The proposed rule on everyone’s mind is NCUA’s recent Risk-Based Capital rule. This proposal would apply to federally insured, natural person credit unions with assets over $50 million. It will potentially have the greatest impact on those credit unions with higher concentrations of assets in real estate loans, member business loans, longer-term investments or high levels of delinquent loans. This proposal adjusts risk-weights for many of NCUA’s current asset classifications and requires a 10.5% or higher risk based capital ratio in order to be well capitalized. (This is In addition to the existing requirement for credit unions to maintain a 7% or higher net worth ratio to be well capitalized.) The proposal would also allow NCUA to require higher capital on a case-by-case basis.
NCUA has created a calculator that allows credit unions to enter their credit union charter number or name to determine if they are undercapitalized, adequately capitalized or well capitalized under both the current regulation and the proposed regulation. If your credit union is even close to $50 million in assets or more I strongly encourage you to use the calculator and determine how this proposed rule would impact your institution.
Comments must be submitted to NCUA by May 28, 2014. This rule could have a significant impact on the credit union industry so this is the time, before the rule becomes final, for individual credit unions to let NCUA know how this rule will affect their credit union and their members.