###### Editorial Note on [Part 702](/current/title-12/part-702?toc=1)

#### Editorial Note:

Nomenclature changes to part 702 appear at [84 FR 1606](https://www.federalregister.gov/citation/84-FR-1606), Feb. 5, 2019.

#### § 702.102 Capital classification.

(a) *Capital categories.* Except for credit unions defined as “new” under [subpart B of this part](/on/2024-09-19/title-12/part-702/subpart-B), a credit union shall be deemed to be classified (Table 1 of this section)—

(1) *Well capitalized* if:

(i)

(A) *Net worth ratio.* The credit union has a net worth ratio of 7.0 percent or greater; and

(B) *Risk-based capital ratio.* The credit union, if complex, has a risk-based capital ratio of 10 percent or greater; or

(ii) *Complex credit union leverage ratio.*

(A) The complex credit union is a qualifying complex credit union that has opted into the CCULR framework under [§ 702.104(d)](/on/2024-09-19/title-12/section-702.104#p-702.104(d)) and it has a CCULR of 9.0 percent or greater; or

(B) The complex credit union is a qualifying complex credit union that has opted into the CCULR framework under [§ 702.104(d)](/on/2024-09-19/title-12/section-702.104#p-702.104(d)), is in the grace period, as defined in [§ 702.104(d)(7)](/on/2024-09-19/title-12/section-702.104#p-702.104(d)(7)), and has a CCULR of 7.0 percent or greater.

(2) *Adequately capitalized* if:

(i) *Net worth ratio.* The credit union has a net worth ratio of 6.0 percent or greater; and

(ii) *Risk-based capital ratio.* The credit union, if complex, has a risk-based capital ratio of 8.0 percent or greater; and

(iii) Does not meet the definition of a well capitalized credit union.

(3) *Undercapitalized* if:

(i) *Net worth ratio.* The credit union has a net worth ratio of 4.0 percent or more but less than 6.0 percent; or

(ii) *Risk-based capital ratio.* The credit union, if complex, has a risk-based capital ratio of less than 8.0 percent.

(4) *Significantly undercapitalized* if:

(i) The credit union has a net worth ratio of 2.0 percent or more but less than 4.0 percent; or

(ii) The credit union has a net worth ratio of 4.0 percent or more but less than 5.0 percent, and either—

(A) Fails to submit an acceptable net worth restoration plan within the time prescribed in [§ 702.110](/on/2024-09-19/title-12/section-702.110);

(B) Materially fails to implement a net worth restoration plan approved by the NCUA Board; or

(C) Receives notice that a submitted net worth restoration plan has not been approved.

(5) *Critically undercapitalized* if it has a net worth ratio of less than 2.0 percent.

Table 1 to [§ 702.102](/on/2024-09-19/title-12/section-702.102)—Capital Categories

| Capital classification | Net worth ratio | | Risk-based capital ratio, if applicable | | CCULR, if applicable | And subject to following condition(s) . . . |
| --- | --- | --- | --- | --- | --- | --- |
| Well Capitalized | 7% or greater | And | 10% or greater | Or | 9% or greater \* | |
| Adequately Capitalized | 6% or greater | And | 8% or greater | Or | N/A | And does not meet the criteria to be classified as well capitalized. |
| Undercapitalized | 4% to 5.99% | Or | Less than 8% | Or | N/A | |
| Significantly Undercapitalized | 2% to 3.99% | | N/A | | N/A | Or if “undercapitalized at <5% net worth and (a) fails to timely submit, (b) fails to materially implement, or (c) receives notice of the rejection of a net worth restoration plan. |
| Critically Undercapitalized | Less than 2% | | N/A | | N/A | |
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| \* A qualifying complex credit union opting into the CCULR framework should refer to [12 CFR 702.104(d)(7)](/on/2024-09-19/title-12/section-702.104#p-702.104(d)(7)) if its CCULR falls below 9.0 percent. | | | | | | |

(b) *Reclassification based on supervisory criteria other than net worth.* The NCUA Board may reclassify a well capitalized credit union as adequately capitalized and may require an adequately capitalized or undercapitalized credit union to comply with certain mandatory or discretionary supervisory actions as if it were classified in the next lower capital category (each of such actions hereinafter referred to generally as “reclassification”) in the following circumstances:

(1) *Unsafe or unsound condition.* The NCUA Board has determined, after providing the credit union with notice and opportunity for hearing pursuant to [§ 747.2003 of this chapter](/on/2024-09-19/title-12/section-747.2003), that the credit union is in an unsafe or unsound condition; or

(2) *Unsafe or unsound practice.* The NCUA Board has determined, after providing the credit union with notice and opportunity for hearing pursuant to [§ 747.2003 of this chapter](/on/2024-09-19/title-12/section-747.2003), that the credit union has not corrected a material unsafe or unsound practice of which it was, or should have been, aware.

(c) *Non-delegation.* The NCUA Board may not delegate its authority to reclassify a credit union under [paragraph (b)](/on/2024-09-19/title-12/section-702.102#p-702.102(b)) of this section.

(d) *Consultation with state officials.* The NCUA Board shall consult and seek to work cooperatively with the appropriate state official before reclassifying a federally insured state-chartered credit union under [paragraph (b)](/on/2024-09-19/title-12/section-702.102#p-702.102(b)) of this section, and shall promptly notify the appropriate state official of its decision to reclassify.

[[80 FR 66706](https://www.federalregister.gov/citation/80-FR-66706), Oct. 29, 2015, as amended at [86 FR 72804](https://www.federalregister.gov/citation/86-FR-72804), Dec. 23, 2021]