PALM BEACH, Fla. (11/18/13)--National Credit Union Administration board member Michael Fryzel said the agency should take "neither an overly stringent nor an overly permissive approach" as it crafts risk-based capital rules. "I advocate 'right sizing' NCUA's risk-based rules," he said.
Fryzel made his remarks before more than 110 attendees at the American Association of Credit Union Leagues' (AACUL) 2013 Winter Meeting. "Risk-based capital, properly formulated, should match up with the real-world activities of a credit union," Fryzel said. "Greater net worth might be necessary, depending on the type of activities that credit unions pursue as they serve their members," he added.
The agency is developing a new risk-based capital framework. The agency has said this framework will protect credit unions and consumers from losses, and replace the "outdated and insufficient" one-size-fits-all capital requirement.
The NCUA plan could result in higher capital levels for credit unions with high concentrations of risky assets. The current 7% leverage capital standard, which is required by the Federal Credit Union Act, would remain the floor. However, the agency has said credit unions with assets of $50 million and above could be subject to improved risk-based capital requirements to better correlate required capital levels to risk.
"A credit union's function is serving customers' financial needs, which by definition carries risk," Fryzel said on Friday. "I want NCUA to recognize that risk, not as an extraordinary characteristic that should be avoided, but as part of doing business as a provider of financial services in the 21st century. I want to see standards that are as minimal as possible and as much as necessary. I will be keeping this vision in mind as NCUA considers changes to the industry's risk-based capital rules," he added.
NCUA Chairman Debbie Matz, in a recent Inside Exchange interview with the Credit Union National Association's Paul Gentile, discussed the upcoming risk-based capital rule as one of her broad-ranging topics in the interview. She told Gentile that the new rule, if adopted, is unlikely to impact many credit unions. (See Nov. 6 News Now story: Matz Discusses Budget, CUSO Rule, Risk-based Cap With Gentile: Inside Exchange, Part II.)
For more of Fryzel's remarks, use the resource link.