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Risk-based capital rule comments due in 90 days

NCUA’s much-anticipated risk-based capital proposal was published in the Federal Register Thursday morning, starting the clock on a 90-day comment period for credit unions and associations/leagues.

Both the Credit Union Association of New York and CUNA are soliciting credit union feedback on the critical proposal. The Association emailed all member credit union leaders the link to a statewide survey earlier this week.

Notably, the proposal would:

  • cover credit unions with assets of more than $50 million;
  • restructure NCUA’s current Prompt Corrective Action (PCA) regulation to involve calculation of a capital-to-risk assets ratio that is comparable to Basel III for community banks, although the risk weights would be substantially different;
  • require a well-capitalized credit union to maintain a 7 percent net worth ratio (unchanged from the current PCA system) and a new, 10.5 percent risk-based capital ratio;
  • change many of the effective risk weights for most of NCUA’s current asset classifications;
  • set higher risk weights and higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer-term investments and some other assets;
  • authorize the agency to require even higher capital on a case-by-case basis; and
  • set further restrictions on the ability of a credit union to pay dividends.

Credit union leaders can determine how the proposal would affect their net worth/capital using NCUA’s online calculator.