Risk-Based Capital Resource Center

Risk-Based Capital Live Updates

Resource CenterOn January 15, 2015, the NCUA Board voted to approve for comments a new proposed rule on risk-based capital [“RBC”]. 

Changes included in the revised proposal include:

  • Exempting credit unions with up to $100 million in total assets (up from $50 million in the original proposal).
  • Lowering the risk-based capital ratio level for a “well-capitalized” credit union to 10% (down from 10.5% in the original proposal.
  • Lowering risk weights for many asset classes, including investments, real estate loans, member business loans, corporate credit unions, and credit union service organizations.
  • Removing interest rate risk from the risk weights.
  • Removing the individual minimum capital requirement.
  • Extending the effective date to January 1, 2019 (from the 18 month implementation period originally proposed).

The proposal passed with a vote of 2 to 1.  Chairman Matz and Vice Chair Metsger voted in favor of the proposal, while Board Member McWatters opposed the proposal. McWatters’ detailed statement is provided as an attachment below.  In sum, McWatters stressed that he did not believe the NCUA board had the legal authority to establish a two tiered risk-based net worth [“RBNW”] system. He also expressed that he could not support even a single tier RBNW standard without including secondary capital in the calculation of the RBNW ratio as permitted by law. Additionally, McWatters opposed defining “complex” credit unions solely by their asset size. Finally, he expressed concerns for the cost of compliance on credit unions, especially small credit unions.  

Comments are due April 27, 2015. The text of the proposal can be found here.

Cornerstone Requests

Changes in Revised RBC Proposal

Objected to risk-based capital ratio for well capitalized credit unions. The 10.5% requirement to be well capitalized was lowered to 10%.
Urged reevaluation of risk weights. Many risk weights were lowered, including: investments, real estate loans, MBLs, corporate credit unions, and CUSOs.
Urged removing interest rate risk for better parity with banks under basel III. Interest rate risk was removed from the proposal. However, it may be reconsidered in a separate future proposal.
Urged removal of the individual minimum capital requirement. The individual minimum capital requirement was removed.
Raised concerns with the definition of complex credit union. Asset size threshold for RBC coverage was raised from $50 million to $100 million.
Urged significantly longer compliance date. Extended the compliance date from 18 months to over 4 years.

The tools and documents below will help your credit union determine how this proposal affects you.  The information available today is a basic overview, but rest assured that Cornerstone and CUNA will be analyzing the proposal in great detail. We will share additional information and talking points to assist credit unions in crafting comment letters to NCUA.  Visit this page regularly for updates.

Summary Documents & Tools

PDF Cornerstone Comment Letter to NCUA (04.27.2015) -- Proposed Rule: Risk-Based Capital [RIN 3133-AD77]
Video Cornerstone RBC2 Webinar -- Conducted on April 20, 2015
PDF Cornerstone RBC2 Comment Letter Presentation -- Overview of RBC and how to write an effective comment letter.
PDF CUNA's Comment Letter to the NCUA -- Submitted on April 17, 2015
Video CUNA's Comment Letter Explanation Video -- Produced on April 17, 2015
PDF CUNA RBC2 Comment Letter Guide -- Provides suggestions on how to develop and submit your RBC2 comment letter before the April 27th deadline.
PDF Risk-Based Capital Rule FAQ -- Frequently asked questions and answers for NCUA's risk-based capital revised proposed rule
PDF Risk-Based Capital Ratio: Risk Weights at a Glance -- Compares the risk weights in the current NCUA rule, the original proposal, the revised proposed rule, and the FDIC's rule
PDF Risk-Based Capital Proposal Comparison -- Highlights notable differences between original proposal and revised proposed rule
PDF Risk-Based Capital Ratio Estimator Instructions -- Guidelines for using the risk-based capital estimator tools
PDF Risk-Based Capital Ratio Estimator (PDF) -- Determine your risk-based capital ratio under the revised proposed rule (PDF version)
Spreadsheet Risk-Based Capital Ratio Estimator (XLS) -- Determine your risk-based capital ratio under the revised proposed rule (Microsoft Excel version)
PDF J. Mark McWatters Statement to the NCUA Board -- Statement by J. Mark McWatters, Board Member, at the NCUA Board Meeting on January 15, 2015
Document State RBC List Explanation -- Explanation for listing of credit unions under three risk-based capital approaches.
PDF Arkansas RBC Proposal List -- Analysis of the three risk-based capital proposals for Arkansas credit unions.
PDF Oklahoma RBC Proposal List -- Analysis of the three risk-based capital proposals for Oklahoma credit unions.
PDF Texas RBC Proposal List -- Analysis of the three risk-based capital proposals for Texas credit unions.