of a State law if such law would conflict with the re-
quirements of section 107A.’’. 
SEC. 3. IMPROVED CAPITAL STANDARDS AND LEVERAGE 
RATIOS FOR CREDIT UNIONS. 
(a) IN GENERAL.—Section 216 of the Federal Credit 
Union Act (12 U.S.C. 1790d) is amended— 
(1) by redesignating subsection (o) as sub-
section (p); 
(2) by inserting after subsection (n) the fol-
lowing: 
‘‘(o) REVISED CAPITAL STANDARDS.— 
‘‘(1) TWO-TIER SYSTEM.—The Board shall im-
plement a two-tier system of net worth ratios for 
credit unions, consisting of a risk-based net worth 
ratio and a net worth capital ratio. Net worth cat-
egories in this section shall take into account the 
simplicity or complexity of credit unions in terms of 
risk profile. 
‘‘(2) USE OF LEVERAGE RATIOS.—The Board 
shall establish standards under this section with re-
spect to leverage ratios of a credit union to the same 
extent as are provided for net worth ratios of a cred-
it union. Such standards shall take into account the 
unique nature of credit unions and, to the extent 
practicable, be comparable to, but not necessarily 
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identical to, the leverage ratio standards under sec-
tion 38 of the Federal Deposit Insurance Act.’’; and 
(3) in subsection (p), as so redesignated, by 
amending paragraph (2) to read as follows: 
‘‘(2) NET WORTH.—The term ‘net worth’— 
‘‘(A) with respect to any insured credit 
union, means the retained earnings balance of 
the credit union, as determined under generally 
accepted accounting principles, together with— 
‘‘(i) any amounts that were previously 
retained earnings of any other credit union 
with which the credit union has combined; 
and 
‘‘(ii) components of equity under gen-
erally accepted accounting principles not 
included in retained earnings, as deter-
mined by the Board; 
‘‘(B) with respect to any insured credit 
union, includes, at the Board’s discretion and 
subject to rules and regulations established by 
the Board, assistance provided under section 
208 of this title to facilitate a least-cost resolu-
tion consistent with the best interests of the 
credit union system; and 
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‘‘(C) with respect to a low income credit 
union, includes secondary capital accounts, sub-
ject to limitations set by the Board to address 
the safe and sound use of secondary capital to 
carry out the purpose of this section, that are— 
‘‘(i) uninsured; and 
‘‘(ii) subordinate to all other claims 
against the credit union, including the 
claims of creditors, shareholders, and the 
Fund.’’. 
(b) AMENDMENTS TO NET WORTH CATEGORIES.— 
(1) Section 216(c)(1) of the Federal Credit 
Union Act is amended as follows: 
(A) WELL
CAPITALIZED.—In subpara-
graph (A), by striking clauses (i) and (ii) and 
inserting the following: 
‘‘(i) it has a risk-based net worth 
ratio of not less than 10 percent; or 
‘‘(ii) is considered to be well capital-
ized by any other standard, as determined 
by the Board.’’. 
(B) ADEQUATELY CAPITALIZED.—In sub-
paragraph (B), by striking clauses (i) and (ii) 
and inserting the following: 
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‘‘(i) it has a risk-based net worth 
ratio of not less than 8 percent; or 
‘‘(ii) is considered to be adequately 
capitalized by any other standard, as de-
termined by the Board.’’. 
(C) 
UNDERCAPITALIZED.—In 
subpara-
graph (C), by striking clauses (i) and (ii) and 
inserting the following: 
‘‘(i) it has a risk-based net worth 
ratio of not less than 6 percent; or 
‘‘(ii) is considered to be undercapital-
ized by any other standard, as determined 
by the Board.’’. 
(D) 
SIGNIFICANTLY
UNDERCAPITAL-
IZED.—Subparagraph (D) is amended to read 
as follows: 
‘‘(D) 
SIGNIFICANTLY
UNDERCAPITAL-
IZED.—An insured credit union is ‘significantly 
undercapitalized’ if— 
‘‘(i) it has a net worth ratio of less 
than 3.25 percent; 
‘‘(ii) it has a net worth ratio of less 
than 4.25 percent, and either— 
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‘‘(I) fails to submit an acceptable 
net worth restoration plan within the 
time allowed under subsection (f); or 
‘‘(II) materially fails to imple-
ment a net worth restoration plan ap-
proved by the Board; or 
‘‘(iii) it has a risk-based net worth 
ratio of less than 6 percent.’’. 
(2) RELEVANT
CAPITAL
MEASURES.—Section 
216(c)(2) of the Federal Credit Union Act is amend-
ed— 
(A) by striking ‘‘, for purposes of section 
38(c) of the Federal Deposit Insurance Act,’’; 
(B) by striking ‘‘(as those terms are used 
in section 38),’’; and 
(C) by inserting ‘‘or relevant capital meas-
ures as defined by the Board’’ after ‘‘leverage 
limit’’ each place such term appears. 
(3) 
ADJUSTMENT
OF
LEVELS.—Section 
216(c)(2)(A) of the Federal Credit Union Act is 
amended— 
(A) by striking ‘‘Federal banking agencies 
increase or decrease’’ and inserting ‘‘Federal 
Deposit Insurance Corporation increases or de-
creases’’; and 
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(B) by striking ‘‘level for’’ and inserting 
‘‘levels for’’. 
(4) ADJUSTING NET WORTH LEVELS.—Section 
216(c)(2)(A) of the Federal Credit Union Act is 
amended by striking ‘‘not more than the difference 
between the required minimum level most recently 
established by the Federal banking agencies and 4 
percent of total assets (with respect to institutions 
regulated by those agencies)’’ and inserting ‘‘the in-
crease or decrease made by the Federal Deposit In-
surance Corporation’’. 
(5) CONSULTATION
WITH
FEDERAL
DEPOSIT 
INSURANCE CORPORATION.—Section 216(c)(2)(B)(i) 
of the Federal Credit Union Act is amended by 
striking ‘‘Federal banking agencies’’ and inserting 
‘‘Federal Deposit Insurance Corporation’’. 
(c) AMENDMENTS RELATING TO RISK-BASED NET 
WORTH REQUIREMENTS.—Section 216(d) of the Federal 
Credit Union Act is amended— 
(1) in paragraph (1)— 
(A) by striking ‘‘that are complex, as de-
fined by the Board’’; and 
(B) by inserting ‘‘, as defined by the 
Board’’ before the period at the end; 
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(2) by amending paragraph (2) to read as fol-
lows: 
‘‘(2) STANDARD.—The Board shall design the 
risk-based net worth requirement to take account of 
any material risks, as defined by the Board, applica-
ble to insured credit unions that are taken account 
of by comparable standards applicable to institutions 
insured by the Federal Deposit Insurance Corpora-
tion.’’; and 
(3) in the heading for such subsection, by strik-
ing ‘‘FOR COMPLEX CREDIT UNIONS’’. 
(d) TREATMENT BASED ON OTHER CRITERIA.—Sec-
tion 216(h)(1) of the Federal Credit Union Act is amend-
ed to read as follows: 
‘‘(1) the Board may not reclassify an insured 
credit union into a lower net worth category due 
solely to interest rate risk, or treat an insured credit 
union as if it were in a lower net worth category, for 
reasons not pertaining to the safety and soundness 
of that credit union; and’’. 
(e) DEFINITIONS RELATING TO NET WORTH.— 
(1) NET WORTH RATIO.—Section 216(p) of the 
Federal Credit Union Act, as redesignated by sub-
section (a), is amended in paragraph (3)— 
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(A) by inserting ‘‘minus its deposit in the 
Fund,’’ after ‘‘net worth of credit union’’; and 
(B) by inserting ‘‘minus its deposit in the 
Fund’’ after ‘‘total assets of the credit union’’. 
(2) RISK-BASED NET WORTH RATIO.—Section 
216(p) of the Federal Credit Union Act, as redesig-
nated by subsection (a), is amended by inserting 
after paragraph (4) the following new paragraph: 
‘‘(5) RISK-BASED
NET
WORTH
RATIO.—The 
term ‘risk-based net worth ratio’ means, with respect 
to any credit union— 
‘‘(A) the ratio of the net worth of the cred-
it union, plus any loan loss reserves (subject to 
limitations established by the Board), and 
minus the credit union’s deposit in the Fund, to 
‘‘(B) the risk assets of the credit union, as 
defined by the Board.’’. 
(3) AMENDMENTS RELATING TO NET WORTH 
RESTORATION PLANS.— 
(A) TEMPORARY WAIVER OF NET WORTH 
RESTORATION
PLAN
REQUIREMENT
IN
RE-
SPONSE TO DISASTERS.—Subsection 216(f)(1) 
of the Federal Credit Union Act is amended by 
striking ‘‘Each insured credit union’’ and in-
serting ‘‘Except as determined by the Board in 
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the case of a credit union that becomes or re-
mains no less than undercapitalized due to the 
impact of a major natural or man-made dis-
aster, each insured credit union’’. 
(B) NET WORTH RESTORATION REQUIRE-
MENT
FOR
CREDIT
UNIONS
THAT
ARE
NOT 
WELL
CAPITALIZED.—Section 216(e) of the 
Federal Credit Union Act is amended to read 
as follows: 
‘‘(e) NET WORTH RESTORATION PLAN REQUIRE-
MENT APPLICABLE TO CREDIT UNIONS THAT ARE NOT 
WELL CAPITALIZED.—The Board may require an insured 
credit union that is not well capitalized to submit a net 
worth restoration plan, as required under subsection (f), 
if— 
‘‘(1) material safety and soundness concerns 
caused the credit union to become less than well cap-
italized; and 
‘‘(2) the safety and soundness concerns remain 
unresolved.’’. 
(C) BOARD ACTION MAY INCLUDE ORDER 
TO CREDIT UNION.—Section 216(i)(1)(B) of the 
Federal Credit Union Act is amended— 
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(i) by inserting ‘‘order the credit 
union to’’ before ‘‘take such other action’’; 
and 
(ii) by inserting ‘‘, in the discretion of 
the Board,’’ after ‘‘as the Board’’. 
(D) SUBSTITUTION
OF
CALENDAR 
DAYS.—Section 216(i)(3)(A) of the Federal 
Credit Union Act is amended— 
(i) by striking ‘‘calendar quarter’’ and 
inserting ‘‘90 calendar days’’; and 
(ii) by inserting ‘‘first’’ after ‘‘the 
date on which the credit union’’. 
(E) CLARIFICATION OF COORDINATION RE-
QUIREMENT.—Section 216(l)(3)(A)(ii) of the 
Federal Credit Union Act is amended by insert-
ing before the semicolon the following: ‘‘, if the 
Board determines that such action by the offi-
cial will carry out the purpose of this section’’. 
(f) STUDY ON REFORM OF PROMPT CORRECTIVE AC-
TION.— 
(1) STUDY.—The National Credit Union Ad-
ministration Board shall carry out a study of prob-
lems associated with the current prompt corrective 
action regime. In carrying out such study, the Board 
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shall consult with qualified industry and National 
Credit Union Administration representatives. 
(2) REPORT.—Not later than the end of the 1- 
year period beginning on the date of the enactment 
of this Act, the Board shall issue a report to the 
Congress containing all findings and determinations 
made in carrying out the study required under para-
graph (1), including any specific legislative rec-
ommendations recommended by the Board. 
SEC. 4. REVIEW OF CREDIT UNION REGULATIONS. 
(a) COST-BENEFIT ANALYSIS.— 
(1) NATIONAL
CREDIT
UNION
ADMINISTRA-
TION.—Section 120 of the Federal Credit Union Act 
(12 U.S.C. 1766), as amended by section 2, is fur-
ther amended by adding at the end the following: 
‘‘(m) COST-BENEFIT ANALYSES.— 
‘‘(1) PRE-ISSUANCE.—Each regulation issued 
by the Board shall include a thorough cost-benefit 
analysis that details the estimated cost to a credit 
union of complying with such regulation compared 
to the measurable benefit the regulation may have. 
Any information provided to the Board from credit 
unions for purposes of the Board’s analysis shall be 
on a voluntary basis. 
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