WASHINGTON—Comments are due to NCUA Sept. 1 on the agency's proposed revisions to requirements for corporate credit union retained earnings and Tier 1 capital.
Released during the NCUA board's June 23 open meeting and published this week in the Federal Register, the proposed rule would primarily affect the calculation of capital after corporates consolidate and set a retained earnings ratio target in meeting prompt corrective action standards, NAFCU noted.
The changes would align post-consolidation retained earnings with generally accepted accounting principles by incorporating GAAP equity acquired in a merger as a component of retained earnings. Retained earnings are a component of Tier 1 capital, so the latter would change as well, the trade association added.
NCUA has said the changes would, among other things, provide transparency in corporate credit unions' presentation of their capital adequacy. The agency last revised the corporates' regulatory framework in 2010 in response to the fallout from the financial crisis, which included the failure of five large corporate credit unions with investments in faulty mortgage securities, noted NAFCU.
“Noting improvements in the corporate system through stabilization and an improved economy, the agency says the board believes conditions are such that it is now safe and appropriate to revisit the capital standards set in the 2010 rule,” NAFCU said.
The corporate system has significantly contracted and consolidated since the 2010 rule went into effect. Before the rule, there were 26 corporates with an aggregate $81.7 billion in assets. Today, there are 11 corporates with an aggregate $24.9 billion, explained NAFCU.