ALEXANDRIA, Va. (9/30/14)--National Credit Union Administration Chair Debbie Matz announced Monday that she will request that a revised risk-based capital proposal be issued with a new comment period due to "significant structural changes" being considered. Credit Union National Association President/CEO Jim Nussle commended the NCUA's decision.
"CUNA, the leagues and credit unions fervently advocated for a second comment period given the significance of the proposal and the feedback that it received from both the credit union movement and policymakers," Nussle said. "This is terrific news; we look forward to continuing to work with the agency to craft a rule that meets the needs of the credit union system."
CUNA requested an additional comment period in its original comment letter filed with the agency May 28, and has advocated for it during the three NCUA Listening Sessions over the summer and in meetings with NCUA board members and staff.
Board member J. Mark McWatters called the previously proposed risk-based capital proposal "deeply flawed" and said it merits substantial revision.
"As I stated last week, I will not consider the rules for adoption unless they are re-proposed with a robust comment period of not less than 60 to 90 days," he said. "I articulated this position out of respect for Congress and those members of the credit union community who have enthusiastically voiced their opposition to the proposed rules."
NCUA staff are reviewing and revising the current proposal, and reviewing stakeholder comments, before bringing the revised version to the board. The agency could not confirm when the board might see the revision, but Matz anticipates the board could issue an amended proposal before the end of the year.
According to the agency, the amended proposal will include a longer implementation period and revised risk weights for mortgages, investments, member business loans, credit union service organizations and corporate credit unions, among other changes.
Stakeholders will be invited to comment on an alternative approach for addressing interest rate risk using the supervisory process. NCUA board member Rick Metsger said he believes interest rate risk must be addressed in the risk-based capital rule, but separately from credit risk.
"Weighting credit risk and interest rate risk with a single numerical value created conflicts that ultimately made it difficult to accurately weigh the risk of either," he said. ""I am pleased we appear to be moving in the direction of separating interest rate risk and credit risk and that structural change alone is sufficient for me to believe an additional comment period would be appropriate."
Matz said the changes will pose less of a regulatory burden than the original proposed rule, but some changes will affect the rule's structure.
"Based on discussions with NCUA's general counsel, I now believe it is prudent under the APA to ask for additional comments," she said.