Summary: NCUA Final Rule, Corporate Credit Unions (November, 2017)

Prepared by the NASCUS Legislative and Regulatory Affairs Department
November 2017

NCUA has amended provisions in its Corporate Credit Union rule, Part 704, related to retained earnings and Tier I capital. The changes, supported by NASCUS, include:

  • amending the definition of ‘‘retained earnings’’ to incorporate ‘‘GAAP equity acquired in a merger’’
  • allowing the inclusion of all PCC in capital calculations upon a corporates reaching 250 basis points of retained earnings
  • adding a retained earnings threshold to the expanded authorities provisions

The Corporate Credit Union final rule may be read here. The rule becomes effective December 22, 2017.


In response to the corporate crisis during the recession, NCUA took steps to curtail corporate credit union activities to reduce risk to the natural person credit union system. Among the rule changes implemented in 2010, NCUA set investment concentration limits, limited asset maturities, and prohibited investments in subordinated and private label mortgage-backed securities. The 2010 rule also implemented a prompt corrective action (PCA) regime stipulating capital adequacy for corporates.

NCUA has now amended the corporate credit union rule again to provide corporate credit unions more flexibility in calculating Tier 1 capital. The final rule:

  • Incorporates ‘‘GAAP equity acquired in a merger’’ as a component of retained earnings;
  • Permits corporates to include all PCC  sourced from an entity not federally insured in its Tier 1 capital once a corporate achieves a retained earnings ratio of 250 basis points
  • Adds a definition of “retained earnings ratio” to mean ‘‘the corporate credit union’s retained earnings divided by its moving daily average of net assets;’’

The NCUA did tighten the expanded authorities section of Appendix B of the corporate rule by adding a retained earnings ratio requirement in addition to the existing leverage ratios.