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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Proposed Rules Non-security beneficial interest is defined as the residual equity interest in the Special Purpose Entity SPE that represents a right to receive possible future payments after specified payment amounts are made to third-party investors in the securitized receivables.
For purposes of this definition, a SPE
means a trust, bankruptcy remote entity or other special purpose entity which is wholly owned, directly or indirectly, by the credit union and which is formed for the purpose of, and engages in no material business other than, acting as an issuer or a depositor in a securitization.

Off-balance sheet exposure 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 sales 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 collateral or on an uncollateralized basis.
Off-balance sheet items mean offbalance sheet exposures and the offbalance sheet exposure amount of repurchase transactions.

Repurchase transactions mean either a transaction in which a credit union agrees to sell a security to a counterparty and to repurchase the same or an identical security from that counterparty at a specified future date and at a specified price or a transaction in which an investor agrees to purchase a security from a counterparty and to resell the same or an identical security to that counterparty at a specified future date and at a specified price. The offbalance sheet exposure amount for a repurchase transaction equals all of the positions the credit union has sold or bought subject to repurchase or resale, which equals the sum of the current fair values of all such positions.

Swap Dealer has the meaning as defined by the CFTC in 17 CFR 1.3.

Trading assets means securities or other assets acquired, not including loans originated by the credit union, for the purpose of selling in the near term or otherwise with the intent to resell in order to profit from short-term price movements. Trading assets would not include shares of a registered investment company or a collective investment fund used for liquidity purposes.
Trading liabilities means the total liability for short positions of securities or other liabilities held for trading purposes.

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Unconditionally cancelable means with respect to a commitment, that a credit union may, at any time, with or without cause, refuse to extend credit under the commitment to the extent permitted under applicable law.

3. In 702.101, revise paragraph a2
to read as follows:
702.101 Capital measures, capital adequacy, effective date of classification, and notice to NCUA.

a
2 If determined to be applicable under 702.103, either the risk-based capital ratio under 702.104a through c or the CCULR framework under 702.104d.

4. In 702.102, revise paragraph a1i and ii, and Table 1 to read as follows:
702.102

Capital classification.

a
1
iA Net worth ratio. The credit union has a net worth ratio of 7.0
percent or greater; and B Risk-based capital ratio. The credit union, if complex, has a riskbased 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 10 percent or greater, subject to any applicable transition provisions in 702.104d8; 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 period, as defined in 702.104d7, and has a CCULR of 7 percent or greater.

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TABLE 1 TO 702.102CAPITAL CATERGORIES
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

10% or greater .
N/A

4% to 5.99%
2% to 3.99%

Or

Less than 8%
N/A

Or

N/A
N/A

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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.

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