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April 25, 2018

The NCUA Board issued the final rule to amend its regulations on capital planning and stress testing for federally insured credit unions with USD 10 billion or more in assets (also known as the covered credit unions). This final rule becomes effective on June 01, 2018.

The final rule reduces regulatory burden by removing some of the capital planning and stress testing requirements currently applicable to certain covered credit unions. The final rule also makes the requirements of NCUA more efficient by, among other things, authorizing covered credit unions to conduct their own stress tests in accordance with the NCUA's requirements and permitting covered credit unions to incorporate the stress test results into their capital plans.

Compared to the proposed rule, NCUA, in the final rule, has partially revised the thresholds for tier I and II covered credit unions. In the final rule, a tier I credit union is a covered credit union that has less than USD 15 billion in total assets and a tier II credit union is a covered credit union that has USD 15 billion or more in total assets, but less than USD 20 billion in total assets (or is otherwise designated as a tier II credit union by NCUA). Therefore, in the final rule, a covered credit union that remains under USD 15 billion will not conduct annual stress tests, even if it has been subject to capital planning requirements for over three years. For such covered credit unions, the final rule provides additional regulatory relief from supervisory stress testing. However, a tier I credit union that crosses the USD 15 billion threshold in less than three years after becoming a covered credit union, will have to conduct stress tests earlier under the final rule than as proposed. The designation for a tier III credit union remains the same as proposed and includes a covered credit union that has USD 20 billion or more in total assets (or is otherwise designated as a tier III credit union by NCUA).

 

Related Link: Final Rule

Effective Date: June 01, 2018

Keywords: Americas, US, Banking, Stress Testing, Capital Planning, Credit Unions, Proportionality, NCUA

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