Effective Date Set For NCUA Final Rule On Complex Credit Union Leverage Ratio – Finance and Banking

United States:

Effective Date Set For NCUA Final Rule On Complex Credit Union Leverage Ratio

The National Credit Union Administration (“NCUA”) set

a January 1, 2022 effective date for a final rule that would establish a

simplified method of measuring capital adequacy for credit unions

classified as complex (those with over $500 million in total

assets). The final rule was published in the Federal Register.

As previously covered, the rule updates the

NCUA’s October 2015 risk-based capital final rule,

“including addressing asset securitizations issued by credit

unions, clarifying the treatment of off-balance sheet exposures,

deducting certain mortgage servicing assets from a complex credit

union’s risk-based capital numerator, updating several

derivative-related definitions, and clarifying the definition of a

consumer loan.”

The NCUA also finalized an amendment to the Subordinated Debt rule

that expands the scope of the rule to include assets issued to the

U.S. government and any of its subdivisions.

On choosing the effective date, the Board “acknowledge[d]

that January 1, 2022, is less than the standard effective date of

30 days following the publication of this final rule.” It

cited several factors on why credit unions will not be

disadvantaged by the January 1, 2022 date, including, among

others,: (i) that credit unions are not required to comply with the

Complex Credit Union Leverage Ratio (“CCULR”) framework

“as it is an optional framework to the 2015 Final Rule”;

(ii) credit unions do not have to select their framework until the

end of the first quarter in 2022, and (iii) the final rule

“does not include any new calculations for complex credit

unions and relies on the net worth ratio, an existing capital

measure that credit unions report each quarter.”

Primary Sources

1. NCUA: Capital Adequacy – The Complex Credit Union
   
   Leverage Ratio; Risk-Based Capital
2. NCUA: Subordinated Debt

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