Not all corporates that own legacy assets will be required to give them up to NCUA, according to final corporate rules posted online today. The regulator is currently revealing the final rule in an open board meeting in Washington.
Some corporates have lesser securities positions and NCUA does not expect credit losses to exceed total capital, wrote NCUA in the final rule. Howeer, NCUA expects such corporates to develop business plans and take action on all investments not compliant with the new rule.
Generally, NCUA will want corporates to sell legacy assets as soon as possible to come into compliance with the corporate rule, the regulator said. However, if a corporate decides an alternative approach to selling the legacy assets is sound and supportable, the corporate may submit a draft investment action plan to NCUA for its approval.
For example, NCUA will consider an action plan that includes retention of legacy assets while they amortize, if the corporate can document that the expected future credit losses are significantly less than the losses the corporate would take if the investments were sold at current market prices.
Depending on the circumstances, an NCUA-approved action plan might permit the corporate to operate temporarily outside the rules. In addition, NCUA might grant corporates a waiver of time to build the retained earnings required by this regulation, but only to the extent as identified in the approved action plan.
