On Compliance: Complex credit union leverage ratio vs. risk-based capital rule

Affected credit unions should consider whether adopting CCULR would make sense if NCUA finalizes the proposal.

The National Credit Union Administration board has recently proposed the complex credit union leverage ratio as a simplified compliance alternative to the agency’s risk-based capital rule.

If finalized, CCULR will give federally insured credit unions with between $500 million and $10 billion in assets the choice between implementing the agency’s risk-based capital rule or the CCULR. Credit unions will need to do the math to determine whether it makes sense to adopt the simplified CCULR or stay the course with NCUA’s more granular risk-based capital rule.

CCULR is modeled on the Federal Deposit Insurance Corporation’s community bank leverage ratio that is a simplified regulatory capital option available to FDIC-insured banking institutions. Fewer than half of the community banks that are eligible to use the community bank leverage ratio have chosen it over the FDIC’s risk-based capital rules. More than half of eligible community banks appear to have determined that they would have lower capital requirements under the FDIC’s risk-based capital rule than under the community bank leverage ratio, however, many other FDIC-insured banks have decided that the community bank leverage ratio is preferable.


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