[Federal Register Volume 86, Number 44 (Tuesday, March 9, 2021)]
[Proposed Rules]
[Pages 13498-13502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01397]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 702 and 703

[NCUA-2021-0010]
RIN 3133-AF35


Simplification of Risk Based Capital Requirements

AGENCY: National Credit Union Administration.

ACTION:  Advance notice of proposed rulemaking.

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SUMMARY:  The National Credit Union Administration (NCUA) Board (Board) 
is issuing this advance notice of proposed rulemaking (ANPR) to solicit 
comments on two approaches to simplify its risk-based capital 
requirements. The Board's risk-based capital requirements are set forth 
in a final rule dated October 29, 2015, which is currently scheduled to 
become effective on January 1, 2022. The delayed effective date has 
provided the Board with additional time to evaluate the capital 
standards for federally-insured credit unions (FICUs) that are 
classified as ``complex'' (those with total assets greater than $500 
million). The first approach would replace the risk-based capital rule 
with a Risk-based Leverage Ratio (RBLR) requirement, which uses 
relevant risk attribute thresholds to determine which complex credit 
unions would be required to hold additional capital (buffers). The 
second approach would retain the 2015 risk-based capital rule but 
enable eligible complex FICUs to opt-in to a ``complex credit union 
leverage ratio'' (CCULR) framework to meet all regulatory capital 
requirements. The CCULR approach would be modeled on the ``Community 
Bank Leverage Ratio'' framework, which is available to certain banks.

DATES:  Comments must be received on or before May 10, 2021.

ADDRESSES:  You may submit comments, by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
The docket number for this advance notice of proposed rulemaking is 
NCUA-2021-0010. Follow the instructions for submitting comments.
     Fax: (703) 518-6319. Include ``[Your name] Comments on 
``Simplification of Risk Based Capital Requirements'' in the 
transmittal.
     Mail: Address to Melane Conyers Ausbrooks, Secretary of 
the Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public inspection: All public comments are available on the Federal 
eRulemaking Portal at http://www.regulations.gov as submitted, except 
as may not be possible for technical reasons. Public comments will not 
be edited to remove any identifying or contact information.
    Due to social distancing measures in effect, the usual opportunity 
to inspect paper copies of comments in the NCUA's law library is not 
currently available. After social distancing measures are relaxed, 
visitors may make an appointment to review paper copies by calling 
(703) 518-6540 or emailing [email protected].

FOR FURTHER INFORMATION CONTACT:  Policy: Thomas Fay, Director, 
Division of Capital Markets, Office of Examination and Insurance, at 
(703) 518-1179; Legal: Rachel Ackmann, at (703) 548-2601 or Ariel 
Pereira, at (703) 548-2778; or by mail at National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia 22314.

SUPPLEMENTARY INFORMATION:
I. Background
II. This ANPR
III. Legal Authority
IV. Risk-Based Leverage Ratio (RBLR)
V. Complex Credit Union Leverage Ratio (CCULR)
VI. Timeline
VII. Conclusion

I. Background

    Capital adequacy standards are a prudential tool to protect the 
safety and soundness of individual credit unions and the credit union 
system as a whole. Capital serves as a buffer for credit unions to 
prevent institutional failure during times of stress. During a 
financial crisis, a buffer can mean the difference between the 
financial institution surviving or failing. Higher levels of capital 
insulate credit unions from the effects of adverse developments in 
assets and liabilities, allowing credit unions to continue to serve as 
credit providers during times of stress without government 
intervention. Higher levels of capital also reduce the probability of a 
systemic crisis, producing benefits that generally outweigh the 
associated costs.
    On August 7, 1998, Congress enacted the Credit Union Membership 
Access Act (CUMAA).\1\ CUMAA addressed credit union capital adequacy 
standards by adding section 216 to the Federal Credit Union Act 
(FCUA).\2\ Section 216 directed the Board to adopt a regulation to 
establish a system of prompt corrective action (PCA) to restore the net 
worth of all FICUs if they are inadequately capitalized. Section 216 
requires supervisory actions indexed to five statutory net worth 
categories, ranging from well capitalized to critically 
undercapitalized. The mandatory actions and conditions triggering 
conservatorship and liquidation are expressly prescribed by statute.\3\ 
To supplement the mandatory actions, section 216 charged the NCUA with 
developing discretionary actions which are comparable to the 
discretionary safeguards available under section 38 of the Federal 
Deposit Insurance Act--the statute that applies PCA to other federally 
insured depository institutions.\4\
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    \1\ Public Law 105-219, 112 Stat. 913 (1998).
    \2\ The FCUA is codified at 12 U.S.C. 1751 et seq. Section 216 
of the act is codified at 12 U.S.C. 1790d.
    \3\ 12 U.S.C. 1790d(e), (f), (g), (i); 12 U.S.C. 1786(h)(1)(F), 
1787(a)(3)(A).
    \4\ 12 U.S.C. 1790d(b)(1)(A). Section 38 of the FDI Act, 12 
U.S.C. 1831o, was added by section 131 of the Federal Deposit 
Insurance Corporation Improvement Act, Public Law 102-242, 105 Stat. 
2236 (1991).
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    Section 216(d)(1) of the FCUA requires that the NCUA's PCA system 
include, in addition to the statutorily defined net worth ratio 
requirement, ``a risk-based net worth requirement'' for credit unions 
that are complex, as defined by the Board.\5\ The FCUA directs the NCUA 
to base its definition of ``complex'' credit unions ``on the portfolios 
of assets and liabilities of credit unions.'' \6\ If a credit union is 
not classified as complex, as defined by the NCUA, it is not subject to 
a risk-based net worth requirement. The NCUA implemented the regulatory 
PCA system mandated by section 216 through a final rule published on 
February 18, 2000.\7\ The NCUA's PCA regulations are codified in 12 CFR 
part 702.
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    \5\ 12 U.S.C. 1790d(d)(1).
    \6\ 12 U.S.C. 1790d(d).
    \7\ 65 FR 8560 (Feb. 18, 2000).
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    Following the 2007-2009 recession, the NCUA substantially 
reevaluated the capital adequacy standards codified in part 702. On 
October 29, 2015, the Board published a final rule restructuring the 
PCA regulations (2015 Final Rule).\8\ The overarching intent of

[[Page 13499]]

the 2015 Final Rule was to reduce the likelihood that a relatively 
small number of high-risk credit unions would exhaust their capital and 
cause large losses to the National Credit Union Share Insurance Fund 
(NCUSIF). Under the FCUA, FICUs are collectively responsible for 
replenishing losses to the NCUSIF.\9\
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    \8\ 80 FR 66626 (Oct. 29, 2015).
    \9\ See 12 U.S.C. 1782(c)(2)(A). The FCUA requires that each 
FICU pay an insurance premium equal to a percentage of the FICU's 
insured shares to establish sufficient reserves in the NCUSIF to pay 
potential share insurance claims, and to provide assistance in 
connection with the liquidation or threatened liquidation of FICUs 
in troubled condition.
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    The 2015 Final Rule restructured the NCUA's current capital 
adequacy regulations and made various revisions, including amending the 
agency's risk-based net worth requirement, by replacing a credit 
union's risk-based net worth ratio with a risk-based capital ratio.\10\ 
The risk-based capital requirements in the 2015 Final Rule are more 
consistent with the NCUA's risk-based capital ratio measure for 
corporate credit unions, and are more comparable to the risk-based 
capital measures implemented by the Federal Deposit Insurance 
Corporation (FDIC), Board of Governors of the Federal Reserve System 
(Federal Reserve Board), and Office of the Comptroller of Currency 
(OCC) (collectively, the other banking agencies).\11\
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    \10\ For purposes of this ANPR, the term ``risk-based net worth 
requirement'' is used in reference to the statutory requirement for 
the Board to design a capital standard that accounts for variations 
in the risk profile of complex credit unions. The term ``risk-based 
capital ratio'' is used to refer to the specific standards 
established in the 2015 Final Rule to function as criteria for the 
statutory risk-based net worth requirement. The term ``risk-based 
capital ratio'' is also used by the other banking agencies and the 
international banking community when referring to the types of risk-
based requirements that are addressed in the 2015 Final Rule. This 
change in terminology throughout the ANPR is intended only to reduce 
confusion for the reader.
    \11\ The Federal Reserve Board and OCC issued a joint final rule 
on October 11, 2013 (78 FR 62018), and the FDIC issued a 
substantially identical interim final rule on September 10, 2013 (78 
FR 55340). On April 14, 2014 (79 FR 20754), the FDIC adopted the 
interim final rule as a final rule with no substantive changes.
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    The risk-based capital provisions of the 2015 Final Rule apply only 
to credit unions that are ``complex,'' which the rule defined as those 
with total assets over $100 million.\12\ On November 6, 2018,\13\ the 
Board published a supplemental final rule that raised the threshold 
level for a ``complex'' credit union to $500 million (2018 Supplemental 
Rule). Therefore, only credit unions with over $500 million in assets 
are now subject to the risk-based capital requirements of the 2015 
Final Rule. The 2018 Supplemental Rule also delayed the effective date 
of the 2015 Final Rule for one year (from January 1, 2019, to January 
1, 2020).
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    \12\ See, supra note 8.
    \13\ 83 FR 55467 (Nov. 6, 2018).
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    The effective date was delayed a second time through a final rule 
published on December 17, 2019 (2019 Supplemental Rule).\14\ The 
amendments are now scheduled to become effective on January 1, 2022. 
The delay has provided credit unions and the NCUA with additional time 
to implement the 2015 Final Rule. Further, as explained in the 2019 
Supplemental Rule, the delay provided the Board additional time to 
evaluate the NCUA's capital standards for credit unions.\15\ The 2019 
Supplemental Rule provided several examples of issues the Board would 
consider during the delay, including asset securitization, the 
implementation of the Financial Accounting Standards Board's final 
current expected credit loss (CECL) methodology, and amendments to the 
2015 Final Rule for subordinated debt. Additionally, the delay provided 
additional time for the NCUA to prepare for internal modernization 
projects to support the 2015 Final Rule.\16\ The proposed rule also 
stated the Board would use the delay to consider whether a community 
bank leverage ratio (CBLR) analog should be integrated into the NCUA's 
capital standards.\17\
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    \14\ 84 FR 68781 (Dec. 17, 2019).
    \15\ Id. at 68782.
    \16\ Id.
    \17\ Id.
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II. This ANPR

    The ANPR is an invitation from the Board to participate in shaping 
potential changes to the 2015 Final Rule. The Board has interacted with 
stakeholders on the subject of capital requirements going back to 1998, 
when Congress established the PCA requirements for FICUs. There have 
been several NCUA rulemakings regarding capital requirements since 
1998. Stakeholders have made it clear to the Board that any capital 
requirements should be: Tailored to the unique risks of credit unions; 
simple in structure; and, designed to avoid unnecessary regulatory 
burden. This consistent feedback, tempered by the Board's ongoing 
commitment to adapt and improve capital standards based upon 
stakeholder input and lessons learned, remains a driving impetus behind 
this ANPR.
    As noted above, this ANPR invites comments on the RBLR and CCULR 
approaches to the risk-based capital requirements. The RBLR approach 
would replace the 2015 Final Rule in its entirety. The RBLR approach 
uses relevant risk attribute thresholds to determine which complex 
FICUs would be required to hold an additional capital buffer above what 
is currently specified in the PCA regulations. The CCULR approach would 
retain the 2015 Final Rule, but would enable eligible complex FICUs to 
opt-into a framework to meet all regulatory capital requirements. 
Accordingly, the two approaches outlined are mutually exclusive, and 
the CCULR would not be available under the RBLR.
    This ANPR also poses questions designed to garner critical insight 
into how stakeholders view the implicit tradeoff between a reduction in 
the complexity and burden of the capital requirements in exchange for 
holding potentially higher amounts of mandatory capital above the seven 
percent net worth ratio necessary to be classified as well capitalized. 
The Board would benefit from hearing the views of FICUs on these 
possible enhancements now, to allow time to disseminate one of these 
approaches before the 2015 Final Rule is scheduled to take effect. The 
Board also invites any other recommendations that might similarly 
provide regulatory relief without diminishing the efficacy of its 
capital regulation and standards.

III. Legal Authority

    The Board is issuing this ANPR pursuant to its authority under the 
FCUA. Under the FCUA, the NCUA is the chartering and supervisory 
authority for Federal credit unions and the federal supervisory 
authority for state-chartered FICUs.\18\ The FCUA grants the NCUA a 
broad mandate to issue regulations governing both Federal credit unions 
and all FICUs. For example, section 120 of the FCUA is a general grant 
of regulatory authority and authorizes the Board to prescribe rules and 
regulations for the administration of the FCUA.\19\ Other provisions of 
the FCUA, such as section 216, confer specific rulemaking authority to 
address prescribed issues or circumstances.\20\ Accordingly, the FCUA 
grants the Board broad rulemaking authority to protect the safety and 
soundness of the credit union industry and the NCUSIF. This ANPR is 
being issued under both the general

[[Page 13500]]

rulemaking authority conferred by section 120 of the FCUA and as 
discussed in this preamble, the more specific grant of authority under 
section 216.
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    \18\ 12 U.S.C. 1752-1775.
    \19\ 12 U.S.C. 1766(a).
    \20\ Other provisions of the FCUA providing the Board with 
specific rulemaking authority include section 207 (12 U.S.C. 1787), 
which is a specific grant of authority over share insurance 
coverage, conservatorships, and liquidations. Section 209 (12 U.S.C. 
1789) grants the Board plenary regulatory authority to issue rules 
and regulations necessary or appropriate to carry out its role as 
share insurer for all FICUs.
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IV. Risk-Based Leverage Ratio (RBLR)

A. Overview of RBLR Approach

    As an alternative to the 2015 Final Rule, the Board is seeking 
comment on a simplified capital framework that satisfies the risk-based 
net worth requirement for complex FICUs. The Board's intention for the 
RBLR approach is to simplify the regulatory risk-based capital 
requirements, while ensuring the overall capital framework:
    (1) Complies with all applicable statutory and legal requirements, 
including the statutory PCA requirements;
    (2) is easier to understand and use; and
    (3) effectively identifies risk characteristics that trigger 
commensurate capital requirements.
    The RBLR approach would utilize certain risk characteristics to 
determine the required capital level. This approach differs from the 
2015 Final Rule, where all assets and certain off-balance sheet 
activities are categorized into risk groups and then risk-weighted to 
produce a risk-based ratio. The Board is also considering using the net 
worth ratio as the RBLR measurement, which is already a well-
established, simplified, and observable measurement. The net worth 
ratio would be supplemented with mandatory capital buffers when certain 
risk factors are triggered. This approach, illustrated in the chart 
below, would require an extra cushion of capital buffers over and above 
the seven percent net worth ratio standard for classification as well 
capitalized when certain characteristics inherent in a FICU's balance 
sheet exceed specified thresholds. The amount of the capital buffer 
would be a discreet percentage of net worth-to-total assets over seven 
percent and would be a mandatory capital requirement.
[GRAPHIC] [TIFF OMITTED] TP09MR21.004

    The Board is considering basing the RBLR risk factors on the asset 
categories from the 2015 Final Rule, which utilize higher risk 
weightings. For example, there are a number of risk-based capital 
categories under the 2015 Final Rule that receive a risk weighting 
greater than 100 percent. These categories include:
     Non-current loans,
     commercial loans exceeding 50 percent of assets,
     junior lien real estate loans exceeding 20 percent of 
assets,
     mortgage servicing rights, and
     other investment activities.
    The Board may also consider other asset concentration risk factors 
in developing risk thresholds.
    As previously mentioned, the Board seeks a reduction in the 
administrative burden of categorizing all assets and off-balance 
balances into risk categories. The RBLR approach would identify certain 
risk factors and establish thresholds that would trigger a capital 
buffer. The buffer amount might also vary based on the level of the 
applicable threshold. For example, if a FICU held a certain amount of 
commercial loans as a percentage of assets that triggered a ``Buffer 
A'' capital requirement, then the FICU would be required to hold a 
higher net worth ratio to maintain a well-capitalized classification. 
However, if a second and higher threshold were established for 
commercial loans, then it is possible that the FICU will be required to 
hold an additional amount of capital above the first buffer amount 
(Buffer B).
    The Board's intention is that the RBLR will streamline compliance 
with capital requirements without sacrificing the safety and efficacy 
of the overall capital regime. As envisioned, the greater simplicity 
would come from converting the current computational framework for 
complex credit unions into a three-tiered system of minimum leverage 
ratios for all complex FICUs. The minimum leverage ratio necessary to 
be well capitalized under RBLR would remain at seven percent, with two 
higher tiers applied to those complex credit unions exhibiting 
quantified amounts of higher relative risk. The defining risk 
attributes would be a function of the types and concentration of 
underlying assets.
    Basing the RBLR on the net worth ratio would significantly reduce 
the Call Report requirements and utilize a measurement that FICUs are 
already familiar with. However, while an RBLR approach would be 
simpler, it may also result in a higher capital requirement for certain 
FICUs that have riskier assets when compared to the risk-based capital 
framework. The Board welcomes input on which asset types and 
concentrations stakeholders view as most significant to establish 
capital buffers in excess of the

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seven percent threshold. The Board also welcomes views on the 
practicality of having discreet thresholds above seven percent to guard 
against higher risk, and striking the right balance between adequate 
buffers and the efficient allocation of capital.
    Question 1: The Board invites comments on the merits of 
incorporating the RBLR approach as an alternative to the risk-based 
capital framework under the 2015 Final Rule. What risk characteristics 
should be incorporated into the RBLR? Are the higher risk-weighted 
asset categories from the risk-based capital framework the correct 
starting point, or should the Board consider a different approach?
    Question 2: The Board invites comments on what risk thresholds 
should be used for the risk factors. What measurements should be used 
and how would the measurement be reported and monitored? Should there 
be more than one capital buffer for a risk factor based on the 
measurement? How would multiple measurements be combined or weighted to 
determine the threshold?
    Question 3: The Board invites comments on what capital buffers over 
the well-capitalized seven percent threshold should be used?

B. Impact of RBLR on Subordinated Debt Final Rule

    The Board recognizes that any changes to the regulatory capital 
framework have potential consequences for other NCUA rulemakings. Other 
than the changes required to implement any regulatory capital framework 
changes, the Board believes the RBLR approach would require the NCUA to 
modify its recent final rulemaking regarding subordinated debt 
(Subordinated Debt Rule).\21\ The Subordinated Debt Rule is a direct 
amendment to the 2015 Final Rule. As such, elimination of the 2015 
Final Rule would alter the form and structure of the Subordinated Debt 
Rule. Further, the current Subordinated Debt Rule allows a complex 
credit union that is not designated as a ``low-income credit union'' 
(LICU) to issue subordinated debt to include in the risk-based capital 
numerator.\22\ In an RBLR approach, non-LICU complex credit unions may 
or may not be able to apply subordinated debt towards a capital 
calculation, depending on the ultimate design of the approach and the 
relevant legal and policy considerations.
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    \21\ The final rule was approved by the Board at the December 
17, 2020 meeting. See, https://www.ncua.gov/files/agenda-items/AG20201217Item5b.pdf.
    \22\ Subject to a 20 percent per annum discounting of 
outstanding Subordinated Debt once the remaining maturity is less 
than five years.
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    The Board would be required to evaluate the ability of non-LICU 
complex credit unions to use a subordinated debt instrument for the 
RBLR, as the FCUA includes a definition of ``net worth,'' which only 
allows LICUs to include such instruments in their net worth. The 
potential absence of utility for non-LICU complex credit unions and the 
structural changes resulting from the repeal of the 2015 Final Rule may 
require amendments to the Subordinated Debt Rule. However, the Board 
notes the Subordinated Debt rule would not need to be modified with 
respect to non-complex LICUs and new credit unions. Changes to the 
Subordinated Debt rule would be focused on moving the rule from its 
current location in the 2015 risk-based capital rule, removing 
references to the risk-based capital rule, and amending the rule for 
possible use by complex credit unions of Subordinated Debt to meet any 
proposed RBLR.
    Question 4: The Board invites comments on how a non-LICU complex 
credit union may be able to apply subordinated debt towards an RBLR 
capital calculation.

V. Complex Credit Union Leverage Ratio (CCULR)

    Section 201 of the Economic Growth, Regulatory Relief, and Consumer 
Protection Act directed the other banking agencies to propose a 
simplified, alternative measure of capital adequacy for certain 
federally insured banks.\23\ On November 13, 2019, the other banking 
agencies issued a final rule implementing this statutory directive 
(CBLR Final Rule).\24\
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    \23\ Public Law 115-174 (May 24, 2018). Section 201 is codified 
at 12 U.S.C. 5371 note.
    \24\ 84 FR 61776 (Nov. 13, 2019).
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    The CBLR is an optional framework to the risk-based capital 
requirements for depository institutions and depository institution 
holding companies that meet the following criteria:
    1. A leverage ratio (equal to tier 1 capital divided by average 
total consolidated assets) of greater than nine percent; \25\
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    \25\ Under section 4012 of Public Law 116-136 (Mar. 27, 2020), 
the CBLR was temporarily set to 8 percent. See, 85 FR 22924 (Apr. 
23, 2020). Under the statute, the temporary CBLR of 8 percent 
expired on December 31, 2020. The CBLR will transition back to 9 
percent during calendar year 2021. See, 85 FR 22930 (Apr. 23, 2020).
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    2. Total consolidated assets of less than $10 billion;
    3. Total off-balance sheet exposures of 25 percent or less of its 
total consolidated assets;
    4. Trading assets plus trading liabilities of five percent or less 
of its total consolidated assets; and
    5. Not an advanced approaches banking organization.\26\
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    \26\ Advanced approaches banking organizations are generally 
those with at least $250 billion in total consolidated assets or at 
least $10 billion in total on-balance sheet foreign exposure, and 
depository institution subsidiaries of those firms.
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    The CBLR Final Rule refers to the depository institutions and 
depository institution holding companies that meet these regulatory 
criteria as ``qualifying community banking organizations.'' Qualifying 
community banking organizations that opt into the CBLR framework are 
considered to be in compliance with the other banking agencies' 
generally applicable risk-based and leverage capital requirements. 
Further, for the purposes of section 38 of the Federal Deposit 
Insurance Act,\27\ these qualifying banking organizations will have met 
the well-capitalized ratio requirements. In exchange, the qualifying 
banking organization must maintain a greater amount of capital than 
normally required to be deemed well capitalized. Qualifying community 
banking organizations may opt into or out of the CBLR framework at any 
time.
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    \27\ As noted previously, this is the statute that applies PCA 
to federally insured depository institutions, as defined under the 
Federal Deposit Insurance Act.
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    The CBLR Final Rule includes a two-quarter grace period during 
which a qualifying community banking organization that temporarily 
fails to meet any of the qualifying criteria, including the greater 
than nine percent leverage ratio requirement, will still be deemed well 
capitalized. However, the qualifying community banking organization 
must maintain a leverage ratio greater than eight percent. At the end 
of the grace period, the banking organization must meet all qualifying 
criteria to remain in the CBLR framework or otherwise must comply with 
and report under the generally applicable risk-based and leverage 
capital requirements. Similarly, a banking organization that fails to 
maintain a leverage ratio greater than eight percent will not be 
permitted to use the grace period and must comply with the generally 
applicable capital requirements and file the appropriate regulatory 
reports.
    In March 2020, the CBLR was temporarily set to eight percent by 
statute.\28\ Accordingly, effective the second quarter of 2020, the 
CBLR requirement was eight percent or greater.\29\ Banking 
organizations are still

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subject to a two-quarter grace period if they do not meet any of the 
eligibility criteria and may remain under the CBLR framework, provided 
that their leverage ratio is above seven percent during the grace 
period. Beginning in 2021, the CBLR requirement will be 8.5 percent or 
greater and the minimum requirement during the grace period will be 7.5 
percent.\30\ Beginning in 2022, the CBLR requirement will return to 
nine percent and the minimum requirement during the grace period will 
return to eight percent.
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    \28\ Supra, note 22.
    \29\ See, 85 FR 22924 (Apr. 23, 2020).
    \30\ See, 85 FR 22930 (Apr. 23, 2020).
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    In the preamble to the 2019 Supplemental Rule, the Board explained 
that it might consider a capital standard analog to the CBLR framework 
developed by the other banking agencies--referred to in this ANPR as 
CCULR. The CCULR approach would be based on the principles of the CBLR 
framework and, for complex credit unions that meet specified qualifying 
criteria and have opted into the approach, would provide relief from 
the requirement to calculate a risk-based capital ratio, as implemented 
by the 2015 Final Rule. In exchange, the qualifying complex credit 
union would be required to maintain a higher net worth ratio than is 
otherwise required for the well-capitalized classification. This is a 
similar trade-off to the one made by qualifying community banking 
organizations under the CBLR.
    As noted above, the 2015 Final Rule is scheduled to take effect on 
January 1, 2022. Accordingly, a CCULR approach would be parallel to the 
2015 Final Rule and would not take effect until January 1, 2022. 
Qualifying complex credit unions would not be able to opt into the 
proposed CCULR approach prior to this effective date.
    In designing the CCULR, the Board would seek to further the goal of 
the FCUA's PCA requirements by requiring that complex credit unions 
continue to hold capital commensurate with their risks, while 
minimizing the burden associated with complying with the NCUA's risk-
based capital requirement. The Board welcomes comments on a possible 
adoption of the CCULR and, in particular, seeks input on the following 
issues:
    Question 5: The Board invites comments on the merits of 
incorporating the CCULR in its capital adequacy regulations. Should the 
NCUA capital framework be amended to adopt an ``off-ramp'' such as the 
CCULR to the risk-based capital requirements of the 2015 Final Rule?
    Question 6: The Board invites comment on the criteria for CCULR 
eligibility. Should the Board adopt the same qualifying criteria as 
established by the other banking agencies for the CBLR? In recommending 
qualifying criteria regarding a credit union's risk profile, please 
provide information on how the qualifying criteria should be considered 
in conjunction with the calibration of the CCULR level under question 
7, below.
    Question 7: What assets and liabilities on a FICU's Call Report 
should the Board consider in determining the net worth threshold? How 
should each of these items be weighted?
    Question 8: What are the advantages and disadvantages of using the 
net worth ratio as the measure of capital adequacy under the CCULR? 
Should the Board consider alternative measures for the CCULR? For 
example, instead of the existing net worth definition, the CCULR could 
use the risk-based capital ratio numerator from the 2015 Final Rule, 
similar to the ``Tier 1 Capital'' measure used for banking 
institutions.
    Question 9: Should all complex credit unions be eligible for the 
CCULR, or should the Board limit eligibility to a subset of these 
credit unions? For example, the Board could consider limiting 
eligibility to the CCULR approach to only complex credit unions with 
less than $10 billion in total assets.
    Question 10: The Board invites comment on the procedures a 
qualifying complex credit union would use to opt into or out of the 
CCULR approach. What are commenters' views on the frequency with which 
a qualifying complex credit union may opt into or out of the CCULR 
approach? What are the operational or other challenges associated with 
switching between frameworks?
    Question 11: The Board invites comment on the treatment for a 
complex credit union that no longer meets the definition of a 
qualifying complex credit union after opting into the CCULR approach. 
Should the Board consider requiring complex credit unions that no 
longer meet the qualifying criteria to begin to calculate their assets 
immediately according to the risk-based capital ratio? Should the Board 
provide a grace period for these credit unions to come back into 
compliance with the CCULR and, if so, how long of a grace period is 
appropriate? What other alternatives should the Board consider with 
respect to a complex credit union that no longer meets the definition 
of a qualifying complex credit union and why? Is notification that a 
credit union will not meet the qualifying criteria necessary?

VI. Timeline

    As discussed above, the 2015 Final Rule will be effective January 
1, 2022. The Board expects that any final rule developed in response to 
this ANPR would be issued before the effective date of the 2015 Final 
Rule. Accordingly, the Board expects that any notice of proposed 
rulemaking issued in response to this ANPR would be issued by midyear 
of 2021. Once comments are received, the Board will evaluate the 
comments and direct NCUA staff to move forward in drafting any proposed 
rule to meet this timeline.

VII. Conclusion

    The Board is committed to tailoring its capital requirements to the 
unique features of credit unions. The two approaches outlined in this 
ANPR are designed to accomplish this goal without reducing the 
effectiveness of the Board's capital standards. The RBLR approach would 
replace the 2015 Final Rule risk-based capital requirements using 
relevant risk attribute thresholds that would require additional 
capital buffers. The CCULR would enable eligible complex FICUs to opt-
into a framework to meet all regulatory capital requirements. The Board 
invites comments on these two options, as well as on any other 
recommendations that might similarly accomplish the goals outlined in 
this ANPR. All comments will be considered in the development of a 
future proposed rule.

    By the National Credit Union Administration Board, this 14th day 
of January, 2021.
Melane Conyers Ausbrooks,
Secretary of the Board.
[FR Doc. 2021-01397 Filed 3-8-21; 8:45 am]
BILLING CODE P