Proposed delay of credit union risk-based capital rule to 2022 at top of accomplishments in six-month ‘progress report’

A proposal to delay, by two more years, a “risk-based capital” rule for complex credit unions is at the top of the list of accomplishments issued Tuesday by the board chairman of the federal credit union regulator in a “six-month progress report.”

In his report, National Credit Union Administration (NCUA) Board Chairman Rodney E. Hood states that a delay of the rule – which is still proposed, but has been delayed once previously after being finalized in 2015 – will allow the credit union regulator to take a “surgical approach” to implementing the rule “in a coordinated manner.” That, he said, is the alternative to the agency taking an incremental approach.

“It also would give the agency time to consider additional improvements to credit union capital standards, such as subordinated debt authority, capital treatment for asset securitization, and a community bank leverage ratio equivalent for credit unions,” he wrote.

In June, the NCUA Board voted 2-1 to proposed a delay in the risk-based capital rule for complex credit unions –  those with more than $500 million in assets – from Jan. 1, 2020, to Jan. 1, 2022. The rule, as originally adopted four years ago, restructured the agency’s 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).

Other top accomplishments listed by Hood in his six-month tenure include:

  • A final rule amending NCUA’s real estate appraisals for some commercial real estate transactions. Hood wrote that the final rule will help boost economic activity and job creation in local communities, particularly in some hard-pressed areas.
  • A final rule giving federally chartered credit unions an option to offer more payday alternative loans (PALs). The “PALs II” option, he said, augments, rather than replaces, the existing payday alternative loan option by, among other things, allowing federal credit unions to offer a PALs II loan for any amount up to $2,000.
  • A proposed rule allowing federally insured credit unions to accept nonmember and public unit shares of up to 50% of paid-in and unimpaired capital and surplus.
  • “2nd chance initiative,” which clarifies that persons convicted of certain minor offenses could be allowed to work in the credit union industry without applying for prior NCUA Board approval.

However, the list makes no mention of Hood’s comments last month that he plans for the agency to consider a rulemaking on credit union acquisition of banks to add more transparency to the process.

“Right now, the NCUA must approve these transactions, as does the FDIC for these identical transactions,” Hood said in September. “Data suggest these are generally smaller institutions with lower profitability before the transactions occurred. If it makes it possible for a local financial institution to keep its doors open, then we must consider this factor.”

Six-Month Progress Report of Chairman Rodney E. Hood