ALEXANDRIA, Va. — The NCUA Board showed its unanimous support for the Prompt Corrective Action proposal currently included in the Credit Union Regulatory Improvements Act (H.R. 1537) at today's meeting.

The proposal would eliminate the current “one-size-fits-all” approach to PCA. The 2007 version of the risk-based capital proposal bumped the leverage ratios up 25 basis points from the previous proposal in the last Congress. This change was made to account for differences between the credit union and banking system, but NCUA's proposal closely mirrors the Basel 1a proposal.

“NCUA's proposed system is rigorous and appropriately flexible…” NCUA Chairman JoAnn Johnson stated. “The proposal empowers healthy credit unions to utilize capital more efficiently and operate in a safe and sound manner while protecting the National Credit Union Share Insurance Fund.”

Nearly all, 99.2%, of credit unions would be well capitalized under the proposal. However, on the lower end, the “critically undercapitalized” credit unions would increase from 10 (0.1%) to 18 (0.2%). NCUA Loss/Risk Analysis Officer Steve Farrar noted, “The requirement at the lowest level is actually higher” so NCUA can take action while there is still a bit more capital in the troubled institution.