Corporate Credit Union Final Rule Analysis
The National Credit Union Administration (NCUA) Board has approved the new corporate credit union final rule, which is more than 250 pages long and will impose extensive changes to NCUA's corporate credit union rules. The final rule is substantially similar to the proposal although a number of changes were made.
The final rule addresses key safety and soundness issues including capital, prompt corrective action, investments, asset-liability management, corporate governance and transparency, and corporate CUSO activities. The final rule will be effective 90 days after publication in the Federal Register, although the effective date of many provisions will be delayed, as described in the analysis.
The final rule makes significant changes to the capital rules for corporates. Corporate credit unions will be subject to stronger capital requirements that are more consistent with those of the banking regulators under Basel I. The current 4% total capital ratio will be replaced with:
- 4% percent leverage ratio, for an adequately capitalized corporate credit union;
- 4% tier one risk-based capital ratio; and
- 8% total risk-based capital ratio.
If a corporate fails to meet any of its minimum ratios, it must develop a capital restoration plan. The final rule requires that a certain percentage of core capital be in the form of retained earnings (100 basis points after six years and 200 basis points after ten years) in order to be adequately capitalized.
Please see CUNA's analysis of the final rule for additional information on these and other changes.