Johnson: Reg Flex Qualifying Net Worth Ratio To Be 7%

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In remarks before a delegation of Texas credit unions visiting here, NCUA Chairman JoAnn Johson said she plans to move forward soon with plans on on lowering from 9% to 7% the RegFlex qualifying net worth ratio for well-managed, well-run CUs.

"We have more than two years' experience with RegFlex, and the structure is thoroughly implemented within the agency and the examination process," said Johnson. "It's time to provide flexibility for well-capitalized credit unions with 7% net worth." Johnson noted the agency is finalizing draft rule changes for presentation to the NCUA Board in the near future. "If we agree that 7% leverage is an unnecessarily high ratio for 'well capitalized' status under a system of risk-based prompt corrective action, then we should not set a higher bar for RegFlex," the chairman said. "The added risk of RegFlex activities is not significant in a properly-managed, well-supervised credit union, and setting the bar at 9% causes credit unions to manage to an even higher ratio."

In addition to enhancing the RegFlex rule, Johnson is also proposing to allow well-managed, highly-rated, low-income designated CUs to have the option of releasing the portion of secondary capital account that no longer counts as net worth. "Once these funds no longer count as net worth, the funds remain on the books as an asset drawing down the credit union's own net worth."

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