NCUA proposes raising threshold for ‘complex’ CUs

January 14, 2021

The NCUA Board issued a proposal raising the asset threshold for credit unions defined as “complex” for risk-based capital purposes at its Thursday meeting. A complete summary of the meeting can be found on CUNA’s Removing Barriers Blog.

Specifically, the RBC proposal would amend the NCUA’s regulations to provide that any risk-based net worth requirement will be applicable to only a federally insured natural-person credit union (credit union) with quarter-end assets that exceed $500 million and a risk-based net worth requirement that exceeds 6%.

This change would remain in place until the RBC rule goes into effect.

The board also issued an advance notice of proposed rulemaking (ANPR) to solicit comments on two approaches to simplify its RBC requirements:

  • The first approach would replace the RBC rule with a Risk-based Leverage Ratio (RBLR) requirement, which uses relevant risk attribute thresholds to determine which complex credit unions would be required to hold additional capital (buffers).
  • The second approach would retain the 2015 RBC rule but enable eligible complex credit unions to opt-in to a “complex credit union leverage ratio” (CCULR) framework to meet all regulatory capital requirements. The CCULR approach would be modeled on the Community Bank Leverage Ratio framework, which is available to certain banks.

CAMELS rating system proposal

NCUA issued a proposal to add the “S” (Sensitivity to Market Risk) component to the existing CAMEL rating system and redefine the “L” (Liquidity Risk) component. The existing CAMEL rating process addresses both sensitivity to market risk and liquidity risk within the “L” component.

The proposed addition of the “S” component is intended to enhance transparency and allow the NCUA, state supervisory authorities, and credit unions to better distinguish between liquidity risk and sensitivity to market risk.

CUSO proposal

The board issued a proposal to amend NCUA’s credit union service organization (CUSO) regulations. The proposal would:

  • Expand the list of permissible activities and services for CUSOs to include originating any type of loan that a federal credit union may originate; and
  • Grant NCUA additional flexibility to approve permissible activities and services.

CUSOs are generally limited to business lending, consumer mortgage lending, student lending, and credit cards.

Corporate credit union final rule

The final corporate credit union rule would amend NCUA’s corporate credit union regulation to make clear that corporate credit unions may purchase subordinated debt instruments issued by natural person credit unions.

It also specifies the capital treatment of these instruments for corporate credit unions that purchase them.

The board also heard briefings on: