Any changes to risk-based capital requirements—including the proposed adoption of a complex credit union leverage ratio (CCULR)—requires a delay of the Jan. 1, 2022 RBC effective date, CUNA wrote to NCUA Thursday. CUNA submitted its comments on the CCULR proposal, which allows credit unions that meet certain criteria to opt into the CCULR framework.

CUNA also reiterated its long-standing position that the 2015 RBC rule is “functionally unnecessary” and will place significant burdens on credit unions at a significant cost to credit union members.

NCUA proposed the CCULR framework at its July meeting. A complex credit union that opts into the CCULR framework would not be required to calculate a risk-based capital ratio under the Oct. 29, 2015, risk-based capital final rule.

The minimum net worth ratio would initially be 9% on Jan. 1, 2022, and then gradually increased to 10% by Jan. 1, 2024.

A qualifying complex credit union that opts into the CCULR framework and that maintains the minimum net worth ratio would be considered well capitalized.

“We believe 10% is excessive and will result in an “option” that is not practical for many, if not most, complex credit unions… a CCULR of 10% would likely force some credit unions to make financial decisions aimed solely at ensuring their net worth is at least 10% (and thus able to apply the CCULR) or make business decisions involving different uses of their capital aimed at serving their members,” the letter reads. “Therefore, in order to actually relieve the regulatory burden associated with the RBC requirements, we urge the NCUA to decrease the (permanent) CCULR level from 10% to 9%.”

“Thus, it is crucial that the level be high enough to maintain strong capital levels in the credit union system and ensure safety and soundness. However, it is equally important that the level be low enough to provide a realistic option for complex credit unions considering whether to pursue the CCULR over the RBC alternative,” the letter adds.

CUNA appreciates NCUA’s proposed transition period of two years, but also notes that an extended transition period—such as four years—would be more appropriate, in light of the continued economic challenges and depressed net worth ratios amid the ongoing pandemic.