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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Proposed Rules
lotter on DSK11XQN23PROD with PROPOSALS2

qualifying criteria to remain in the CBLR framework or otherwise must comply with and report under the generally applicable risk-based and leverage capital requirements. Similarly, a banking organization that fails to maintain a leverage ratio greater than eight percent will not be permitted to use the grace period and must comply with the generally applicable capital requirements and file the appropriate regulatory reports.
In March 2020, the CBLR was temporarily set to eight percent by statute.16 Accordingly, effective the second quarter of 2020, the CBLR
requirement was eight percent or greater.17 At the start of 2021, the CBLR
requirement was increased to 8.5
percent or greater and the minimum requirement during the grace period is 7.5 percent.18 Beginning on January 1, 2022, the CBLR requirement will return to nine percent and the minimum requirement during the grace period will return to eight percent.
C. The NCUAS Advance Notice of Proposed Rulemaking At its January 14, 2021, meeting the Board issued an advance notice of proposed rulemaking ANPR to solicit comments on two approaches to simplify the 2015 Final Rule.19 The riskbased leverage ratio RBLR is the first alternative to the 2015 Final Rule included in the ANPR, which would replace the 2015 Final Rule with a new capital framework. The RBLR would use relevant risk-attribute thresholds to determine which complex credit unions would be required to hold additional capital buffers above the statutory leverage ratio. The second alternative contemplated in the ANPR is to retain the 2015 Final Rule but enable eligible complex credit unions to opt-in to the CCULR framework.
The ANPR provided for a 60-day comment period that closed on May 10, 2021. The Board received 19 comments.
Almost all commenters supported the stated goal of simplifying the 2015 Final Rule. In general, commenters favored the NCUA developing a CCULR
complement to risk-based capital rather than adopting a RBLR system of capital adequacy.
Several commenters were opposed to the RBLR framework because it would likely call for higher capital requirements for credit unions holding certain assets compared to the current RBC requirements. Several commenters 16 Public
Law 116136.
85 FR 22924 Apr. 23, 2020.
18 See, 85 FR 22930 Apr. 23, 2020.
19 86 FR 13498 Mar. 9, 2021.
17 See,
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also stated that introducing a RBLR
regime at this point would increase regulatory burden and negate the substantial work complex credit unions have undertaken to achieve compliance with the 2015 Final Rule. Commenters also generally stated that the RBLR
would increase transaction costs for complex credit unions as they would be required to invest additional resources to redevelop the processes that have been put in place in anticipation of the RBC requirements. A few commenters also stated that a RBLR framework could result in a capital cliff. These commenters were concerned that a small change in assets could move a credit union to a new buffer, thereby causing a large increase in minimum capital requirements.
Almost all commenters that favored the CCULR framework noted that it is a more flexible framework than the RBLR
because complex credit unions have the option of calculating the more complex risk-based capital measure for a more precise and generally lower overall capital requirement. A few commenters noted that a benefit of the CCULR
framework, as compared to a RBLR
framework, is its similarity to the capital framework of the other banking agencies.
After reviewing the comments received in response to the ANPR, the Board decided to issue this proposed rule to provide a simple measure of capital adequacy for complex credit unions that would serve as a complement to the 2015 Final Rule.
II. Legal Authority This proposed rule would primarily provide a simple measure of capital adequacy for credit unions classified as complex based on the principles of the CBLR framework. The CCULR would relieve complex credit unions that satisfy specified qualifying criteria from having to calculate the risk-based capital ratio. In exchange, the credit union would be required to maintain a higher net worth ratio than is otherwise required for the well-capitalized classification for risk-based capital purposes. This is a similar trade-off to the decision qualifying community banks make under the CBLR. After the initial phase in period, a qualifying complex credit union that has a net worth ratio of 10 percent or greater will be eligible to opt into the CCULR
framework.
A qualifying complex credit union that opts into the CCULR framework and maintains the minimum net worth ratio both during and after the threshold transition will be considered well capitalized under the 2015 Final
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Rule.20 The proposed rule would also make several amendments to update the NCUAs 2015 Final Rule, including addressing asset securitizations issued by credit unions, clarifying the treatment of off-balance sheet exposures, deducting certain mortgage servicing assets from a complex credit unions risk-based capital numerator, updating certain derivative-related definitions and clarifying the definition of a consumer loan.
The Board is issuing this proposed rule pursuant to its authority under the FCUA. Under the FCUA, the NCUA is the chartering and supervisory authority for FCUs and the federal supervisory authority for FICUs.21 The FCUA grants the NCUA a broad mandate to issue regulations governing both FCUs and all FICUs. Section 120 of the FCUA is a general grant of regulatory authority and authorizes the Board to prescribe rules and regulations for the administration of the FCUA.22 Section 207 of the FCUA is a specific grant of authority over share insurance coverage, conservatorships, and liquidations.23 Section 209 of the FCUA is a plenary grant of regulatory authority to the Board to issue rules and regulations necessary or appropriate to carry out its role as share insurer for all FICUs.24 Accordingly, the FCUA grants the Board broad rulemaking authority to ensure that the credit union industry and the NCUSIF remain safe and sound.
The FCUA also includes an express grant of authority for the Board to develop capital adequacy standards for credit unions. In 1998, Congress enacted the Credit Union Membership Access Act CUMAA.25 Section 301 of CUMAA added section 216 to the FCUA,26 which required the Board to adopt by regulation a system of prompt corrective action PCA to restore the net worth of credit unions that become inadequately capitalized.27 Section 20 12

CFR 702.102a1 effective Jan. 1, 2022.
U.S.C. 17521775.
22 12 U.S.C. 1766a.
23 12 U.S.C. 1787b1.
24 12 U.S.C. 1789a11.
25 Public Law 105219, 112 Stat. 913 1998.
26 12 U.S.C. 1790d.
27 The risk-based net worth requirement for credit unions meeting the definition of complex was first applied on the basis of data in the Call Report reflecting activity in the first quarter of 2001. 65 FR
44950 July 20, 2000. The NCUAs risk-based net worth requirement has been largely unchanged since its implementation, with the following limited exceptions: Revisions were made to the rule in 2003 to amend the risk-based net worth requirement for member business loans, 68 FR
56537 Oct. 1, 2003; revisions were made to the rule in 2008 to incorporate a change in the statutory definition of net worth, 73 FR 72688 Dec. 1, 2008; revisions were made to the rule in 2011 to expand the definition of low-risk assets to include debt instruments on which the payment of 21 12

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