Summaries outline RBC, RBNW proposals

(Feb. 26, 2021) Summaries on NCUA proposals for simplifying risk-based capital (RBC) requirements and on the complex credit union threshold under risk-based net worth (RBNW) for relief during theCOVID-19 pandemic have been published by NASCUS.

Both summaries are available to members only.

Last month, the board issued an advance notice of proposed rulemaking (on a vote of 2-1, with now-Chairman Todd Harper dissenting) to invite comment on two approaches to simplify risk-based capital (RBC) requirements. Under the proposal, the agency envisions:

(1) replacing the risk-based capital rule with a risk-based leverage ratio requirement, which would use relevant risk attribute thresholds to determine which complex credit unions would be required to hold additional capital; and

(2) retaining the risk-based capital rule (approved in 2015 and revised numerous times, with two delays in effective dates) but enabling eligible complex FICUs to opt-in to a “complex credit union leverage ratio” (CCULR) framework to meet all regulatory capital requirements.

The CCULR approach would be modeled on the “community bank leverage ratio” framework implemented under the 2018 economic growth and regulatory relief law. A 60-day comment period was assigned to the proposal (As of Thursday, it had not yet been published in the Federal Register; that publication date launches the comment period).

Also in January, NCUA proposed (on a vote of 2-1, with Harper again dissenting) to raise the asset threshold for defining a credit union as “complex” for purposes of being subject to any RBNW requirement in its regulations. According to the agency, the proposal would amend the regulations to provide that any RBNW requirement will be applicable only to a federally insured credit union (FICU) with assets that exceed $500 million and an RBNW requirement that exceeds 6%.

The COVID-19 pandemic has created a vital need for financial institutions, including credit unions, to provide access to responsible credit and other member services to support consumers,” NCUA said in its proposal. “Implementing this regulatory change in advance of Jan. 1, 2022, the effective date of the 2015 final risk-based capital (RBC) rule issued by the NCUA, would provide necessary capital relief to a significant number of credit unions without substantially decreasing the safety and soundness of credit unions or the National Credit Union Share Insurance Fund (NCUSIF).”

Comments are due by March 25.

NASCUS Summary: ANPR, Simplification of the RBC Requirements (Parts 702 & 703) (members only)

NASCUS Summary: Proposed rule, Risk Based Net Worth – COVID 19 Relief; Complex credit union threshold (Part 702) (members only)

Proposed rule: Risk-Based Net Worth – COVID-19 Regulatory Relief