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CUNA Expresses Concerns Over Proposed NCUA Capital Standards — 1/29/14

Credit Unions over $50 Million would likely be impacted

Although it may be two years from implementation, credit unions with greater than $50 million in assets will likely have new capital standard requirements to meet if a National Credit Union Administration proposal is adopted. The NCUA Board met on January 23 to move forward with a plan would revise the agency’s Prompt Corrective Action regulations--Part 702. According to the proposed risk based capital rule, to be classified as well capitalized, credit unions with over $50 million in assets would be required to maintain a risk-based capital ratio of 10.5% or above, and pass both net worth ratio and risk-based capital ratio requirements.

The NCUA emphasized there are only about 200 credit unions nationally that would be required to change their portfolio as a result of this rule.

"CUNA supports capital modernization--including risk-based net worth--but as part of a broader plan that considers appropriate leverage ratios and also access to supplemental capital," stated CUNA President Bill Cheney following the meeting.

"The bottom line for us is: If our members agree that this proposal is needed, our primary objective in developing our position will be to ensure a final rule is narrowly tailored to minimize any negative effects on credit unions. We are particularly troubled by the section of the proposal that would allow NCUA to raise the risk-based capital requirement of an individual credit union above the normal threshold levels based on subjective factors," said Cheney.

Credit unions will have 90 days to comment on the proposal after it is published in the Federal Register. After the comment period closes, it would likely take several months for a rule to be finalized. Once the final rule is adopted, the changes to capital requirements would not go into effect until approximately 18 months later. As a result, CUNA estimates that credit unions will likely operate under current capital requirements until some time in 2016.

Following the meeting, the NCUA unveiled an online calculator to help credit unions determine how they would be impacted by the proposal and released a YouTube video outlining the proposal.