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

January 23, 2014 by Credit Union Times

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.

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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.