ALEXANDRIA, Va. (10/25/13)--Federally insured credit unions with assets exceeding $10 billion would be required to develop and maintain capital plans, and undergo annual stress tests under a rule proposed by the National Credit Union Administration Thursday.
|CUNA Deputy General Counsel Mary Dunn (left) Executive Vice President for Strategic Communications Paul Gentile (center) and General Counsel Eric Richard (far right) meet with NCUA Chairman Debbie Matz following Thursday's open board meeting. (CUNA Photo)|
The stress test requirements, drafted by the agency's Office of National Examinations and Supervision, would require impacted credit unions to conduct specific capital analyses to evaluate how changes in variables, parameters and inputs used by credit unions in their capital plans could impact capital. Credit unions would also need to test how interest rate shocks of at least 300 basis points would impact their net economic value.
"This proposed rule will further our efforts to dedicate more resources to the largest credit unions, which by their sheer size pose the greatest risks to the share insurance fund," NCUA Chairman Debbie Matz said.
Ensuring the liquidity of the credit union system is the NCUA's responsibility, board member Richard Metsger added.
The four credit unions with more than $10 billion in assets already conduct their own stress tests, agency staff said during their presentation. The agency would meet with representatives from those credit unions if the separate stress tests garner different results, NCUA staff said. However, the agency has not said what actions it would take to address any differences.
The NCUA has not decided whether the results of stress tests would be released publicly. Credit unions can comment on the benefits and drawbacks of publicly releasing stress test results, Matz said. Metsger said he was already disposed toward public disclosure, but he also welcomed credit union comments on the issue.
The agency hopes to have the rule finalized next year.
Setting up stress testing for credit unions could cost the agency as much as $4 million in the first year, according to unofficial agency estimates. The costs should decline after the first year, NCUA staff added. The costs would be charged to the National Credit Union Share Insurance Fund, not the NCUA operating budget. Any costs in excess of $4 million would need board approval. The agency plans to outsource the stress testing to a vendor.
The proposal will be open to public comment for 60 days.
"We share NCUA's basic safety and soundness objectives reflected by the proposal," Credit Union National Association Deputy General Counsel Mary Dunn said. "The extent to which a new costly program is needed to accomplish those objectives is one of the key issues we will be discussing with our members. We also have concerns about public disclosure of stress testing results, an issue the agency is seeking comments on," she added.