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RISK-BASED CAPITAL RESOURCE CENTER

The Risk-Based Capital (RBC) rule requires a second, complex calculation of the capital level of a credit union. Unlike the simple leverage ratio (net worth to assets), this new ratio involves many variables to be factored in the calculation. To be considered well-capitalized by the National Credit Union Administration (NCUA), credit unions will have to have a minimum RBC ratio of 10.5%, as well as a net worth to assets ratio of 7%.


Watch the Callahan & Associates Risk-Based Capital Webinar - 2015

View our 2015 Risk-Based Capital Webinar Slides

Watch The 2015 Risk-Based Capital Webinar

Watch the Callahan & Associates Risk-Based Capital Webinar - 2014

View our 2014 Risk-Based Capital Webinar Slides

Watch The 2014 Risk-Based Capital Webinar


 

Risk-Based Capital Forecasting Updated In Peer-to-Peer

In light of NCUA's finalization of its Risk-Based Capital (RBC) rule, we've implemented significant updates to the RBC forecasting tool in Peer-to-Peer.

Log into Peer-to-Peer and visit the Hot Topics section for two useful reports:

  • RBC Forecasting: Understand exactly how the rule will impact your credit union. Download a comprehensive spreadsheet template directly from the RBC Forecasting tool, or manually enter numbers into the site. Fill in your credit union's balances for all fields and upload the spreadsheet back to the tool.
     
  • RBC Component Breakdown: The only tool in the industry that provides an immediate side-by-side comparison of your credit union's standing under the old rule and the new rule.

Log into peer-to-peer

RBC Frequently Asked Questions

What is the Risk-Based Capital Rule?

It is a finalized rule from NCUA that would require a second, complex calculation of the capital level of a credit union. Unlike the simple leverage ratio (net worth to assets), this new ratio involves many variables to be factored in the calculation.

What effect does the final RBC rule have on credit unions?

To be considered well-capitalized by the NCUA, credit unions will have to have a minimum RBC ratio of 10.5%, as well as a net worth to assets ratio of 7%. If credit unions fall below either one of these, they may be subject to regulatory action to improve the ratio which is deemed too low.

It will also fundamentally change the way every credit union thinks about capital and superimpose a financial screen on every asset a credit union might consider holding, especially loans. As such, it will mean reduced value for members and impose bank-like thinking when offering products and services.

What is the main problem with the RBC as it stands?

While the concept seems straightforward, these decisions made locally cannot be “scaled up” to a single national formula appropriate for every credit union. One commentator stated, “It’s obvious that neither man nor model can adequately assess a given asset’s risk under all circumstances before the fact.” Or said more succinctly: One size does not fit all.


Op-Eds

Rate Your Regulators

How did the three board members and NCUA fare during the open meeting in which the agency released the revised risk-based capital proposal?

A Look Behind NCUA's Revised RBC Proposal

A condensed review of the changes NCUA made to its proposed risk-based capital rule and the primary takeaways for credit unions.

What To Listen For When The NCUA Board Discusses The Revised RBC Rule

To craft an effective response, credit unions must understand how board members view the rule.

What Role Did The Practitioners Council Play In NCUA’s Revised Risk-Based Capital Rule?

If NCUA implemented the role of the practitioners in the spirit of member participation, then the precedent could be an important milestone in how the agency works with credit unions.

Will NCUA’s Revised RBC Rule Benefit From Banking Regulators' Experience?

A speech by the vice chair of the FDIC should be top of mind as the industry considers the new risk-based capital proposal.

Practitioners Council On RBC Could Be A Step In The Right Direction

Is the RBC approach the best framework for how cooperatives should determine their level of reserves?

NCUA’s Risk-Based Capital Proposal Is The Wrong Idea At The Wrong Time

Is the RBC approach the best framework for how cooperatives should determine their level of reserves?

The Potential Harm Of A Risk-Based Capital Rule

The downside of what a regulatory-designed and imposed capital system would do to credit unions

One Action Credit Unions Should All Agree The System Needs

An independent review council with a staff separate from NCUA will enhance the distinct characteristics of the cooperative model.

Professional Reviews Of Risk-Based Capital’s Role In Banking

Conclusions from commentaries and studies about why the risk-based capital requirements did not prevent severe losses.

RBC Rule Would Double Credit Union Capital Requirements

NCUA’s RBC Rule Would Double Credit Union Capital Requirements Versus Banks For Common Assets Classes Where Risk Weights Are Different.

NCUA’s RBC Proposal Gives Banks A Capital Advantage

An analysis of capital requirements for a bank and a credit union with the same asset size and composition.

An Assessment Of NCUA's Proposed Risk-Based Capital Rule

The new high rate of corporate perpetual capital could drive credit unions to bank with non-credit union organizations.

FDIC Approves A Simple Leverage Ratio To Improve Capital Adequacy Standards

Bank regulators vote to strengthen the leverage capital requirements for the eight largest banking organizations by taking an approach the cooperative model has used for more than 100 years.

  • Log into Peer-to-Peer and visit the Hot Topics section for two useful reports: RBC Forecasting: Understand exactly how the rule will impact your credit union. Download a comprehensive spreadsheet template directly from the RBC Forecasting tool, or manually enter numbers into the site. Fill in your credit union's balances for all fields and upload the spreadsheet back to the tool.
  • RBC Component Breakdown: The only tool in the industry that provides an immediate side-by-side comparison of your credit union's standing under the old rule and the new rule.
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