Credit Union National Association’s Initial Summary of NCUA’s Risk-Based Capital (RBC) Proposal
What NCUA Is Proposing – An Overview
The National Credit Union Administration Board is seeking comments for 90 days on a proposal regarding risk-based capital (RBC) requirements under its prompt corrective action rules. The proposal would:
• Cover credit unions with assets over $50 million;
• Restructure NCUA’s current PCA regulation to involve calculation of a capital to risk assets ratio, analogous to Basel III for community banks, although the risk weights would be substantially different;
• Require a well-capitalized credit union to maintain a 7% net worth ratio (unchanged from the current PCA system) and a new, 10.5% risk based capital ratio;
• Change many of the effective risk-weights for most of NCUA’s current asset classifications;
• Set higher risk weights and hence higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer-term investments and some other assets;
• Authorize the agency to require even higher capital on a case-by-case basis.
• Set further restrictions on the ability of a credit union to pay dividends.
NCUA has produced a calculator to help credit unions determine how the proposal would affect their net worth (capital), as the bank regulators provided under their Basel III proposal. Comment are to to NCUA by May 28, 2014.
Please submit your comments to CUNA as soon as possible, as we anticipate filing a comment letter to NCUA well in advance of the comment period deadline.
For more information about the proposal, contact Bill Hampel, Mary Dunn or Lance Noggle.