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Compliance Outlook

Compliance Outlook. NCUA Capital Planning and Stress Testing Requirements. Capital Planning & Stress Testing. The ultimate responsibility for governance over a covered credit union’s capital planning and analysis process rests with the credit union’s board of directors.

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Compliance Outlook

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  1. Compliance Outlook NCUA Capital Planning and Stress Testing Requirements

  2. Capital Planning & Stress Testing The ultimate responsibility for governance over a covered credit union’s capital planning and analysis process rests with the credit union’s board of directors.

  3. Capital Planning & Stress Testing Senior management responsible for capital planning and analysis must provide regular reports on capital planning and analysis to the credit union’s board of directors.

  4. Capital Planning & Stress Testing • The capital policy must: • 1. State goals and limits for capital levels and risk exposure. • 2. Establish requirements for reviewing and reporting capital levels and breaches of capital limits, with contingency plans for remedying any breaches. • 3. State the governance over the capital analysis process; • 4. Specify capital analysis roles and responsibilities; • 5. Specify the internal controls that govern capital planning; • 6. Describe the frequency with which capital analyses will be conducted; • 7. State how capital analysis results are used and by whom; and • 8. Be reviewed at least annually.

  5. Capital Planning & Stress Testing The credit union must develop and maintain a capital plan and submit this plan to NCUA each year by February 28th. The plan must be based on the credit union’s financial data as of September 30th of the immediately preceding previous calendar year.

  6. Capital Planning & Stress Testing The capital plan must contain: A quarterly assessment of the expected sources and levels of stress test capital; A discussion of how the credit union will maintain stress test capital; A discussion of how the credit union will, maintain ready access to funding; A discussion of how the credit union will maintain a stress test capital ratio of 5 percent or more under baseline, adverse, and severely adverse conditions; A discussion of any expected changes to the credit union’s business plan; and A program to conduct sensitivity testing, reverse stress testing, and an analysis of the impact of credit risk and interest rate risk to capital under unfavorable economic conditions.

  7. Capital Planning & Stress Testing The NCUA will conduct stress tests which will consist of baseline, adverse, and severely adverse scenarios. The tests will take into account all relevant exposures and activities of a credit union to evaluate its ability to absorb losses in specified scenarios over a 9-quarter horizon. The minimum stress test capital ratio is 5%.

  8. Thank you for joining me for this review of the NCUA’s Capital Planning and Stress Testing Requirements. Shawn Wolbert, CIA, CUCE Director CU System Relations 101 S. Washington Square, Suite 900 Lansing, MI 48933-1703 (800) 262-6285 Ext. 486 (734) 658-5427 Mobile Follow me on Twitter – Shawn Wolbert @ Go2CUGuru

  9. Cloud Computing Resources: NCUA Guidance - http://www.gpo.gov/fdsys/pkg/FR-2014-04-30/pdf/2014-09814.pdf

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