Agency to finally publish delay in risk-based capital rules for ‘complex’ credit unions

The delay of risk-based capital (RBC) requirements for large “complex” credit unions to Jan. 1, 2020, becomes official Tuesday when the notice of the final rule (supplemental) is scheduled to be published, according to filings with the Federal Register released Monday.

The final rule – which supplements a regulation adopted by the National Credit Union Administration (NCUA) in May 2015 – moves the implementation date for the RBC requirement by one year, from Jan. 1, 2019. In addition, the final rule amends the definition of a complex credit union adopted in 2015 for RBC purposes by increasing the credit union asset-size threshold level for coverage from $100 million to $500 million.

In its notice filing, NCUA states that, under this final rule, 98.7% of all complex credit unions are well capitalized. However, the agency points out, the final rule would leave six complex credit unions with total assets of $8.8 billion with a lower capital classification and a capital shortfall of approximately $71 million.

The notice also points out that during the one-year delay period, the NCUA’s current prompt corrective action (PCA) requirements will remain in effect.

According to the scheduled Federal Register notice, the changes for the RBC rules provide covered credit unions and NCUA with “additional time to prepare for the rule’s implementation, and exempt an additional 1,026 credit unions from the risk-based capital requirements of the 2015 Final Rule without subjecting the National Credit Union Share Insurance Fund (NCUSIF) to undue risk.”

The PCA requirements adopted three years ago replaced the risk-based net worth ratio then in effect with the new RBC 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).

In October, when the two-member NCUA Board voted unanimously to delay the risk-based capital effective date by one year to 2020, the agency said the change, by exempting the additional 1,026 insured credit unions from the RBC requirements, would result in about 90% of all federally insured credit unions being exempt from the regulation.

However, the agency asserted, the RBC requirements would still cover 76% of credit union assets as well as 85% all complex assets and liabilities in the credit union system. (By comparison, the agency says, 100% of banks are subject to federal RBC rules.)

Federal Register notice: Risk-Based Capital