NAFCU questions whether NCUA has the statutory authority to institute individual minimum capital requirements. Under the proposed rule, NCUA introduces a new power to raise individual minimum capital requirements for credit unions “that varies from any of the risk-based capital requirement (s) that would otherwise apply to the credit union…”

Prompt corrective action for “significantly undercapitalized” credit unions.

(a) Mandatory supervisory actions by credit union. A federally-insured credit union which is “significantly undercapitalized” must—

(1) Earnings retention. Increase net worth and transfer earnings to its regular reserve account accordance with §702.201;

(2) Submit net worth restoration plan. Submit a net worth restoration plan pursuant to §702.206;

Overview of steps an “undercapitalized” credit unions must take

Submitted by sevans on Tue, 01/06/2015 - 5:26pm

Prompt corrective action for “undercapitalized” credit unions.

(a) Mandatory supervisory actions by credit union. A federally-insured credit union which is “undercapitalized” must—

(1) Earnings retention. Increase net worth and transfer earnings to its regular reserve account in accordance with §702.201;

The NCUA Board has the discretion to reclassify a credit union to the next lower category if the credit union has an unsafe or unsound condition or engages in material unsafe and unsound practices. The NCUA Board may reclassify a well-capitalized credit union as adequately capitalized, and may require an adequately capitalized or undercapitalized credit union to comply with certain mandatory or discretionary supervisory actions as if it were in the next lower category.

Net Worth Restoration Plan

Submitted by rthompson on Tue, 11/11/2014 - 3:44pm

Net Worth Restoration Plan (NWRP.) Management’s written plan detailing the steps the credit union will take to become adequately capitalized by the end of the plan’s term, and remain so for four consecutive quarters. The credit union will submit the plan within the mandated time frames to the appropriate regional director and, if state-chartered, the appropriate state supervisory authority (SSA) (5702.206.) For PCA purposes, the regulation refers to a new credit union’s equivalent of a NWRP as a revised business plan (5702.304(a)(2)).