NCUA Board slates action on risk-based capital rule delay, 2020-2021 budget

A final rule likely providing for a new delay in implementation of a risk-based capital rule that applies to “complex” credit unions is slated for action next week by the National Credit Union Administration (NCUA) Board, along with the agency’s budget for 2020-2021.

The board will also receive a briefing on the 2020 operating level of the fund that insures deposits in credit unions.

The board proposed the delay in the risk-based capital rule in June on a split vote, with Board Member Todd Harper, the panel’s lone Democrat, voting no. The rule, which would apply to credit unions that have more than $500 million in assets, is currently slated to take effect Jan. 1, 2020. Under the June proposal, implementation would be delayed to Jan. 1, 2022.

The NCUA first issued its risk-based capital proposal for “complex” credit unions – then defined as those with more than $100 million in assets – in 2014, with implementation slated 18 months after the rule would have been finalized. A revised proposed rule was issued in 2015 and finalized that October with an effective date of Jan. 1, 2019. That final rule replaced the risk-based net worth ratio with a new risk-based capital ratio for federally insured credit unions, which the NCUA 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).

Last year, the NCUA Board revised its definition of “complex” credit unions to include only those credit unions with more than $500 million in assets and delayed the rule’s implementation further, to Jan. 1, 2020.

In proposing the added delay, the agency in June said it would use the extra time before implementation to review potential changes such as subordinated debt authority (a way to allow credit unions to generate “alternative” or “supplemental” capital); capital requirements for asset securitization; and an option similar to the community bank leverage ratio (CBLR) that has since been finalized by federal banking agencies under last year’s regulatory relief statute (the Economic Growth, Regulatory Relief, and Consumer Protection Act, or EGRRCPA/S.2155).

The CBLR framework generally applies to banks that have less than $10 billion in consolidated assets and meet other criteria.

The NCUA Board’s vote on the final budget figures for 2020-2021 is the first item listed on next week’s open meeting agenda. (The agency proposed budgets of $347.7 million in 2020, up 3.9% from 2019, and $358.1 million in 2021. A public comment period on the budget closed Dec. 2.) The risk-based capital final rule is next, followed by a briefing for the board on the “normal operating level” for the National Credit Union Share Insurance Fund (NCUSIF) in 2020.

The normal operating level, coupled with year-end financials for the fund, will affect whether and how much the NCUSIF might return to insured credit unions in 2020 in the form of a “dividend.”

NCUA Board Dec. 12 open meeting agenda