Complex credit union leverage ratio and the MBL cap

At the beginning of the month, the National Credit Union Administration’s (NCUA) risk-based capital requirements and complex credit union leverage ratio (CCULR) went into effect. Today’s blog will discuss the effects of those events on the member business lending (MBL) cap in the Federal Credit Union Act (FCU Act) and section 723.8 of NCUA’s regulations.

The FCU Act provides that complex credit unions must be subject to a risk-based net worth requirement. As noted in the CCULR final rule, NCUA set the complex credit union threshold at $500 million.  For a credit union with total assets greater than $500 million, section 702.103 of NCUA’s regulations requires that credit union to “calculate its risk-based capital measure either by using the risk-based capital ratio under § 702.104(a) through (c), or, for a qualifying complex credit union opting into the CCULR framework, by using the CCULR framework under § 702.104(d).”

Calculating the risk-based capital ratio under section 702.104(a) through (c) involves several steps. On the other hand, the CCULR is calculated just like the net worth ratio. It is “the ratio of the net worth of the credit union to the total assets of the credit union, expressed as a percentage rounded to two decimal places.” Credit unions must be qualifying complex credit unions under section 702.104(d)(2) to be able to opt in to using the CCULR framework rather than the risk-based capital requirements. This includes having a CCULR of at least 9% and satisfying three other requirements.


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