Links in “Risk-Based Capital”

In a report submitted to the House Financial Services Committee on its new RB rule, NCUA outlined its support for allowing healthy, well-managed credit unions to issue supplemental capital that can be counted as net worth. NCUA further stated that it plans to finalize a supplemental capital rule before implementation of the new RBC rule in 2019. [11/24/15]

If the new risk-based capital rule is clear as mud to you, a new video posted on the NCUA website may help. The video provides a summary of the rule and the agency’s implementation plan. The new rule is expected to impact 24% of federally-insured credit unions with assets of $100 million or more. [11/10/15]

The third installment of the NAFCU’s series on the new risk-based capital rule looks at how investments in CUSOs are risk weighted. The rule requires that these investments be assigned a risk weight of 150%, unless the credit union’s overall exposure is “non-significant,” in which case a risk weight of 100% can be used. What does that mean? [11/9/15]

The NCUA has amended current regulations to require that credit unions taking certain risks must hold capital commensurate with those risks. The intent of the NCUA is to reduce the number of high-risk institutions that are exhausting capital and causing systemic losses. [10/29/15]

During a NAFCU webcast yesterday, Larry Fazio, Director of Examination and Insurance for the NCUA, shared details about the Agency’s goals for the new RBC rule and how credit unions should prepare for the 2019 implementation date. He added that complex credit unions should, in 2017, start looking at their capital adequacy plans, their RBC capital ratio, and at how changes in their business plans may affect their capital ratios. [10/27/15]

NCUA Board Member Mark McWatters says that NCUA should not wait to issue a supplemental capital rule that is simple, functional in the marketplace, and transparent. At the October Board Meeting, NCUA staff said that a supplemental capital rule would be made final before the 2019 implementation of the RBC rule. [10/23/15]

NCUA says that if the final RBC rule was to take effect today that only 16 credit unions would have to raise capital or reduce risk in order to comply. Chairman Matz pointed out that those 16 credit unions hold assets of $10 billion, which is about the same size as the share insurance fund. She added that if one of those credit unions failed the impact on all credit unions would be significant. [10/16/15]

After 2,100 comment letters, several town hall meetings, pressure from Congress to delay finalization, the NCUA Board voted yesterday to approve a final rule on risk-based capital that reflects only minor changes from the proposed RBC2.  The final rule reduces the risk weighting for most investments in CUSOS and for charitable donation accounts to 100%.  The final rule is effective 1/1/19. [10/16/15]

The second risk-based capital rule, which the NCUA is expected to vote on Thursday, includes what is being called the "wild card" on capital adequacy that would allow examiners to determine that a credit union has insufficient capital, regardless of what the ratios are. [10/13/15]