Compliance Blog

Written by PJ Hoffman, Regulatory Affairs Counsel

Welcome back to the latest installment of our recurring series of posts where NAFCU’s Compliance Blog will break down different portions of NCUA’s proposed rule regarding risk-based capital and provide you with resources to help your credit union understand the impact of the rule. Today’s topic is our newest resource for your credit union, NAFCU's risk-based net-worth calculator.  

To get you up to speed, on January 23, 2014, the NCUA Board issued a proposed rule regarding risk-based capital for credit unions. We at NAFCU are working tirelessly for you and have created some helpful resources for our members to use including NAFCU’s Regulatory Alert 14-EA-03, NAFCU Compliance Blog Posts here, here, here and the Capital Reform Issue Page. We know that this is an important issue and NAFCU has and will continue to advocate on behalf of our members regarding this rule, but your feedback is needed. Please send us your comments here regarding the rule so that we can incorporate them into our advocacy and comment letter.  

In order to help with understanding the impact of NCUA’s proposed rule on your credit union now and in the future, we have put together a customizable risk-based net-worth calculator for your credit union to use. This resource will allow you to substitute what you think the proposed risk weights should be and test the impact on your credit union's risk-based net worth ratio now and after five years. You can also change assumptions about your credit union’s asset growth and ROA and see the effect on your credit union's risk-based net worth ratio. All you need to do is plug in the information from the call report and you have a fully customizable calculator.  

You can use this tool to help your credit union in a number of ways. The calculator can be used to see how small changes to your portfolio can affect your credit union’s risk-based net-worth ratio both now and over the next 5 years.  The calculator is also helpful when your credit union is starting to write your comment letter to the NCUA regarding the proposed rule. Your credit union can use it to better understand the effects that the proposed risk-weights will have based on your portfolio especially when looking at heavily weighted assets such as investments and real estate loans. 

After you see how the proposed rule will affect your credit union, send us your comments here. We are especially interested in how the risk weights for real estate and investments will affect your decision making. Let us know.  

***

Shameless Plug: NAFCU has a member call-in scheduled for Tuesday, March 18 at 4:00 pm Eastern and you should join us. 

NAFCU’s member-only call-in, will address the latest legislative, regulatory, compliance and economic issues affecting credit unions. NAFCU President and CEO Dan Berger and other NAFCU senior staff will discuss top challenges, including the Target breach and data security concerns, NCUA’s risk-based capital proposal and more. 

Participation is free for all members, but you must register to attend.