In a report to Congress released Monday, the NCUA provided more details regarding how examiners will determine capital adequacy when enforcing the agency's final risk based capital rule. The final rule granted examiners the ability to determine capital adequacy beyond the risk-based capital ratio; when the rule was proposed, that provision drew criticism that it gave examiners too much subjective examination authority.

"(The) NCUA's supervisory assessment of capital adequacy may differ from conclusions that might be drawn solely from the calculation of a complex credit union's regulatory capital ratios," the report read. 

The NCUA further explained that examiners will take into account the following when judging capital adequacy: 

• Quality and trends in a credit union's capital composition;
• Whether the credit union is entering new activities or introducing new products;
• If a credit union is receiving special supervisory attention;
• If a credit union has or is expected to have losses resulting in capital inadequacy;
• If a credit union has significant exposure due to risks from non-traditional activities; or, 
• If a credit union has significant exposure to interest rate or operation risk.

An effective capital planning process involves an assessment of the risks to which a credit union is exposed and its processes for managing and mitigating those risks, an evaluation of its capital adequacy relative to its risks and consideration of the potential impact on its earnings and capita base from current and prospective economic conditions," the report read.