a final rule related to corporate credit unions and proposed rules to address the risk-based net worth complex threshold and credit union service organizations (CUSOs).

In addition, the board is expected to issue an advance notice of proposed rulemaking to simplify risk-based capital (RBC) requirements and a notice of proposed rulemaking related to the CAMELs rating system. The board will also receive briefings on its new ACCESS initiative, statutory inflation adjustment of civil money penalties, and the recently enacted Consolidated Appropriations Act, which included Phase 4 coronavirus relief provisions, and review its 2021 Annual Performance Plan.

The corporate credit unions final rule is related to the NCUA's subordinated debt rule finalized last month as well as another final rule on corporate credit unions finalized in October. The previous corporate credit union rule proposed requiring a corporate credit union to deduct certain investments in subordinated debt instruments issued by natural person credit unions, but this provision was not finalized in that rule. The NCUA said it still intended to finalize it, but would do so separately.

The risk-based net worth proposal is intended to provide credit unions with additional regulatory relief amid the coronavirus pandemic. According to the NCUA's fall rulemaking agenda, it would temporarily raise the asset threshold for defining a credit union as complex for the purposes of risk-based net worth requirements to assets exceeding $500 million and a risk-based net worth requirement in excess of 6 percent. It would expire when the NCUA's risk-based capital rule goes into effect.

For CUSOs, the NCUA's fall rulemaking agenda indicated it's looking to propose a rule to expand the permissible lending activities.

The NCUA in 2019 approved delaying the implementation of its RBC rule by two years to Jan. 1, 2022. 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 NCUA. The association has also requested that the NCUA permanently grandfather "excluded goodwill" and "excluded other tangible assets" in the RBC calculation and will continue to encourage the agency to design a true risk-based capital system for credit unions. The association has continued to call for additional RBC relief amid the coronavirus pandemic.

Related to the Consolidated Appropriations Act, the NCUA Thursday sent a Letter to Credit Unions providing a summary of key provisions related to credit unions, including the extension of changes to the Central Liquidity Facility and troubled debt restructurings. NAFCU also has a summary of the act available here.

NAFCU will monitor Thursday's NCUA Board meeting – set to begin at 10 a.m. Eastern and available via livestream on the agency's website – and provide credit unions with updates afterward.