CUNA Regulatory Comment Call

December 2, 2002


Executive Summary

Highlights of the Proposal


The concept of an abbreviated net worth restoration plan ("NWRP") that would provide certain marginally undercapitalized credit unions with a “safe harbor” for PCA compliance in that additional transfer to reserves would not have been required, was first raised in the proposed rule issued in June to improve PCA implementation. However, NCUA did not adopt the proposed “safe harbor” and is seeking comments on a revised version that would not go as far as the earlier proposal in streamlining compliance for credit unions that are marginally undercapitalized because of asset growth. NCUA said it was reluctant to adopt the previous proposal because a ‘safe harbor” implies that NCUA will not be monitoring a credit union’s net worth restoration efforts “’Safe harbor’" approval was a misnomer to the extent that it implied, incorrectly, that NCUA would abdicate this statutory responsibility,” NCUA said.

Proposal for "1st Tier Net Worth Restoration Plan"

The proposed rule permits an "eligible" federally-insured credit union to submit for NCUA approval a "1st tier net worth restoration plan" ("1st tier NWRP") if the credit union falls marginally below "adequately capitalized" (6%) because asset growth, driven primarily by share and deposit growth, outpaces growth in net worth.


To be eligible, a credit union must meet the following criteria:

Filing Time Frame

Contents of 1st Tier NWRP

The 1st Tier plan must must:

Differences between 1st Tier and Standard NWRP

Criteria for Approval

Approval is subject to NCUA's case-by-case determination that the growth rate and ROAA projected for the credit union are based on realistic assumptions that are likely to succeed in restoring its net worth ratio to 6 percent and satisfying any applicable RBNW requirement at the end of the term of the plan.

Requirement To File Standard NWRP

A qualifying credit union may still have to file a standard net worth restoration plan under certain circumstances:

Questions to Consider

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •