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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Proposed Rules
initially considered a potential ratio for the CCULR of 9 to 11 percent.
When considering the appropriate calibration for the proposed CCULR, the Board intended to strike a balance between strong capital levels and providing appropriate regulatory burden relief. To that end, the Board analyzed the potential impact in terms of safety and soundness and burden reduction for potential CCULRs of 9 and 10 percent.
The Board estimates that as, of December 31, 2020, the majority of complex credit unions would constitute qualifying complex credit unions and would meet a proposed CCULR well capitalized standard of nine percent.
Based on reported data, approximately 73 percent of complex credit unions would qualify to use the CCULR
framework and be well capitalized under a nine percent calibration. Of the 649 complex credit unions, 472 have net worth greater than nine percent as of December 31, 2020, and would be well capitalized under a nine percent CCULR
standard. Of those 472 credit unions, it is estimated that two credit unions would not meet the proposed qualifying criteria, and thus would not be eligible to opt into the CCULR. The total minimum capital required for these 470
credit unions under the 2015 Final Rule to be well capitalized is estimated at $82
billion. Under the proposed CCULR, if all estimated 470 credit unions opted into the CCULR and held the minimum nine percent to be well capitalized, the total minimum net worth required would be estimated at $104.6 billion, an increased capital requirement of $22
billion.
Based on reported data as of December 31, 2020, approximately 48
percent of complex credit unions would qualify to use the CCULR framework and be well capitalized under a 10
percent calibration. Of the 649 complex credit unions, 313 have net worth greater than 10 percent as of December 31, 2020, and would be well capitalized under a 10 percent CCULR standard. Of those 313 credit unions, it is estimated that one credit union would not meet the proposed qualifying criteria, and thus would not be eligible to opt into the CCULR framework. The total minimum capital required for those 312
credit unions under the 2015 Final Rule to be well capitalized is estimated at $57.5 billion. Under the proposed CCULR, if all estimated 312 credit unions opted into the CCULR and held the minimum 10 percent net worth required to be well capitalized, the total minimum net worth required would be estimated at $81.7 billion, and increased capital requirement of $24 billion.

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A nine percent CCULR would allow more credit unions to opt into the CCULR framework but could incentivize some qualifying complex credit unions to hold less regulatory capital than they do today. In contrast, a 10 percent wellcapitalized standard would ensure strong capital levels and more certainty that qualifying complex credit unions are holding greater levels of capital than under the 2015 Final Rule. The Board has proposed a 10 percent wellcapitalized threshold for the CCULR
framework. A 10 percent wellcapitalized standard for the CCULR
would be 300 basis points above the well-capitalized threshold for the net worth ratio, and 400 basis points above a six percent well-capitalized standard for the net worth ratio when considering credit unions decreased holdings in corporate credit unions. In addition, a 10 percent well-capitalized threshold for the CCULR would be 100 basis points higher than the nine percent threshold established by the other banking agencies for the CBLR. As discussed previously, the total minimum capital required to be well capitalized under the 2015 Final Rule is $57.5 billion for credit unions that also meet the CCULR qualifying criteria and would be well capitalized under a 10
percent calibration for the CCULR. If all those credit unions meeting the qualifying criteria opted into the CCULR
and held the minimum 10 percent net worth required to be well capitalized, the total minimum net worth required would be estimated at $81.6 billion.
This figure is approximately $24.2
billion in excess of the risk-based capital requirement under the 2015
Final Rule. The Board believes that the proposed 10 percent CCULR
requirement strikes the right balance between maintaining strong capital levels and providing a simpler option to comply with risk-based capital requirements.
Question 10: The Board invites comment on the proposed CCULR
calibration. What are the advantages and disadvantages to the Board considering a CCULR of 8, 9 or 10 percent? Should the Board consider further modifications to its methodology in calibrating the CCULR? What other factors should the Board consider in calibrating the CCULR and why? The Board requests that commenters include a discussion of how the proposed CCULR level should be affected by potential changes to other aspects of the proposed framework, such as the definition of CCULR and the definition of a qualifying complex credit union.
Question 11: One factor in the Boards calibration of the CCULR is the recent
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trend in credit unions investing in fewer corporate credit union capital instruments. The Board is soliciting comment on whether the trend is likely to continue or whether it is likely that the trend is temporary and in response to the 20072009 recession.
E. Opting Into the CCULR Framework Under the proposal, a qualifying complex credit union with a CCULR of 10 percent or greater, subject to the transition provisions, may opt into the CCULR framework at the end of each calendar quarter. Similar to the other banking agencies CBLR framework, a qualifying complex credit union may only opt into the CCULR framework if it would be well capitalized. Requiring credit unions to be at least be well capitalized when they opt into the framework would ensure that complex credit unions that do not meet the minimum CCULR are reporting capital under the 2015 Final Rule, which is a more risk-sensitive measure of capital adequacy. A qualifying complex credit union choosing to opt into the CCULR
would indicate its decision by completing a CCULR reporting schedule in its Call Report.
Question 12: The Board invites comment on the proposed procedure a qualifying complex credit union would use to opt into the CCULR framework.
What are commenters views on the frequency with which a qualifying complex credit union may opt into the CCULR framework? What other alternatives should the Board consider for purposes of qualifying complex credit unions opt in elections to use and report the CCULR and why?
F. Voluntarily Opting Out of the CCULR
Framework Under the proposal, after a qualifying complex credit union has adopted the CCULR framework, it may voluntarily opt out of the framework by providing written notice to the appropriate Regional Director or the Director of the Office of National Examinations and Supervision ONES. The notice must be provided at least 30 days before the end of the calendar quarter that the credit union will begin reporting its risk-based capital ratio.
The notice must include several items:
A statement of intent explaining why the qualifying complex credit union is opting out of the CCULR
framework.
A copy of board meeting minutes showing that the credit unions board of directors was notified of the opt out election.

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