The NCUA board on Thursday approved final rules aimed at tailoring stress testing and capital requirements to the size, complexity and financial condition of financial institutions.

The final rule establishes a tiered approach.

NCUA Board Chairman J. Mark McWatters said that large bank stress testing and capital requirements are designed to help protect the larger U.S. economy. He added that no credit union is so large that it can affect the overall economy. Instead, credit union stress testing and capital requirements protect the share insurance fund and credit union members.

“It builds on what we've learned,” board member Rick Metsger said, agreeing that banks adopted capital requirements and stress testing for very different reasons than credit unions.

Under the plan, a Tier I credit union is an institution that has less than $15 billion in total assets; a Tier II credit union has between $15 billion and $20 billion in total assets and Tier III credit unions will be those with more than $20 billion.

And the rule's regulatory requirements will depend on where a credit union falls.

For instance, under the plan, a covered credit union that remains under $15 billion will not be subject to annual stress testing requirements. Tier II and Tier III credit unions will be required to conduct stress tests. However, Tier II credit unions will not be subject to a 5% minimum stress test capital threshold.

In addition, Tier I and II credit unions will continue to develop capital plans, but those plans do not have to be formally submitted to the agency. Instead, the plans will be reviewed during the agency's supervisory process.

In commenting on the plan when it was first proposed, CUNA said that credit unions should remain exempt from stress testing requirements.

NAFCU agreed with the agency's plan to increase flexibility in the capital planning process and urged the agency to ensure that its tiered plan was appropriately tailored to the credit union business model, complexity and financial condition.

At Thursday's meeting the board also approved final rules governing advertising requirements.