§ 702.206 - Revised business plans (RBP) for new credit unions.

§ 702.206 Net worth restoration plans.

Cross Reference

Link to an amendment published at 86 FR 11073, Feb. 23, 2021.

Revised business plans (RBP) for new credit unions.

(a) Schedule for filing -

(1) Generally. A federally insured credit union shall file a written net worth restoration plan (NWRP Except as provided in paragraph (a)(2) of this section, a new credit union classified moderately capitalized or lower must file a written revised business plan (RBP) with the appropriate Regional Director and, if Statestate-chartered, with the appropriate State state official, within 45 30 calendar days of the effective date of classification as either “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” unless the NCUA Board notifies the credit union in writing that its NWRP is to be filed within a different period.

(2) Exception. An otherwise “adequately capitalized” credit union that is reclassified “undercapitalized” on safety and soundness grounds under § 702.102(b) is not required to submit a NWRP solely due to the reclassification, unless the NCUA Board notifies the credit union that it must submit an NWRP.

(3) Filing of additional plan. Notwithstanding paragraph (a)(1) of this section, a credit union that has already submitted and is operating under a NWRP approved under this section is not required to submit an additional NWRP due to a change in net worth category (including by reclassification under § 702.102(b)), unless the NCUA Board notifies the credit union that it must submit a new NWRP. A credit union that is notified to submit a new or revised NWRP shall file the NWRP in writing with the appropriate Regional Director within 30 calendar days of receiving such notice, unless the NCUA Board notifies the credit union in writing that the NWRP

either:

(i) The last of the calendar month following the end of the calendar quarter that the credit union's net worth ratio has not increased consistent with the-present approved business plan;

(ii) The effective date of classification as less than adequately capitalized if the credit union has no then-present approved business plan; or

(iii) The effective date of classification as less than adequately capitalized if the credit union has increased the total amount of member business loans in violation of § 702.204(a)(3).

(2) Exception. The NCUA Board may notify the credit union in writing that its RBP is to be filed within a different period or that it is not necessary to file an RBP.

(

4

3) Failure to timely file plan. When a new credit union fails to

timely file an NWRP pursuant to this paragraph

file an RBP as provided under paragraphs (a)(1) or (a)(2) of this section, the NCUA Board shall promptly notify the credit union that it has failed to file an

NWRP

RBP and that it has 15 calendar days from receipt of that notice within which to

file an NWRP

do so.

(b) Assistance to small credit unions. Upon timely request by a credit union having total assets of less than $10 million (regardless how long it has been in operation), the NCUA Board shall provide assistance in preparing an NWRP required to be filed under paragraph (a) of this section.

(c) Contents of NWRP. An NWRP must -

(1) Specify -

(i) A quarterly timetable of steps the credit union will take to increase its net worth ratio so that it becomes “adequately capitalized” by the end of the term of the NWRP, and to remain so for four (4) consecutive calendar quarters. If “complex,” the credit union is subject to a risk-based net worth requirement that may require a net worth ratio higher than six percent (6%) to become “adequately capitalized”;

(ii) The projected amount of earnings to be transferred to the regular reserve account in each quarter of the term of the NWRP as required under § 702.201(a), or as permitted under § 702.201(b);

(iii) How the

Contents of revised business plan. A new credit union's RBP must, at a minimum -

(1) Address changes, since the new credit union's current business plan was approved, in any of the business plan elements required for charter approval under chapter 1, section IV.D. of appendix B to part 701 of this chapter, or for state-chartered credit unions under applicable state law;

(2) Establish a timetable of quarterly targets for net worth during each year in which the RBP is in effect so that the credit union becomes adequately capitalized by the time it no longer qualifies as “new” per § 702.201;

(3) Specify the projected amount of earnings of net worth increases as provided under § 702.204(a)(1) or 702.205(a)(1);

(4) Explain how the new credit union will comply with the mandatory and

any

discretionary supervisory actions imposed on it by the NCUA Board under this subpart;

(

iv

5)

The

Specify the types and levels of activities in which the new credit union will engage;

and

(

v) If

6) In the case of a new credit union reclassified to a lower category under § 702.

102

202(

b

d), specify the steps the credit union will take to correct the unsafe or unsound

practice(s) or condition(s);

(2) Include pro forma financial statements, including any off-balance sheet items, covering a minimum of the next two years; and

(3) Contain

condition or practice; and

(7) Include such other information as the NCUA Board

has required

may require.

(

4) Notwithstanding paragraphs (

c)

(1), (2), and (3) of this section, the Board may permit a credit union that is undercapitalized to submit to the Regional Director a streamlined NWRP plan attesting that its reduction in capital was caused by share growth and that such share growth is a temporary condition due to the COVID-19 pandemic. A streamlined NWRP plan is permitted between April 19, 2021 and March 31, 2022.

(d)

Criteria for approval

of NWRP

. The NCUA Board shall not

accept a NWRP plan

approve a new credit union's RBP unless it -

(1)

Complies with

Addresses the items enumerated in paragraph (

c

b) of this section;

(2) Is based on realistic assumptions, and is likely to succeed in

restoring

building the credit union's net worth; and

(3) Would not unreasonably increase the credit union's exposure to risk (including credit risk, interest-rate risk, and other types of risk).

(

e) Consideration of regulatory capital. To minimize possible long-term losses to the NCUSIF while the credit union takes steps to become “adequately capitalized,” the NCUA Board shall, in evaluating an NWRP under this section, consider the type and amount of any form of regulatory capital which may become established by NCUA regulation, or authorized by State law and recognized by NCUA, which the credit union holds, but which is not included in its net worth. (f) Review of NWRP

d) Review of revised business plan -

(1) Notice of decision. Within

45

30 calendar days after receiving an

NWRP

RBP under this

part

section, the NCUA Board shall notify the credit union in writing whether

the NWRP has been

its RBP is approved, and shall provide reasons for its decision in the event of disapproval. The NCUA Board may extend the time within which notice of its decision shall be provided.

(2) Delayed decision. If no decision is made within the time prescribed in paragraph (

f

e)(1) of this section, the

NWRP

RBP is deemed approved.

(3) Consultation with

State

state officials.

In the case of an NWRP

When evaluating an RBP submitted by a federally insured

State

state-chartered new credit union (whether an original, new

, additional, revised or amended NWRP

or additional RBP), the NCUA Board shall

, when evaluating the NWRP,

seek and consider the views of the appropriate

State

state official, and provide prompt notice of its decision to the appropriate

State

state official.

(

g

e)

NWRP

Plan not approved -

(1) Submission of new revised

NWRP

plan. If an

NWRP

RBP is rejected by the NCUA Board, the new credit union shall submit a

revised NWRP

new RBP within 30 calendar days of receiving notice of disapproval of its initial RBP, unless it is notified in writing by the NCUA Board that the

revised NWRP

new RBP is to be filed within a different period.

(2) Notice of decision on revised

NWRP

plan. Within 30 calendar days after receiving

a revised NWRP

an RBP under paragraph (

g

f)(1) of this section, the NCUA Board shall notify the credit union in writing whether the

revised NWRP (h) Amendment of NWRP. A credit union that is operating under an approved NWRP

new RBP is approved. The Board may extend the time within which notice of its decision shall be provided.

(3)

Disapproval of reclassified credit union's NWRP. A credit union which has been classified “significantly undercapitalized” under § 702.102(a)(4)(ii) shall remain so classified pending NCUA Board approval of a new or revised NWRP.

Submission of multiple unapproved RBPs. The submission of more than two RBPs that are not approved is considered an unsafe and unsound condition and may subject the credit union to administrative enforcement action pursuant to section 206 of the FCUA, 12 U.S.C. 1786 and 1790d.

(f) Amendment of plan. A credit union that has filed an approved RBP may, after prior written notice to

,

and approval by the NCUA Board, amend

its NWRP

it to reflect a change in circumstance. Pending approval of an amended

NWRP

RBP, the new credit union shall implement

the NWRP

its existing RBP as originally approved.

(

i

g) Publication. An

NWRP

RBP need not be published to be enforceable because publication would be contrary to the public interest.

[65 80 FR 858466706, FebOct. 1829, 20002015, as amended at 67 FR 71092, Nov. 29, 2002; 85 FR 31957, May 28, 2020; 86 FR 2026411073, AprFeb. 1923, 2021]