Risk-based rule would raise well-capitalized standard to 10.5%

by. Nicholas Ballasy

Federally insured credit unions with more than $50 million in assets that have concentrations in real estate loans, member business loans or delinquent loans would gain additional capital requirements per a proposed risk-based capital rule the NCUA Board introduced Thursday.

Click on the chart at left to expand.

According to the proposed rule, to be classified as well capitalized, affected credit unions would be required to maintain a risk-based capital ratio of 10.5% or above, and pass both net worth ratio and risk-based capital ratio requirements.

Adequately capitalized credit unions would be required to maintain risk-based capital ratios between 8% and 10.49% and pass ratio requirements. Undercapitalized credit unions would fall below 8% risk-based capital ratio.

Additionally, individual federally insured credit unions could be required to maintain higher levels of risk-based capital to address unique supervisory concerns raised by the NCUA, according to the rule’s Board Action Memo.

The risk-based capital proposal for natural person credit unions would replace the current risk-based net worth risk-weighting method, putting them more in line with the NCUA’s risk-based capital requirements for corporate credit unions, the NCUA said, as well as capital requirements at the FDIC, Federal Reserve and Comptroller of the Currency.

continue reading »

More News