Stress testing would become responsibility of some credit unions under proposal

Removing some of the capital planning and stress testing requirements now applicable to federally insured credit unions with $10 billion or more in assets is the aim of a proposed rule issued for comment by the National Credit Union Administration (NCUA) Board Thursday.

The proposal also, NCUA said, would make the agency’s capital planning and stress testing requirements more efficient (for both the credit unions and NCUA) by authorizing some credit unions to conduct their own stress tests in accordance with agency requirements and allowing those credit unions to incorporate the stress test results into their capital plan submissions.

The agency pointed out the approach it is taking is consistent with actions taken recently by the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC).

Under the proposal, NCUA said covered credit unions (those with $10 billion or more in assets) would be subject to new, three-tiered regulatory requirements aimed to ensure that the capital plans of those credit unions covered under the proposal are tailored to reflect their size, complexity, and financial condition. Specifically:

  • A capital plan review for a tier I credit union (which has completed fewer than three capital planning cycles and has less than $20 billion in total assets) would be incorporated into the NCUA’s supervisory oversight of the credit union.
  • A capital plan review for a tier II credit union (which has completed three or more capital planning cycles and has less than $20 billion in total assets, or is otherwise designated as a tier II credit union by the NCUA), would be incorporated into its supervisory oversight from the NCUA.
  • A capital plan review for a tier III credit union (which has $20 billion or more in total assets, or is otherwise designated as a tier III credit union by the NCUA) would continue to be subject to the current requirement that the NCUA formally approve or reject it.

In response to a question from NCUA Board Chairman J. Mark McWatters, staff acknowledged that a goal of the proposal is to internalize review of capital plans, rather than the agency contracting with an outside firm (such as Black Rock) to perform the review. NCUA Board Member Rick Metsger said the board is looking for comments the proposal, in general and in specific areas – such as whether the asset thresholds should be adjusted (that is, is $20 billion too low or too high).

NCUA proposal, Capital Planning and Supervisory Stress Testing

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