Skip to main content
United States flag An official website of the United States government
Official websites use .gov
A .gov website belongs to an official government organization in the United States.
Secure .gov websites use HTTPS
A lock () or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Proposed Risk-Based Capital Rule Adds One-Year Delay, Exempts More Credit Unions

August 2018
Proposed Risk-Based Capital Rule Adds One-Year Delay, Exempts More Credit Unions

Board Action Bulletin

Budget Review Projects Nearly $8.5 Million Operating Budget Net Savings

ALEXANDRIA, Va. (Aug. 2, 2018) – The National Credit Union Administration Board held its seventh open meeting of 2018 at the agency’s headquarters today and unanimously approved five items:

  • A proposed supplemental rule amending the agency’s prompt corrective action regulations to delay the effective date of the risk-based capital rule and raise the asset threshold defining a complex credit union.
  • A $675,000 operating fund budget transfer to pay for cybersecurity improvements and employee relocation costs associated with the agency’s reorganization.
  • Continuation of the current 18 percent annual interest rate limit for loans—with the exception of loans originated under the payday alternative loan program—through March 10, 2020.
  • A final rule creating new suspension and debarment procedures to better protect the federal government’s interest in only doing business with presently responsible contractors.
  • A proposed rule to add specificity and clarity to current regulations covering loans and lines of credit granted to members and to provide credit unions with regulatory relief.

The Chief Financial Officer briefed the Board on the agency’s revised 2018 budget estimates, which currently project a reduction in the agency’s operating fund budget of almost $8.5 million.

Proposed Risk-Based Capital Rule Has One-Year Delay, Raises Asset Threshold for Complex Credit Unions

Ninety percent of federally insured credit unions would be exempt from the NCUA’s risk-based capital rule, and covered credit unions would have an additional year to prepare, under a proposed supplemental rule (Part 702) approved by the Board.

“The proposed changes to the risk-based capital rule, reached through a collaborative and bi-partisan process, if finalized, would allow the agency to provide federally insured credit unions with a measure of regulatory relief without impairing the safety and soundness of the National Credit Union Share Insurance Fund,” NCUA Board Chairman J. Mark McWatters said.

“This proposed rule is a substantive solution, not just another delay,” Board Member Rick Metsger said. “It will give the agency time to finalize its systems and give the handful of complex credit unions who do not have adequate risk-based capital time to raise capital or adjust their balance sheets to achieve compliance and protect their members. This proposed rule continues the NCUA’s tradition of nonpartisan problem-solving. Most importantly, it will better position the Share Insurance Fund, and the system, for the next set of challenges they face.”

The proposed rule would delay the current effective date of the risk-based capital rule approved in October 2015 to Jan. 1, 2020. The current effective date is Jan. 1, 2019.

The proposed rule also could raise the current $100 million asset threshold for defining a complex credit union to $500 million. As a result, 90 percent of credit unions—based on Dec. 31, 2017, Call Report data—would be exempt from the rule. Under the proposed rule, more than 98 percent of all complex credit unions would be considered well-capitalized.

If the rule is finalized, during the one-year delay, the NCUA’s current prompt corrective action requirements would remain in effect.

Comments on the proposed rule, available online here, must be received within 30 days of publication in the Federal Register.

Almost $8.5 Million in Operating Budget Net Savings Projected

The Chief Financial Officer reported the NCUA expects net savings of nearly $8.5 million in its 2018 Operating Fund Budget, primarily due to reduced staff levels from the agency’s reorganization.

The Board approved a $291.8 million Operating Fund Budget at its November 2017 meeting. Current estimates show the agency will have 70 fewer full-time equivalent positions than the 1,183 positions originally planned in the 2018 budget, resulting in a decrease in salary and benefits costs.

The mid-year budget review also reported estimated reductions for travel ($632,000); rent, communications, and utilities ($91,000); administrative costs ($155,000); and contract costs ($102,000). The $15.4 million Capital Projects Budget remained unchanged. The review projected $325,000 savings in the $8.1 million Share Insurance Fund Administrative Budget.

The mid-year budget review presentation is available on the agency’s Budget and Supplementary Materials page.

18 Percent Loan Interest Rate Ceiling Extended to March 2020

After reviewing trends in money-market rates and current conditions among federal credit unions, the Board extended the current interest rate ceiling of 18 percent on most federal credit union loans through March 10, 2020.

The Federal Credit Union Act caps the interest rate on federal credit union loans at 15 percent; however, the NCUA Board has discretion to raise that limit for 18-month periods if interest-rate levels could threaten the safety and soundness of credit unions. The 18 percent cap applies to all federal credit union lending except originations made under NCUA’s consumer-friendly payday alternative loan program, which are capped at 28 percent.

An NCUA staff analysis found money market rates have risen between December 2017 and June 2018, and lowering the interest rate could have an adverse effect on the safety and soundness of credit unions. The Federal Credit Union Act requires both those conditions exist for the Board to allow the interest rate ceiling to be higher than 15 percent. The analysis found that a reduction in the loan rate cap could also force credit unions to restrict the flow of credit, particularly to low-income members.

The Board will continue to monitor market rates and credit union financial conditions to determine whether a change should be made to the maximum loan rate. The Board may take action sooner than 18 months if circumstances warrant.

Details of the staff analysis are available online here.

Final Rule Will Improve Agency’s Procurement Practices

The NCUA is adopting new contractor suspension and debarment procedures to protect the federal government’s interest is doing business with responsible contractors under a final rule approved by the Board.

Although the NCUA is not required to follow federal government acquisition laws and regulations, the agency believes those include best practices, and suspension and debarment procedures have proven to be an important part of government procurement. These procedures would protect the agency by helping ensure the NCUA does business only with presently responsible contractors. The NCUA will only solicit offers from, award contracts to, or consent to subcontracts with presently responsible contractors.

The final rule, available online here, will become effective 30 days after publication in the Federal Register.

Proposed Lending Rule Changes Would Provide Clarity and Ease Compliance

As part of the agency’s ongoing regulatory reform agenda, the NCUA Board proposed to amend its regulations (Part 701) regarding loans and lines of credit to members.

The proposed rule would make those regulations more user-friendly by:

  • Identifying in one section the various maturity limits applicable to federal credit union loans;
  • Clarifying that the maturity for a new loan under GAAP is calculated from the new date of origination;
  • Expressing clearly the limits for loans to a single borrower or group of associated borrowers; and
  • Seeking comment on whether the agency should provide for longer, more flexible maturity limits on certain loans.

Comments on the proposed rule, available online here, must be received within 60 days of publication in the Federal Register.

The NCUA tweets all open Board meetings live. Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at The NCUA also live streams, archives and posts videos of open Board meetings online.

Board Member J. Mark McWatters
Last modified on