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Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations
1 A CBLR greater than nine percent; 10
2 Total consolidated assets of less than $10 billion; 11
3 Total off-balance sheet exposures of 25 percent or less of its total consolidated assets;
4 Trading assets plus trading liabilities of five percent or less of its total consolidated assets; and 5 Not an advanced approaches banking organization advanced approaches banking organizations are generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure, and depository institution subsidiaries of those firms.
In March 2020, the CBLR was temporarily set to eight percent by statute.12 Accordingly, effective the second quarter of 2020, the CBLR
requirement was eight percent or greater.13 In early 2021, the CBLR
requirement was increased to 8.5
percent or greater. During the grace period, the minimum requirement is 7.5
percent.14 Effective January 1, 2022, the CBLR requirement will return to nine percent and the minimum requirement during the grace period will return to eight percent.

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C. The NCUAs Advance Notice of Proposed Rulemaking At its January 14, 2021 meeting, the Board issued an advance notice of proposed rulemaking and solicited comments on two approaches to simplify the 2015 Final Rule.15 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.
Almost all commenters who favored the CCULR framework noted that its flexibility is attributable to the option complex credit unions have in calculating the more complex risk-based 10 Under section 4012 of the Coronavirus Aid, Relief, and Economic Security Act CARES Act, Public Law 116136, 134 Stat. 281 Mar. 27, 2020, the CBLR was temporarily set to eight percent. See, 85 FR 22924 Apr. 23, 2020. Under the statute, the temporary CBLR of eight percent ended on December 31, 2020. The CBLR transitions back to nine percent on January 1, 2022. See, 85 FR 22930
Apr. 23, 2020.
11 See, 85 FR 77345 Dec. 2, 2020, providing temporary relief from December 2, 2020 through December 31, 2021 for purposes of determining the asset size of an institution.
12 Public Law 116136.
13 See, 85 FR 22924 Apr. 23, 2020.
14 See, 85 FR 22930 Apr. 23, 2020. The grace period is the two-calendar quarter period a depository institution or depository institution holding company has to satisfy the requirements to be a qualifying institution or to calculate a riskbased capital ratio.
15 See, 86 FR 13498 March 9, 2021.

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capital measure, which produces a more precise, and generally lower, overall capital requirement. A few commenters also stated that a benefit of the CCULR
framework is its similarity to the capital framework of the other banking agencies.
II. Legal Authority This final rule provides a simple measure of capital adequacy for credit unions classified as complex based on the principles of the CBLR framework.
The CCULR relieves complex credit unions that meet specified qualifying criteria from having to calculate the risk-based capital ratio.16 In exchange, the credit union is required to maintain a higher net worth ratio than is otherwise required for the wellcapitalized classification. This trade-off is akin to the decision qualifying community banks make under the CBLR. A qualifying complex credit union that has a net worth ratio of nine percent or greater is eligible to opt into the CCULR framework.
The Board received no comments on its legal authority to issue the final rule and thus affirms its conclusions and interpretations in the proposed rule.
The Board is issuing this final rule pursuant to its authority under the FCUA. 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.17 Section 207 of the FCUA is a specific grant of authority over share insurance coverage, conservatorships, and liquidations.18 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.19 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 expressly grants authority for the Board to develop capital adequacy standards for credit unions. In 1998, Congress enacted the Credit Union Membership Access Act CUMAA.20 Section 301 of CUMAA
added section 216 to the FCUA,21 which required the Board to adopt by regulation a system of prompt corrective action PCA to resolve the problems of 16 See Section IV.B. Qualifying Credit Unions for more information on the qualifying criteria.
17 12 U.S.C. 1766a.
18 12 U.S.C. 1787b1.
19 12 U.S.C. 1789a11.
20 Public Law 105219, 112 Stat. 913 1998.
21 12 U.S.C. 1790d.

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insured credit unions when the net worth of credit unions declines below certain levels.22 Section 216b1A
requires the Board to adopt by regulation a system of PCA for credit unions consistent with section 216 of the FCUA and comparable to section 38
of the Federal Deposit Insurance Act FDI Act.23 Section 216b1B
requires that the Board, in designing the PCA system, also consider the cooperative character of credit unions.24 The Board initially implemented the required system of PCA in 2000,25 primarily in part 702. As discussed previously, the Board most recently made substantial updates to the regulation in the 2015 Final Rule.
Among other things, section 216c of the FCUA requires the NCUA to use a credit unions net worth ratio to determine its classification among five net worth categories set forth in the FCUA.26 Section 216o generally defines a credit unions net worth as its retained earnings balance as determined under generally accepted accounting principles GAAP; 27 and a credit unions net worth ratio as the ratio of its net worth to its total assets.28 As a credit unions net worth ratio declines, so does 22 The risk-based net worth requirement for credit unions meeting the definition of complex was first applied based on 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 principal and interest is unconditionally guaranteed by NCUA, 76
FR 16234 Mar. 23, 2011; revisions were made in 2013 to exclude credit unions with total assets of $50 million or less from the definition of complex credit union, 78 FR 4033 Jan. 18, 2013; and revisions were made in 2020 to reflect loans issued under the Paycheck Protection Program, 85 FR
23212 Apr. 27, 2020.
23 12 U.S.C. 1790db1A; see also 12 U.S.C.
1831o section 38 of the FDI Act setting forth the PCA requirements for insured banks. In discussing the statutory requirement for comparability, the 2019 Supplemental Rule stated that the FCUA
requires the Board to adopt a PCA framework comparable to the PCA framework in the FDI Act.
The FCUA, however, does not require the Board to adopt a system of risk-based capital identical to the risk-based capital framework for federally insured banking organizations.
24 That is, credit unions are not-for-profit cooperatives that do not issue capital stock, must rely on retained earnings to build net worth, and have boards of directors that consist primarily of volunteers. 12 U.S.C. 1790db1B.
25 12 CFR part 702; see also 65 FR 8584 Feb. 18, 2000 and 65 FR 44950 July 20, 2000.
26 12 U.S.C. 1790dc.
27 12 U.S.C. 1790do2.
28 12 U.S.C. 1790do3.

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