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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Proposed Rules
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The 2015 Final Rule restructured the NCUAs current capital adequacy regulations and made various revisions, including amending the agencys riskbased net worth requirement by replacing a credit unions risk-based net worth ratio with a risk-based capital ratio. The risk-based capital requirements in the 2015 Final Rule are more consistent with the NCUAs riskbased capital ratio measure for corporate credit unions, are more comparable to the risk-based capital measures implemented by the Federal Deposit Insurance Corporation FDIC, Board of Governors of the Federal Reserve System Federal Reserve Board, and Office of the Comptroller of Currency OCC collectively, the other banking agencies in 2013, and consistent with the FCUA.3
The risk-based capital provisions of the 2015 Final Rule apply only to credit unions that are complex, which the rule defined as those with total assets over $100 million.4 On November 6, 2018, the Board published a supplemental final rule that raised the threshold level for a complex credit union to $500
million 2018 Supplemental Rule.5
Therefore, only credit unions with over $500 million in assets are now subject to the risk-based capital requirements of the 2015 Final Rule. The 2018
Supplemental Rule also delayed the effective date of the 2015 Final Rule for one year from January 1, 2019, to January 1, 2020.
The effective date was delayed a second time through a final rule published on December 17, 2019 2019
Supplemental Rule.6 The 2015 Final Rule is now scheduled to become effective on January 1, 2022. The delay has provided credit unions and the NCUA with additional time to implement the 2015 Final Rule. Further, as explained in the 2019 Supplemental Rule, the delay provided the Board FCUA requires each insured credit union to pay an insurance premium equal to a percentage of the credit unions insured shares. The FCUA also requires each insured credit union to pay and maintain a deposit with the NCUSIF equaling one percent of the credit unions insured shares. The NCUSIFs reserves are available to pay potential share insurance claims, to provide assistance in connection with the liquidation or threatened liquidation of credit unions, and for administrative and other expenses the Board incurs in carrying out the purposes of the share insurance subchapter of the FCUA. See 12 U.S.C. 1783a.
3 The Federal Reserve Board and OCC issued a joint final rule on October 11, 2013 78 FR 62018, and the FDIC issued a substantially identical interim final rule on September 10, 2013 78 FR
55340. On April 14, 2014 79 FR 20754, the FDIC
adopted the interim final rule as a final rule with no substantive changes.
4 See, supra note 1.
5 83 FR 55467 Nov. 6, 2018.
6 84 FR 68781 Dec. 17, 2019.

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additional time to holistically and comprehensively evaluate the NCUAs capital standards for credit unions.7
Among a few items that the Board made reference to, the rule highlighted a community bank leverage ratio CBLR
analogue and the treatment of asset securitizations issued by credit unions as items for possible consideration by the Board during the delay.8
B. The Other Banking Agencies RiskBased Capital and CBLR Framework As discussed previously, the other banking agencies adopted a revised riskbased capital rule in 2013, which was designed to strengthen their capital requirements and improve risk sensitivity. These rules, along with subsequent amendments, were intended to address weaknesses that became apparent during the financial crisis of 200708 the other banking agencies 2013 capital rule.9 The other banking agencies 2013 capital rule provides two methodologies for determining riskweighted assets: i A standardized approach; and ii a more complex, models-based approach, which includes both the internal ratings-based approach for measuring credit risk exposure and the advanced measurement approach for measuring operational risk exposure.10
The standardized approach applied to all banking organizations, whereas the internal ratings-based approach applied only to certain large or internationally active banking organizations.
In 2018, section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act EGRRCPA, directed the other banking agencies to propose a simplified, alternative measure of capital adequacy for certain federally insured banks.11 On November 13, 2019, the other banking agencies issued a final rule implementing this statutory directive CBLR Final Rule.12
Under the CBLR Final Rule, the CBLR
framework is optional for depository institutions and depository institution 7 Id.

at 68782.

8 Id.
9 See, 84 FR 35234, 35235 July 22, 2019. The other banking agencies 2013 capital rule also reflected agreements reached by the Basel Committee on Banking Supervision BCBS in Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems Basel III, including subsequent changes to the BCBSs capital standards and recent BCBS consultative papers.
Their rule also included changes consistent with the Dodd-Frank Wall Street Reform and Consumer Protection Act the Dodd-Frank Act.
10 12 CFR part 3, subparts D & E OCC; 12 CFR
part 217, subparts D & E Federal Reserve Board;
12 CFR part 324, subparts D & E FDIC.
11 Public Law 115174 May 24, 2018. Section 201 is codified at 12 U.S.C. 5371 note.
12 84 FR 61776 Nov. 13, 2019.

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holding companies that meet the following criteria:
1 A leverage ratio equal to tier 1
capital divided by average total consolidated assets of greater than nine percent; 13
2 Total consolidated assets of less than $10 billion; 14
3 Total off-balance sheet exposures of 25 percent or less of its total consolidated assets;
4 Trading assets plus trading liabilities of five percent or less of its total consolidated assets; and 5 Not an advanced approaches banking organization advanced approaches banking organizations are generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure, and depository institution subsidiaries of those firms.
The CBLR Final Rule refers to the depository institutions and depository institution holding companies that meet these criteria as qualifying community banking organizations. Qualifying community banking organizations that opt into the CBLR framework are considered to be in compliance with the other banking agencies generally applicable risk-based and leverage capital requirements. Further, these qualifying banking organizations will be considered to have met the wellcapitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act FDI Act, which applies prompt corrective action to federally insured depository institutions.15 Qualifying community banking organizations may opt into or out of the CBLR framework at any time.
The CBLR Final Rule includes a twoquarter grace period during which a qualifying community banking organization that temporarily fails to meet any of the qualifying criteria, including the greater than nine percent leverage ratio requirement, generally will still be deemed well-capitalized so long as the qualifying community banking organization maintains a leverage ratio greater than eight percent.
At the end of the grace period, the banking organization must meet all 13 Under section 4012 of the Coronavirus Aid, Relief, and Economic Security Act CARES Act, Public Law 116136, 134 Stat. 281 Mar. 27, 2020, the CBLR was temporarily set to eight percent. See, 85 FR 22924 Apr. 23, 2020. Under the statute, the temporary CBLR of eight percent ended on December 31, 2020. The CBLR transitions back to nine percent during calendar year 2021. See, 85 FR
22930 Apr. 23, 2020.
14 See, 85 FR 77345 Dec. 2, 2020, providing temporary relief from December 2, 2020, through December 31, 2021, for purposes of determining the asset size of an institution.
15 12 U.S.C. 1831o.

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