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NCUA issues final Risk-Based Capital Rule

first_imgSince the Great Recession, the financial institution industry has been flooded with regulatory changes. From the Dodd-Frank Wall Street Reform and Consumer Protection Act to the expected change in the allowance for loan losses to a current expected credit loss model, the purpose of regulatory reform is to provide stability and confidence in the industry. To that end, the National Credit Union Administration (NCUA) recently approved a final risk-based capital (RBC) rule.The NCUA proposed sweeping changes to the capital rules in 2014 in an effort to replace the current risk-based net worth ratio with a metric that more adequately addresses the amount of capital compared to credit union balance sheet risks. The NCUA expects credit unions will be able to better absorb losses through sufficient capital without causing systemic losses to the National Credit Union Share Insurance Fund (NCUSIF). The RBC rule will apply to complex credit unions—those with more than $100 million in assets. This exempts 78 percent of federally insured credit unions from the risk-based capital requirements.The final rule also will incorporate minimum ratios for credit unions to be considered adequately capitalized (8 percent) or well-capitalized (10 percent). The 2014 proposed RBC rule included an individual minimum capital requirement. This was removed in the final RBC rule, though the final rule offers the NCUA remedies to address credit unions with deficiencies in capital levels.Calculating the RBC RatioThe RBC ratio will be determined by dividing the RBC by the credit union’s total risk-weighted assets. RBC includes tangible and/or liquid balance sheet items that would be available to cover losses incurred by the credit union, including undivided earnings, appropriation for noncomforming investments, equity acquired in a merger, net income and secondary capital accounting in net worth with the addition of the allowance for loan losses. Deducted from RBC will be the credit union’s NCUSIF capitalization deposit and any intangible assets, including goodwill.The denominator of the ratio will represent the credit union’s total risk-weighted assets, including certain off-balance-sheet assets, and will be reduced by the same items that reduce the numerator. There are 10 categories of risk weights, comparable to the FDIC’s Basel III risk weights implemented by the banking system in 2015. The risk weighting of the balance sheet will require higher levels of capital for credit unions with concentrations in real estate loans, commercial loans or noncurrent loans. A significant change from the 2014 proposed RBC rules is the elimination of interest rate risk from the calculation of risk-based assets.Implementation The implementation date of the rule is January 1, 2019. While most credit unions affected by this rule will be considered well-capitalized, the extended implementation date will allow credit unions to implement capital strategies to reduce risk on the balance sheet and/or maintain the current risk. Credit unions also should consider how proposed changes in business operations or potential mergers or acquisitions will impact the credit union’s RBC ratio. Extensive changes will be required to the 5300 Call Report; these are expected to be complete in early 2018. The changes will affect not only regulatory capital schedules but also loan, investment and other schedules. Complex credit unions also will be required to implement a capital policy addressing the credit union’s strategy for assessing capital adequacy and maintaining appropriate capital levels.For more information on how the final RBC rules could affect your credit union, contact your BKD advisor. 9SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Bob Swartz Bob is a member of BKD National Financial Services Group and provides a full range of assurance and consulting services to banks, thrifts and credit unions. He also provides audit … Web: www.bkd.com Detailslast_img read more

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Chambers commits to Saints

first_img With the club since the age of seven, the England Under-19s international become an impressive right-back after starting in midfield. Chambers has been heavily involved during pre-season and is now targeting a regular first-team berth. “It’s fantastic – it’s like my dream, really,” he told the club’s official website, www.saintsfc.co.uk. “I’ve been at the club since I was so young, so this is a great feeling. I’ve been here since I was seven and I’ve been treated really well so it means the world. “The club has a great set-up and it’s going through a really good time at the moment. There are going to be big things from Southampton in the future. “I’ve always wanted to play for the first team at this club, and this is another step towards that.” Press Association Calum Chambers has become the latest academy graduate to commit his future to Southampton, penning a new four-year deal at St Mary’s.center_img James Ward-Prowse, Lloyd Isgrove, Jordan Turnbull and Jack Stephens have all signed new contracts during the past 12 months. Highly-rated left-back Luke Shaw has also recently agreed a new deal and 18-year-old Chambers has now followed suit. last_img read more

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