Corporates will have to meet significant new capital requirements if the NCUA's proposed changes to part 704 become rule.
The regulator recommends replacing its current 4% capital ratio requirement with three requirements corporates must meet to avoid prompt corrective action: a risk based capital ratio of 8%, a Tier 1 risk-based capital ratio of 4%, and a 4% leverage ratio. Those figures represent an adequately capitalized corporate; well capitalized institutions would have to meet higher standards.
The proposed leverage ratio's equation would be determined by dividing an adjusted, and more restrictive, core capital figure by a corporate's daily average net assets.
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Jargon changes include the renaming of paid-in capital accounts to perpetual contributed capital, and MCAs to nonperpetual capital accounts. The move supports the NCUA's proposed division of capital into two categories, core capital also know as Tier 1 capital, and supplementary capital, also called Tier 2.
Corporates may also issue PCC and NCA to both members and non-members under the proposed rules. The NCUA would no longer stand in the way of corporates requiring members to contribute capital as a requirement of membership, nor would it prohibit members from transferring "corporate capital instruments" to third parties.
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