WASHINGTON (6/17/14)--Rep. Erick Paulsen (R-Minn.), a member of the powerful House Ways and Means Committee, warns that credit unions in his state would be adversely impacted by the National Credit Union Administration's risk-based capital proposal and he urged the agency to make revisions before issuing a final rule.
Paulsen said that 84% of Minnesota credit unions that would be affected by the NCUA proposal would see their cushions above the well-capitalized level shrink, and almost 9% would fall from well-capitalized to the lower adequately capitalized ranking.
The lawmaker from Minnesota went on to warn that many credit unions would have to raise capital in order to comply with the proposed rule--and that the situation could be tough on consumers as well.
"Because of credit unions' limited avenues for raising capital, it is likely this proposal would force them to charge higher lending and financial services fees and reduce dividend payments to members," he wrote in a letter to the NCUA chair.
"Before proceeding with a final rule, I would encourage the NCUA to take into account the economic impact of this added burden on the state's credit unions," he said.
Reflecting the concerns of others on Capitol Hill, Paulsen also asked the federal credit union regulator to review the proposed risk-weight calibrations carried in the proposal and to explain why some are "considerably higher" than those applied to banks. He also urged the NCUA to adopt a longer implementation period than the 18 months currently proposed.
Paulsen's letter joins a long and growing list from federal lawmakers who are informing the NCUA of their concerns about the RBC plan, as written. The NCUA has already received are a record number of comments on the proposal--in excess of 2,050. Those from Capitol Hill include one co-signed by 324 House members, and others by current and former U.S. senators.
The Credit Union National Association submitted a detailed, 47-page comment letter to underscore what it called the plan's inherent flaws and the damaging impact it would generate.
"Indeed, the economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher," the CUNA letter states.