CliftonLarsonAllen has submitted a comment letter to the National Credit Union Administration (NCUA) about its proposed regulation for prompt correction action – risk-based capital.
The proposed rule is designed to establish a direct relationship between risk exposure and required capital for credit unions. It outlines the new risk-based capital calculation, and provides extensive information regarding NCUA’s methodology and rational for the various risk-weightings.
CLA’s comment letter states that while it supports the NCUA’s efforts to enhance the risk-based capital system for the credit union industry, it has concerns regarding the definition of “complex” credit unions, the risk weightings used in the proposal, and the implementation period.
The NCUA has indicated it will have an extended phase-in period for the final rule — this will give credit unions enough time to adjust their risk profiles and/or capital levels to comply with the new regulation. With the NCUA’s proposed risk-based capital regulation as well as the current expected credit loss (CECL) model proposed by the Financial Accounting Standards Board (FASB) on the horizon, credit unions should closely monitor their capital positions.