NCUA board proposes leverage ratio for complex credit unions – finance and banking

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NCUA Board proposes leverage ratio for complex credit unions

July 27, 2021

Cadwalader, Wickersham & Taft LLP

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The board of directors of the National Credit Union Administration (“NCUA”) proposed a rule that would introduce a simplified method of measuring capital adequacy for complex credit unions (with total assets in excess of $ 500 million).

The proposed rule would update the NCUA’s final rule on risk-based capital of October 2015, “including the treatment of asset securitisations issued by credit unions, clarification of the treatment of off-balance sheet exposures, the deduction of certain mortgage servicing assets from the risk-based capital of a complex credit union”. Counter, update of several derivative-related definitions and clarification of the definition of consumer credit. “

According to the proposed rule (which, according to the NCUA Board of Directors, is based on the principles of the framework for the leverage ratio of the community banks, which were laid down in a final regulation of the Bundesbanken in 2019), a complex credit union would be entitled to join the complex credit union Leverage Ratio ( “CCULR”) Framework if it (i) maintains a minimum net worth ratio originally set at 9 percent on January 1, 2022 and gradually increased to 10 percent by January 1, 2024, and (ii) other . meets criteria.

Credit unions opting for the CCULR framework would not have to calculate a risk-based capital ratio according to the capital rule of the NCUA Board of Directors of 2015. The proposed rule would amend this rule to, among other things, deal with (i) securitisations of assets issued by credit unions, (ii) explain the treatment of off-balance sheet exposures, (iii) out of the risk-based one. a complex credit union, remove capital counters from certain mortgage loan assets, (iv) update certain definitions related to derivatives, and (v) clarify how consumer credit is defined.

Comments on the proposed regulation are due within 60 days of their publication in the Federal Register.

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

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