NCUA Amends Regulations on Capital Planning and Stress Testing
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
Featured Experts
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Nihil Patel
Data scientist; SaaS product designer; credit portfolio analyst and product strategist; portfolio modeler; correlation researcher
Previous Article
HKMA Announces Measures to Support SME Lending by BanksRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards