These regulations would take effect 18 months after they are finalized. According to NCUA, 90% of impacted credit unions already meet these new capital requirements. Do you feel that 18 months is a sufficient phase-in period?
CALCULATION OF RISK-BASED CAPITAL RATIO
The regulation renames risk-based net worth as risk-based capital ratio. A credit union’s capital would still be determined by dividing its net worth (numerator) by its assets (denominator). The following components would be added and subtracted when calculating a credit union’s capital:
Additions: undivided earnings (includes any regular reserve), appropriations for non-conforming investments, other reserves, equity acquired in a merger, net income, ALLL (limited to 1.25% of risk assets), secondary capital accounts included in net worth and Section 208 assistance included in net worth (as defined in §702.2).
Deductions: NCUSIF deposit, goodwill, other intangible assets and identified losses not reflected as adjustments to components of the risk-based numerator.
Do you agree that the above components should be included in a credit union’s capital calculation?
Since the capital ratio is determined by dividing a credit union’s risk-weighted assets into its capital, the larger a credit union’s asset size, the smaller its capital ratio. Following is the proposed categorization of the items to be included in a credit union’s assets with the corresponding risk weighting for each category. Given the impact that these weightings may have, please be as specific as possible when detailing the risk weightings that most impact your credit union and why (if applicable) you think an alternative classification is appropriate.