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Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations based capital ratio of 10 percent or greater; or ii Complex credit union leverage ratio. A The complex credit union is a qualifying complex credit union that has opted into the CCULR framework
under 702.104d and it has a CCULR
of 9.0 percent or greater; or B The complex credit union is a qualifying complex credit union that has opted into the CCULR framework under 702.104d, is in the grace
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period, as defined in 702.104d7, and has a CCULR of 7.0 percent or greater.

TABLE 1 TO 702.102CAPITAL CATEGORIES
Risk-based capital ratio, if applicable
CCULR, if applicable
Capital classification
Net worth ratio
Well Capitalized
Adequately Capitalized.
Undercapitalized
Significantly Undercapitalized.

7% or greater
6% or greater

And
And

10% or greater
8% or greater

Or
Or

9% or greater
N/A

4% to 5.99%
2% to 3.99%

Or

Less than 8%
N/A

Or

N/A
N/A

Critically Undercapitalized.

Less than 2%

N/A

And subject to following conditions . . .
And does not meet the criteria to be classified as well capitalized.
Or if undercapitalized at <5% net worth and a fails to timely submit, b fails to materially implement, or c receives notice of the rejection of a net worth restoration plan.

N/A

A qualifying complex credit union opting into the CCULR framework should refer to 12 CFR 702.104d7 if its CCULR falls below 9.0
percent.

5. Revise 702.103 to read as follows:

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702.103 Applicability of risk-based capital measures.

For purposes of 702.102, a credit union is defined as complex and a risk-based capital measure is applicable only if the credit unions quarter-end total assets exceed five hundred million dollars $500,000,000, as reflected in its most recent Call Report. A complex credit union may calculate its risk-based capital measure either by using the riskbased capital ratio under 702.104a through c, or, for a qualifying complex credit union opting into the CCULR
framework, by using the CCULR
framework under 702.104d.
6. In 702.104:
a. Revise the introductory text;
b. Remove the word and at the end of paragraph b2iii;
c. Remove the period at the end of paragraph b2iv and add in its place ; and;
d. Add paragraph b2v;
e. Add paragraphs c2iB3 and c2iD;
f. Revise paragraphs c2vii and x;
g. Revise paragraph c4 introductory text;
h. Redesignate paragraphs c4iiiA through E as c4iiiB
through F and add new paragraph c4iiiA;
i. Add paragraphs c4iv through x; and j. Add paragraphs c6, d, and e.
The revisions and additions read as follows:

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702.104

Risk-based capital ratio.

A complex credit union must calculate its risk-based capital measure in accordance with this section. A
complex credit union may calculate its risk-based capital measure either by using the risk-based capital ratio under paragraphs a through c of this section, or, for a qualifying complex credit union opting into the CCULR
framework, by using the CCULR
framework under paragraph d of this section.

b
2
v Mortgage servicing assets that exceed 25 percent of the sum of the capital elements in paragraph b1 of this section, less deductions required under paragraphs b2i thorough iv of this section.
c
2
i
B
3 An obligation of the Bank for International Settlements, the European Central Bank, the European Commission, the International Monetary Fund, the European Stability Mechanism, the European Financial Stability Facility, or an MDB.

D Covered loans issued under the Small Business Administrations Paycheck Protection Program, 15 U.S.C.
636a36.

vii Category 7250 percent risk weight. A credit union must assign a 250 percent risk weight to the carrying value of mortgage servicing assets not
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deducted from the risk-based capital numerator pursuant to 702.104b.

x Category 101,250 percent risk weight. A credit union must assign a 1,250 percent risk weight to the exposure amount of any subordinated tranche of any investment, with the option to use the gross-up approach in paragraph c3iiiA of this section.
However, a credit union may not use the gross-up approach for non-security beneficial interests.

4 Risk weights for off-balance sheet items. The risk weighted amounts for all off-balance sheet items are determined by multiplying the off-balance sheet exposure amount by the appropriate CCF and the assigned risk weight as follows:

iii
A For a commitment that is unconditionally cancelable, a 0 percent CCF.

iv For financial standby letter of credits, a 100 percent CCF and a 100
percent risk weight.
v For forward agreements that are not derivative contracts, a 100 percent CCF and a 100 percent risk weight.
vi For sold credit protection through guarantees and credit derivatives, a 100
percent CCF and a 100 percent risk weight for guarantees; for credit derivatives the risk weight is determined by the applicable provisions of 12 CFR 324.34 or 324.35.
vii For off-balance sheet securitization exposures, a 100 percent CCF, and the risk weight is determined
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