Final rule delaying risk-based capital rule by 1 year on regulator’s meeting agenda

A final rule supplementing risk-based capital regulation for credit unions by delaying the effective date by one year will be considered during a meeting of their federal regulator next week (Oct. 18), according to the agenda made public Thursday.

The National Credit Union Administration (NCUA) Board will also consider a proposal amending Federal Credit Union bylaws, according to the agenda (no additional details were provided).

The final rule on risk-based capital is based on a proposal issued by the board Aug 2. The proposal does two things: First, it delays until Jan. 1, 2020, the effective date of the 2015 final rule (which had been slated to take effect the first day of next year), and which revised the agency’s regulations regarding prompt corrective action (PCA). Second, it reduces the number of federally insured credit unions that would be affected by raising the rule’s asset-size threshold for “complex” credit unions from $100 million to $500 million.

When the proposal was issued, the agency said revising the rule’s definition of “complex” exempts an additional 1,026 credit unions from the rule without subjecting the National Credit Union Share Insurance Fund (NCUSIF) to undue risk. (The NCUSIF is the federal fund that insures credit union member shares.) This change means that about 90%, or all but 531, of federally insured credit unions would be exempt from the rule, the agency says.

Regarding the “complex” redefinition, the agency said the proposal would eliminate two indicators from the previous definition: Internet banking; and investments with maturities greater than five years, where the investments are greater than 1% of total assets. It further revised four of the indicators in the definition by: substituting “commercial loans” for “member business loans”; replacing “participation loans” with “participation loans sold”; excluding first-lien mortgages from interest-only loans; and narrowing “real estate loans” to “sold mortgages.”

NCUA adopted its current PCA requirements three years ago. That regulation, according to NCUA, restructured its regulations and made various revisions, including changes in the agency’s current risk-based net worth requirement. The 2015 rule replaced the risk-based net worth ratio with a new risk-based capital ratio for federally insured credit unions, which the agency called comparable to the regulatory risk-based capital measures used by the federal banking agencies: the Federal Deposit Insurance Corp. (FDIC), Federal Reserve, and Office of the Comptroller of Currency (OCC).

NCUA Board Agenda for the October 18, 2018, Meeting