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Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations recommended January 1, 2023. Other commenters recommended six months after publication of the final rule in the Federal Register.
In contrast, one banking trade organization recommended that the Board first subject credit unions to the risk-based capital standards before implementing an opt-in to the CCULR
framework. This argument appeared to be based primarily or solely on the fact that banks complied with risk-based capital before Congress enacted and the other banking agencies implemented the CBLR. The Board found no new evidence or information that would warrant it refraining from adopting the CCULR framework now. As discussed in the proposed rule and this final rule preamble, a complex credit union which opts into the CCULR framework will generally increase the overall capital requirement. The Board continues to find that implementing the CCULR
framework alongside the 2015 Final Rule will balance flexibility and choice for complex credit unions with safety and soundness and overall capital adequacy.
The Board is not delaying the implementation of either the CCULR
framework or the 2015 Final Rule. The Board did not propose to delay the 2015
Final Rule and does not believe that credit unions need additional time to comply with either framework.44 The Board acknowledges that January 1, 2022, is less than the standard effective date of 30 days following the publication of this final rule. There are, however, several factors that persuade the Board that credit unions will not be disadvantaged. First, credit unions are not required to comply with the CCULR
framework as it is an optional framework to the 2015 Final Rule. Also, credit unions do not have to select their framework until the end of the first quarter in 2022, which is a few months after the publication of the final rule in the Federal Register. The final rule does not include any new calculations for complex credit unions and relies on the net worth ratio, an existing capital measure that credit unions report each quarter. Finally, the Board is not persuaded that credit unions are unprepared to choose between the CCULR framework and the risk-based capital framework due to Call Report amendments. The proposed rule included sample Call Report illustrations. While the Board did not seek specific comments in the proposed 44 Because the Board did not propose any change to the 2015 Final Rules effective date, a change in this final rule would not be within the scope of the proposed rule.

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rule on the Call Report changes, credit unions knew of the potential changes and no comments were received expressing general confusion. The agency also published a Notice and Request for Comment on the proposed Call Report changes on September 27, 2021.45 Thus, the Board believes a January 1, 2022 effective date for the CCULR framework is reasonable and not disadvantageous to credit unions.
B. Qualifying Complex Credit Unions Under the final rule, a qualifying complex credit union is defined as a complex credit union under 12 CFR
702.103 that meets the following criteria qualifying criteria, each as described further as follows:
1 Has a CCULR net worth ratio of 9
percent or greater; 46
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 5 percent or less of its total assets; and 4 Has the sum of total goodwill and total other intangible assets of 2 percent or less of its total assets.

The Board believes 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 will continue to evaluate the qualifying criteria over time to ensure it continues to be appropriate.
1. CCULR of Nine Percent or Greater The final rule requires a complex credit union to have a CCULR of at least nine percent to be classified as a qualifying complex credit union. Given this change from 10 percent in the proposal, the Board is not adopting the proposed transition provision, which would have set the CCULR at 9 percent initially, then increased it to 10 percent by January 1, 2024. For a discussion of the relevant comments, see Section D.
Calibration.
2. Off-Balance Sheet Exposures The Board did not receive substantial comment on the proposed off-balance sheet exposure criterion. One commenter requested further guidance on this criterion. Another credit union said this criterion is better addressed through the examination process. The proposed rule provided substantial detail on the eight off-balance sheet exposures. The Board also disagrees that 45 86

FR 53351 Sept. 27, 2021.
an additional discussion on why the Board set the ratio to nine percent, see Section D.
Calibration of the CCULR.
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this criterion is better addressed through the supervisory process; rather, the Board believes the off-balance sheet criterion is essential in determining the appropriateness of the CCULR
framework for a specific credit union. If a complex credit union has substantial off-balance sheet exposures, the Board believes the more precise risk-based capital framework is necessary to determine its capital adequacy.
Under the final rule, a qualifying complex credit union is 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. Thus, it does not require a qualifying complex credit union to hold capital against its off-balance 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.47
The other banking agencies CBLR
framework also excludes banking organizations with significant offbalance 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. Thus, to make the CCULR framework more comparable to the CBLR and to improve on the effectiveness of the 2015 Final Rule, the final rule amends the NCUAs definition of off-balance sheet exposures. The amendments to the definition of offbalance sheet exposure apply to both the CCULR framework and the riskbased capital framework.48
Under the CCULR framework, offbalance sheet exposures 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 47 The amendments to 702.104, Risk-Based Capital Ratio, include credit conversion factors and risk-weights for off-balance sheet exposures.
48 The final rule also includes risk weights for each new exposure in the definition of off-balance sheet exposure. See, Section L. Amendments to the 2015 Final Rule.

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