Capital Adequacy

There are seven categories of risk credit union supervision focuses on

Submitted by sevans on Mon, 02/09/2015 - 3:24pm

Risk is the potential that events, expected or unanticipated, may have an adverse effect on the credit union’s net worth and earnings. The seven categories of risk for credit union supervision purposes are Credit, Interest Rate, Liquidity, Transaction, Compliance, Strategic, and Reputation. Any product or service may expose the credit union to multiple risks; these categories are not mutually exclusive.

Mandatory elements of a covered credit union’s capital adequacy plan

Submitted by sevans on Fri, 01/16/2015 - 3:30pm

A covered credit union’s (covered credit union means a federally insured credit union whose assets were $10 billion or more on March 31 of the current calendar year) capital plan must contain at least the following elements:

(1) A quarterly assessment of the expected sources and levels of stress test capital over the planning horizon that reflects the covered credit union's financial state, size, complexity, risk profile, scope of operations, and existing level of capital, assuming both expected and unfavorable conditions, including:

Board approval required before submission of capital adequacy plan

Submitted by sevans on Fri, 01/16/2015 - 3:28pm

A covered credit union's (covered credit union means a federally insured credit union whose assets were $10 billion or more on March 31 of the current calendar year) board of directors (or a designated committee of the board) must at least annually, and prior to submission of the capital plan under paragraph (a)(1) of this section:

(i) Review the credit union's process for assessing capital adequacy;

(ii) Ensure that any deficiencies in the credit union's process for assessing capital adequacy are appropriately remedied; and

Annual capital planning. (1) A covered credit union (covered credit union means a federally insured credit union whose assets were $10 billion or more on March 31 of the current calendar year) must develop and maintain a capital plan and submit this plan to NCUA each year by February 28, or such later date as directed by NCUA. The plan must be based on the credit union's financial data as of September 30 of the immediately preceding previous calendar year, or such other date as directed by NCUA.

Your credit union is subject to the requirements of the final rule if:

• Your credit union’s assets exceed $50 million, as shown by your most recent Call Report filing; or

• Your credit union’s assets are equal to or greater than $10 million but do not exceed $50 million and the sum of your first mortgage loans held and investments with maturities exceeding five years is equal to or greater than 100% of your net worth at quarter end.

 

Secondary capital accounts for Community Development credit unions:

Federally insured credit unions designated as low-income may establish secondary capital accounts, which examiners should review for compliance with §701.34(b) of the NCUA Rules and Regulations.

Before offering secondary capital accounts, the credit union must adopt, and forward to the appropriate regional director, a written plan for use of the secondary capital account funds and subsequent liquidity needs to meet repayment requirements upon maturity of the accounts.

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