The NCUA’s proposal to create the credit union version of the community bank leverage ratio was published in the Federal Register today, triggering the beginning of a 60-day public comment period.
The NCUA board of directors, at its July 2021 meeting, voted 3-0 in favor of a 60-day comment period on the proposed rulemaking of Parts 702 and 703 of the Complex Credit Union Leverage Ratio. Although the vote was unanimous, Boardmember Rodney Hood said at the time that he voted in favor of the proposal “begrudgingly,” and would prefer the matter be tabled or even repealed and the focus turned to other areas of capital, CUTODAY reported.
The proposed rule amends the NCUA’s capital adequacy regulation to provide a simplified measure of capital adequacy for federally insured credit unions that are classified as “complex” (those with total assets greater than $500 million) and is comparable to the Community Bank Leverage Ratio that went into effect in January 2020, according to the agency.
The new CCULR also gives complex credit unions that maintain a minimum net-worth level and meet other qualifying criteria a streamlined framework to manage capital in their institutions, and as long as a credit union in the CCULR framework maintains the minimum net worth ratio, it would be considered well capitalized, according to the NCUA.
Under this proposal, the minimum net worth level under the CCULR framework would initially be 9% on Jan. 1, 2022, and this level would gradually increase to 10% by January 1, 2024. Using Dec. 31, 2020 financial performance data, the NCUA estimates that most complex credit unions would be able to meet the CCULR’s initial net worth requirement of 9%, the agency stated.