12 CFR Part 702 - CAPITAL ADEQUACY

The NCUA Board (Board) published a final rule in the Federal Register on August 11, 2015, regarding the capital planning and stress testing provisions in NCUA's regulations. This amendment corrects the regulations by reinstating a provision that was inadvertently removed by the August 2015 final rule.

The NCUA Board (Board) is amending NCUA's current regulations regarding prompt corrective action (PCA) to require that credit unions taking certain risks hold capital commensurate with those risks. The risk-based capital provisions of this final rule apply only to federally insured, natural-person credit unions with assets over $100 million. The overarching intent is to reduce the likelihood of a relatively small number of high-risk outliers exhausting their capital and causing systemic losses—which, by law, all federally insured credit unions would have to pay through the National Credit Union Share Insurance Fund (NCUSIF). This final rule restructures NCUA's PCA regulations and makes various revisions, including amending the agency's current risk-based net worth requirement by replacing it with a new risk-based capital ratio for federally insured, natural-person credit unions (credit unions). The risk-based capital requirement set forth in this final rule is more consistent with NCUA's risk-based capital measure for corporate credit unions and, as the law requires, more comparable to the regulatory risk-based capital measures used by the Federal Deposit Insurance Corporation (FDIC), Board of Governors of the Federal Reserve System, and Office of the Comptroller of Currency (Other Banking Agencies). The effective date is intended to coincide with the full phase-in of FDIC's risk-based capital measures in 2019. The final rule also eliminates several provisions in NCUA's current PCA regulations, including provisions relating to the regular reserve account, risk-mitigation credits, and alternative risk weights.

The NCUA Board (Board) is issuing amendments to the regulation governing credit union capital planning and stress testing. The amendments adjust the timing of certain events in the capital planning and stress testing cycles. The revisions to the regulation become effective January 1, 2016.

The NCUA Board (Board) is seeking comment on a second proposed rule that would amend NCUA's current regulations regarding prompt corrective action (PCA) to require that credit unions taking certain risks hold capital commensurate with those risks. The proposal would restructure NCUA's PCA regulations and make various revisions, including amending the agency's current risk-based net worth requirement by replacing the current risk-based net worth ratio with a new risk-based capital ratio for federally insured natural person credit unions (credit unions). The proposal would also, in response to public comments received, make a number of changes to the original proposed rule that the Board published in the Federal Register on February 27, 2014. These changes include, among other things, exempting credit unions with up to $100 million in total assets from the new rule, lowering the risk-based capital ratio level required for an affected credit union to be classified as well capitalized from 10.5 percent to 10 percent, lowering the risk weights for various classes of assets, removing interest rate risk components from the risk weights, and extending the implementation timeframe to January 1, 2019. These changes would substantially reduce the number of credit unions subject to the rule, reduce the impact on affected credit unions, and afford affected credit unions sufficient time to prepare for the rule's implementation. The proposed risk-based capital requirement set forth in this proposal would be more consistent with NCUA's risk-based capital measure for corporate credit unions and more comparable to the regulatory risk-based capital measures used by the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve, and Office of the Comptroller of Currency (Other Banking Agencies). In addition, the proposed revisions would amend the risk weights for many of NCUA's current asset classifications; require higher minimum levels of capital for credit unions with concentrations of assets in real estate loans or commercial loans or higher levels of non-current loans; and set forth how NCUA can address a credit union that does not hold capital that is commensurate with its risk. The proposed revisions would also eliminate several provisions in NCUA's current PCA regulations, including provisions relating to the regular reserve account, risk-mitigation credits, and alternative risk weights. (For clarity, the “current” PCA regulations would remain in force until the effective date of a final risk-based capital rule.)

The NCUA Board (Board) is issuing proposed amendments to the regulation governing credit union capital planning and stress testing. The amendments would adjust the timing of certain events in the capital planning and stress testing cycles. If finalized, the revisions to the regulation would become effective January 1, 2016.

NCUA is issuing a rule requiring federally insured credit unions (FICUs) with assets of $10 billion or more to develop and maintain capital plans. The rule also provides for annual stress tests of those credit unions.

The NCUA Board (Board) is proposing to amend NCUA's regulations regarding prompt corrective action (PCA) to restructure the part, and make various revisions, including replacing the agency's current risk-based net worth requirements with new risk-based capital requirements for federally insured “natural person” credit unions. The proposed risk-based capital requirements would be more consistent with NCUA's risk-based capital measure for corporate credit unions and the regulatory risk-based capital measures used by the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve, and Office of the Comptroller of Currency (Other Federal Banking Regulatory Agencies). In addition, the proposed revisions would revise the risk-weights for many of NCUA's current asset classifications; require higher minimum levels of capital for federally insured natural person credit unions with concentrations of assets in real estate loans, member business loans (MBLs) or higher levels of delinquent loans; and set forth the process for NCUA to require an individual federally insured natural person credit union to hold higher levels of risk-based capital to address unique supervisory concerns raised by NCUA. The proposed revisions would also eliminate several of NCUA's provisions, including provisions relating to regular reserve accounts, risk-mitigation credits, and alternative risk-weights.

NCUA proposes to conduct annual stress tests of federally insured credit unions (FICUs) with assets of $10 billion or more. NCUA further proposes to require those credit unions to develop and maintain capital plans.

The NCUA Board (Board) is making a number of technical amendments to NCUA's regulations based on issues identified by staff and through NCUA's rolling, three-year regulatory review process. In addition, the Board is making a number of nomenclature changes to NCUA's regulations to reflect changes to NCUA's office structure, including the transfer of duties and the creation of the new Office of National Examinations and Supervision (ONES). Finally, under title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act 1 (Dodd-Frank Act), rulemaking authority for a number of consumer financial protection laws were transferred from various federal regulatory agencies, including NCUA, to the Consumer Financial Protection Bureau (CFPB). As a result, the Board is now updating certain cross citations within its regulations and rescinding NCUA's rules governing the “Privacy of Consumer Financial Information” under the Gramm-Leach-Bliley Act 2 and the “Registration of Residential Mortgage Loan Originators” under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, 3 which were transferred to the CFPB. 1 Public Law 111-203, 124 Stat. 1376, 1955-2113 (2010). 2 12 U.S.C. 6801 et seq. 3 12 U.S.C. 5101 et seq.

The NCUA Board (Board) is issuing a final rule to amend Interpretive Ruling and Policy Statement (IRPS) 87-2, as amended by IRPS 03-2, and two NCUA regulations that apply asset thresholds to grant relief from risk-based net worth and interest rate risk requirements. The amended IRPS increases the asset threshold that identifies credit unions to which NCUA will give more robust consideration of regulatory relief in future rulemakings. The amended regulations similarly include increased asset thresholds, granting immediate and prospective relief from existing regulatory burden to a larger group of small credit unions.

The NCUA Board (Board) has extended the public comment period for its proposed rule titled Prompt Corrective Action, Requirements for Insurance, and Promulgation of NCUA Rules and Regulations, 77 FR 59139 (September 26, 2012), to November 26, 2012. The proposed rule addresses asset thresholds affecting regulatory relief for small credit unions.