Equity Ratio, Net Worth Changes Passed by NCUA

Amendments to the Federal Credit Union Act’s definitions of the National Credit Union Share Insurance Fund’s (NCUSIF) definitions of equity ratio and credit union net worth were unanimously approved by the National Credit Union Administration (NCUA) board on Sept. 22.

During the meeting, NCUA Chairman Debbie Matz said the agency did not intend for the “bargain purchase gain” provisions to discourage mergers or to negatively impact credit unions that have merged. The bargain purchase gain changes will not apply to mergers that have already begun or already have been approved. The changes are set to become effective thirty days after the final rule is published in the Federal Register. However, agency staff hinted that the effective date may be pushed closer to the end of 2011, as some changes to call reports cannot be made within thirty days.

The equity ratio changes clarify that the NCUSIF’s equity ratio must be based solely on the financial statements of the NCUSIF alone, without consolidation with other statements such as those of conserved credit unions.

Under the changes, Section 208 assistance provided to troubled credit unions will soon qualify as regulatory net worth for natural-person credit unions under the NCUA’s Prompt Corrective Action authority.

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance, NCUA.