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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Proposed Rules
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1 Has a CCULR net worth of 10
percent or greater, subject to an initial transition period; 48
2 Has total off-balance sheet exposures of 25 percent or less of its total assets;
3 Has the sum of total trading assets and total trading liabilities of five percent or less of its total assets; and 4 Has the sum of total goodwill, including goodwill that meets the definition of excluded goodwill, and total other intangible assets, including intangible assets that meet the definition of excluded other intangible assets, of two percent or less of its total assets.
The Board believes that complex credit unions that do not meet any one of the qualifying criteria should remain subject to risk-based capital to ensure that such credit unions hold capital commensurate with the risk profile of their activities. The Board would continue to evaluate the qualifying criteria over time to ensure that they continue to be appropriate.
Question 1: The Board invites comment on the qualifying criteria.
What are the advantages and disadvantages of each qualifying criterion? What is the burden associated with determining whether a complex credit union meets the proposed qualifying criteria? What other criteria, if any, should the Board consider in the proposed definition? What are commenters views on the tradeoffs between simplicity and having additional qualifying criteria? In specifying any alternative qualifying criteria regarding a credit unions risk profile, please provide information on how alternative qualifying criteria should be considered in conjunction with the calibration of the CCULR level and why the Board should consider such alternative criteria. For example, if the Board were to consider a CCULR of less than 10 percent to be well capitalized, should additional qualifying criteria be incorporated? The Board may consider qualifying criteria related to mortgage servicing assets, investments in credit union service organizations CUSOs, or investments in corporate credit unions if a permanent CCULR of less than 10
percent is considered.
1. CCULR of 10 Percent or Greater After the transition period, the proposed rule would require a complex credit union to have a CCULR of at least 10 percent to be classified as a 48 For an additional discussion on why the Board set the ratio to 10 percent, see Section D.
Calibration of the CCULR. For additional information on the transition period, see Section I.
Transition Provision.

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qualifying complex credit union. An otherwise qualifying complex credit union could not opt into the CCULR
framework unless its CCULR was at least 10 percent.
Transition Provision Under the proposed rule, there is a transition provision to phase in the 10
percent CCULR over two years to give complex credit unions time to adjust and adapt to the new requirements. The transition provision provides for full effectiveness of the 10 percent CCULR
on January 1, 2024. From January 1, 2022, to December 31, 2022, a complex credit union may opt into the CCULR
framework if it has a CCULR of nine percent or greater. Therefore, a qualifying complex credit union that opts into the CCULR framework and that maintains a CCULR of nine percent would be considered well capitalized.
Beginning January 1, 2023, a complex credit union that has opted into the CCULR framework must have a CCULR
of 9.5 percent or greater to meet the eligibility criteria and be considered well-capitalized. After January 1, 2024, a complex credit union would need to maintain a CCULR of 10 percent to be considered well-capitalized.
Accordingly, the proposed rule provides a complex credit union two years to meet a CCULR of 10 percent or greater.
See, Section I. Transition Provision for additional information.
2. Off-Balance Sheet Exposures Under the proposal, a qualifying complex credit union would be required to have total off-balance sheet exposures of 25 percent or less of its total assets, as of the end of the most recent calendar quarter. The Board is including these qualifying criteria in the CCULR
framework because the CCULR includes only on-balance sheet assets in its denominator and thus would not require a qualifying complex credit union to hold capital against its offbalance sheet exposures. This qualifying criterion is intended to reduce the likelihood that a qualifying complex credit union with significant off-balance sheet exposures would be required to hold less capital under the CCULR
framework than under the risk-based capital ratio.49
The other banking agencies CBLR
framework also excludes banking organizations with significant offbalance sheet exposures. The CBLR
Final Rule excludes banking organizations that have more than 25
49 The proposed amendments to 702.104, Riskbased capital ratio, include credit conversion factors and risk-weights for off-balance sheet exposures.

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percent of total consolidated assets in off-balance sheet exposures. The other banking agencies definition of offbalance sheet exposures, however, has several differences from the current definition of off-balance sheet exposures in the 2015 Final Rule. Therefore, to make the CCULR framework more comparable to the CBLR and to improve on the effectiveness of the 2015 Final Rule, the proposed rule would amend the NCUAs definition of off-balance sheet exposures. The proposed amendments to the definition of offbalance sheet exposure would apply to both the proposed CCULR framework and the risk-based capital framework.50
Under the proposed CCULR
framework, off-balance sheet exposures would mean:
1 For unfunded commitments, excluding unconditionally cancellable commitments, the remaining unfunded portion of the contractual agreement.
2 For loans transferred with limited recourse, or other seller-provided credit enhancements, and that qualify for true sale accounting, the maximum contractual amount the credit union is exposed to according to the agreement, net of any related valuation allowance.
3 For loans transferred under the Federal Home Loan Bank FHLB
mortgage partnership finance program, the outstanding loan balance as of the reporting date, net of any related valuation allowance.
4 For financial standby letters of credit, the total potential exposure of the credit union under the contractual agreement.
5 For forward agreements that are not derivative contracts, the future contractual obligation amount.
6 For sold credit protection through guarantees and credit derivatives, the total potential exposure of the credit union under the contractual agreement.
7 For off-balance sheet securitization exposures, the notional amount of the off-balance sheet credit exposure including any credit enhancements, representations, or warranties that obligate a credit union to protect another party from losses arising from the credit risk of the underlying exposures that arises from a securitization.
8 For securities borrowing or lending transactions, the amount of all securities borrowed or lent against 50 The proposed rule would also include risk weights for each new exposure in the definition of off-balance sheet exposure. See, Section M.
Amendments to the 2015 Final Rule.

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