Calculator for Proposed Risk-Based Capital Rule

The National Credit Union Administration issued a Notice of Proposed Rulemaking to revise and replace the agency’s current risk-based capital requirements for credit unions with assets greater than $50 million.

Credit Union Lookup

The proposed rule includes implementation of a new method for computing the risk-based capital ratio that is more consistent with the approach used by the other banking agencies. It also includes revised risk weights for many asset classifications and a higher capital requirement for credit unions with concentrations of assets in real estate loans or member business loans. The effective date of these changes is projected to occur 12 to 18 months after NCUA issues the final rule.

The calculations below provide a comparison of your credit union’s current and new risk-based capital ratio and Prompt Corrective Action classification under the proposed rule. The data used in these calculations is the most recent validated 5300 Call Report. The following calculations are for informational purposes only. NCUA will not use the proposed rule calculations to determine credit union supervision.

You can access the Federal Register notice and more details about the proposed rule here.
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Assets

The proposed risk-based capital applies to credit unions with assets greater than $50 million. Small credit unions, under $50 million in assets, are exempt from the proposed risk-based capital rule; however, for informational purposes, the calculator is available for all credit unions.

Current Regulation

Net Worth
%
Risk-Based Net Worth Requirement
%
Alternative RBNW Calculation

Proposed Regulation

Applies to credit unions with assets greater than $50 million.

Net Worth
%
Risk-Based Capital Ratio
%
Alternative RBNW Calculation
N/A

Proposed Prompt Corrective Action Classification Criteria

  • Critically Undercapitalized
    • Net Worth Ratio:
      Less than 2%
      Risk-Based Capital Ratio:
      N/A

      No conditions.

  • Significantly Undercapitalized
    • Net Worth Ratio:
      2% to 3.99%
      Risk-Based Capital Ratio:
      N/A

      Or if "undercapitalized" at less than 5% net worth and fails to timely submit or materially implement a net worth restoration plan.

  • Undercapitalized
    • Net Worth Ratio:
      4% to 5.99%
      Risk-Based Capital Ratio:
      Less than 8%

      Must pass both net worth ratio and risk-based capital ratio.

  • Adequately Capitalized
    • Net Worth Ratio:
      6% to 6.99%
      Risk-Based Capital Ratio:
      8% to 10.49%

      Must pass both net worth ratio and risk-based capital ratio.

  • Well Capitalized
    • Net Worth Ratio:
      7% or above
      Risk-Based Capital Ratio:
      10.5% or above

      Must pass both net worth ratio and risk-based capital ratio.

View details to see more about calculating the proposed risk-based capital ratio.

Proposed Risk-Based Capital Calculation

Numerator Denominator = =

Numerator

The numerator for the risk-based capital ratio remains largely the components of a credit union’s net worth. In order to capture all of the material risks, we included some additional equity items and subtracted other balance sheet items. The goal is to achieve a numerator that reflects a measure of amounts available to cover losses.


Numerator Formula View Formula
Call Report Account     Dollars
Liabilities
Subordinated Debt included in Net Worth Acct_925A2
Subordinated Debt (non low income and non-208) Acct_867B2
Equity
Undivided Earnings Acct_940
Regular Reserve Acct_931
Appropriations for Non-Conforming Investments Acct_668
Other Reserves Acct_658
Equity Acquired in Merger Acct_658A
Net Income Acct_602
Contra Assets
ALLL (limited to 1.25% of risk assets/denominator) Acct_719
Other Assets
Goodwill Acct_009D2
Identifiable Intangible Assets Acct_009D1
National Credit Union Share Insurance Fund Acct_794

Denominator

The proposal includes a calculation of a credit union’s risk-weighted asset amount for its on- and off-balance sheet exposures. A credit union determines its total risk-weighted assets by calculating the sum of:
(1) its risk-weighted assets, minus
(2) goodwill and other intangibles, and minus
(3) the National Credit Union Share Insurance Fund deposit.

Once NCUA issues the final rule, we plan to modify the 5300 Call Report to include the final approved risk-based capital ratio calculation. NCUA also intends to expand the Call Report to include the following data collection:

• Schedule B – Investments, Supplemental Information. NCUA will revise this schedule to include maturity categories for FDIC-Issued Guaranteed Notes (account 740A) and All Other US Government Obligations (account 741C3). This change will enable NCUA to apply a zero risk-weight to these investments similar to NCUA Guaranteed Notes. Due to the limitations in our current data collection, the calculation below applies a risk weighting to these investments based on their investment maturity category as reported on Page 1 of the 5300 Call Report.

• Balance Sheet – Loan Section. NCUA will add a category for federally guaranteed student loans. This will enable NCUA to apply a zero risk-weight to these loans. NCUA included these loans with “All Other Nondelinquent Loans” for purposes of this calculation.

• Liquidity, Commitments, and Sources. NCUA will include specific loan categories for “Loans Transferred with Limited Recourse Qualifying for Sales Accounting” (Account 819). This change will provide more detailed information to consistently apply risk weights based on the loan type. This calculation applies a 0.75 risk weight.

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Calculation
Cash
Account Value Proposed
Risk Weight
Calculation
Cash on Hand View Formula 0.00
Investments
Account Value Proposed
Risk Weight
Calculation
0 - 1 Year View Formula 0.20
> 1 to 3 Years View Formula 0.50
> 3 to 5 Years View Formula 0.75
> 5 to 10 Years View Formula 1.50
> 10 Years View Formula 2.00
Corporate CU Member Capital View Formula 1.00
PIC/ Perpetual Contributed Capital View Formula 2.00
Loans
Account Value Proposed
Risk Weight
Calculation
Nondelinquent Nonfederally Guaranteed Student Loans View Formula 1.00
Nondelinquent Other Loans View Formula 0.75
Reportable Delinquent Other Loans View Formula 1.50
Nondelinquent 1st Mortgage Real Estate Loans (excluding Member Business Loans secured by Real Estate) View Formula < 25% of Assets View Formula 0.50
Excess of 25 - 35% of Assets View Formula 0.75
Excess of 35% of Assets View Formula 1.00
Other Real Estate Loans and Delinquent Real Estate Loans View Formula < 10% of Assets View Formula 1.00
Excess of 10 - 20% of Assets View Formula 1.25
Excess of 20% of Assets View Formula 1.50
Small Business Administration Loans View Formula (0.80)
Member Business Loans View Formula < 15% of Assets View Formula 1.00
Excess of 15 - 25% of Assets View Formula 1.50
Excess of 25% of Assets View Formula 2.00
Other Assets
Account Value Proposed
Risk Weight
Calculation
National Credit Union Share Insurance Fund View Formula (1.00)
Goodwill View Formula (1.00)
Identifiable Intangible Assets View Formula (1.00)
Investment in Credit Union Service Organization View Formula 2.50
Mortgage Servicing Rights View Formula 2.50
All Other Assets View Formula 1.00
Off Balance Sheet Items
Account Value Proposed
Risk Weight
Calculation
Loans Sold with Recourse View Formula 0.75
Unfunded Commitments on Business Loans (75% conversion) View Formula 1.00
Unfunded Commitments for Non-Business Loans (10% conversion) View Formula 0.75