Federally insured credit unions with more than $50 million in assets could be subject to additional capital requirements according to a proposed risk-based capital rule from the NCUA board. Those credit unions that have credit concentrations in real estate loans, member business loans, or delinquent loans would be subject to the increased risk-based capital.
According to the proposed rule, credit unions would be required to maintain a risk-based capital ratio of 10.5 percent or above, and pass net worth ratio and risk-based capital ratio requirements to be considered well capitalized. Adequately capitalized credit unions would have to maintain risk-based capital ratios between eight percent and 10.49 percent and pass ratio requirements. Under-capitalized credit unions would fall below eight percent risk-based capital ratio.
The NCUA estimated that more than 90 percent of affected credit unions — approximately 2,237 institutions — would be in compliance with the proposed rule, based on June 30, 2013 Call Report data. However, 189 credit unions would experience a decline in their PCA classification from well capitalized to adequately capitalized, and 10 well-capitalized credit unions would experience a decline to under-capitalized status.
The proposal has not yet been published in the Federal Register, so a specific comment due date has not been set, however the League will update its comment call on this issue to include the date when it appears in the register. Credit unions are encouraged to submit comments and opinions to the LSCU as soon as possible. The League will be filing a comment letter to NCUA prior to the comment period deadline.
Visit the LSCU Top Stories for a more in-depth look at the risk-based capital rule. For more information about the proposal, contact Scott Morris at 866.231.0545 ext. 2165.