Risk-Based Capital Rule: What You Need to Know
Maintaining well-capitalized status became more difficult Jan. 23 when the NCUA Board proposed a new risk-based capital rule. The proposal would require federally insured credit unions with more than $50 million in assets - some 2,237 institutions - to risk-weight additional assets, including real estate loans, member business loans and delinquent consumer and real estate loans. Read the stories linked below to learn more about the proposed rule and other topics from the January monthly NCUA Board meeting.
Risk-Based Rule Would Raise Well-Capitalized Standard to 10.5%: In addition to the proposed risk-based capital requirement, credit unions would also be required to maintain net worth ratios.
Proposed Capital Rule Details Asset Risk-Weights: Investments in CUSOs and mortgage servicing assets would be assigned a 250% risk-weight under the rule.
NCUA Launches Risk-Based Calculator: Online tool compares current net worth standards and proposed risk-based requirements based on call report data. Searches by credit union would be available to the public.
Matz On Risk-Based Capital and Call Report Fines: Video CUTs: Hear the NCUA Chairman talk about the new rule and why she released the late call report fine announcement.
No User Fees on Derivatives Rule: The final rule also curtailed the NCUA's proposed authority over state-chartered credit unions.
Risk-Based Rule Shows NCUA Independence: Video CUTs: Although trade associations said higher capital standards should come from Congress, NCUA Board Member Rick Metsger said new risk-based standards are appropriate.
CUs Should Know Derivatives True Cost: Video CUTs: NCUA Board Member Michael Fryzel says the new authority will cost $2.6 million its first year.
Reaction from trade associations:
While it is apparent the agency has put much effort into developing the proposal, which would have a lengthy transition period, we are reviewing it in detail with our Examination and Supervision Subcommittee – which has already expressed the view that the current system seems to provide sufficient levels of capital. CUNA supports capital modernization – including risk-based net worth – but as part of a broader plan that considers appropriate leverage ratios and also access to supplemental capital. We are assessing the impact not only on the 199 credit unions that would be affected if the proposal is adopted, but also on the credit union system as a whole. - Bill Cheney, CUNA president/CEO
The regulatory burden on credit unions is already far too great. Enough is enough. NAFCU believes that the current regulatory capital system for credit unions is outdated and requires reform, but the reform that is required is legislative. We hope NCUA reconsiders its approach and focuses its energy on securing the necessary legislative changes. - Dan Berger, NAFCU president/CEO
In limiting the final (derivatives) rule to federal credit unions, NCUA acknowledges the experience, expertise, and ability of the states to supervise this activity in their state credit unions," said NASCUS President and CEO . "NASCUS had serious concerns with the rule as proposed, and to NCUA's credit, they engaged in candid and meaningful dialogue with NASCUS and the state regulators about our concerns and NCUA's concerns as well. That state authority has been preserved is not just a benefit to the state system; it preserves dual chartering and that benefits the entire state system. - Mary Martha Fortney, NASCUS president/CEO