NCUA Outlines Proposed Changes To Prompt Corrective Action Rule

ALEXANDRIA, Va. - NCUA has put together a "Q&A" explaining its proposed amendments to the Prompt Corrective Action rule on its website at www.ncua.gov. Here are excerpts from that document.

Why is this a good time to change PCA?

Many CUs continue to increase their level of net worth in order to avoid PCA based on the current 7% leverage ratio. Eliminating the NCUSIF deposit from the calculation is a more precise way to address the issue for individual credit unions.

Short of a statutory change, is there anything NCUA can do to update the capital system we implement?

No, we cannot make credit unions' PCA system comparable and more risk-based without legislation.

What are the safety and soundness implications of the proposal?

Improved risk measurement and management by the credit unions is the primary benefit. This PCA proposal more closely aligns credit risk with capital requirements for all credit unions. The measurement process is highly transparent which allows credit unions to forecast increases in regulatory capital when evaluating business expansion. The capital standard for the most thinly capitalized credit unions is increased.