NWCUA-Backed Regulatory Relief Provisions Show up in Final NCUA Stress-Testing Rule

4/24/18

The National Credit Union Administration (NCUA) finalized its capital planning and stress testing requirements during last week’s Board meeting.

The final rule (Part 702) provides regulatory relief provisions you Association advocated for, according to John Trull, AVP Regulatory Affairs. Trull called the rule “a step in the right direction because it offers targeted regulatory relief that makes sense.”

Specifically, under the new rule:

  • Credit unions with assets under $20 billion will continue to develop annual capital plans but will no longer be required to submit them to NCUA by May 31. Credit unions with assets greater than $20 billion will continue to submit plans for agency approval.
  • NCUA will no longer be required to conduct supervisory stress tests. Credit unions subject to the rule will conduct their own stress tests, with NCUA reserving the right to conduct stress tests on covered credit unions if necessary.
  • Credit unions with assets less than $15 billion, will no longer be subject o stress testing requirements, while those with assets over $15 billion will be required to conduct stress tests.
  • For credit unions with assets over $20 billion, there will a 5 percent minimum stress test capital ratio.

“Stress tests were created as a result of the financial crisis in response to banks being overleveraged and overexposed to complex real estate derivatives,” Trull said. “This was not the case for credit unions which make investments locally in people they know, and in products they understand. Furthermore, credit unions tend to hold more capital than banks in relation to their balance sheets, which allows credit unions to weather economic conditions. The fact is, as not-for-profit cooperatives, credit unions are not being forced by shareholders to deliver ever greater returns at ever greater risk.”

The final rule is available online here.

Editor’s note: Questions about the new NCUA rule, or comments on pending regulatory relief advocacy? Contact John Trull by emailing jtrull@nwcua.org

Posted in Advocacy News.