WASHINGTON (4/22/14)--In discussions with top staff at the National Credit Union Administration, the Credit Union National Association's Examination and Supervision Subcommittee continued a thorough review of concerns on legal and economic grounds regarding the agency's proposed risk-based capital proposal.
NCUA Director of Examination and Insurance (E&I) Larry Fazio and Deputy E&I Director Tim Segerson participated in the meeting.
During the meeting, the credit union subcommittee leaders directly questioned the proposal's impact on credit unions' capital cushions above the well-capitalized level, as well the proposed authority to allow the agency, on a case-by-case basis, to impose additional capital requirements above what the rule specifically would require.
The subcommittee also expressed concerns about some of the proposal's highest risk weightings--such as those for mortgages, investments, and member business loans--and the detrimental impact those risk-weightings would have on business and agricultural lending in rural areas.
Well-capitalized credit unions have a higher leverage ratio than other financial institutions and have lower risk generally. In light of this, the subcommittee raised a number of questions regarding the need for a such a high well-capitalized risk-based capital requirement, which would be a ratio of equity to cover losses divided by risk-weighted assets as defined by NCUA and set at 10.5% under the proposal.
The RBC proposal would apply to credit unions with over $50 million in assets. Comments are due May 28. CUNA has reiterated its request that the agency extend the comment period by 90 days.
CUNA has estimated that the RBC proposal, as written, will reduce credit unions' capital buffers by about $7.6 billion.
The meeting was chaired by Wisconsin Credit Union League President Brett Thompson, and in addition to subcommittee member, CUNA President/CEO Bill Cheney, Chief Economist Bill Hampel, General Counsel Eric Richard, Deputy General Counsel Mary Dunn, and Assistant General Counsel for Special Projects Robin Cook joined in the meeting.
Use the resource link for CUNA's Risk-Based Capital Action Center.