WASHINGTON (9/24/14)--The National Credit Union Administration's risk-based capital proposal could "have a large ripple effect on countless credit unions," says Rep. Jim Jordan (R-Ohio) in a letter to the agency. Jordan became the 334th member of Congress to write a letter outlining concerns with the proposal.
Jordan said the proposal "would place more importance on the current asset size of a credit union rather than a complete assessment of a credit union's overall portfolio," adding that the proposal seemed to be a deviation from the current regulations provided in the Federal Credit Union Act.
In questioning the NCUA's authority to pass such a rule, Jordan cited a letter from former Senate Banking Committee Chair Alfonse D'Amato, who served in the Senate when the Federal Credit Union Act was changed.
D'Amato said the language only gives the NCUA authority to design an "adequately capitalized" risk-based standard, but that it did not intend for the agency to have the authority to establish a separate requirement to be "well capitalized," which is in the NCUA's current proposal.
"Such a major expansion on current legislation deserves not only authorization from Congress, but more importantly it deserves an open debate on behalf of the party that will ultimately feel the final effects: the American people," Jordan's letter reads.
Jordan also expressed concerns that the proposal would have an adverse effect on the more than 4,000 credit unions offering mortgage products that currently make up approximately 6.5% of the mortgage market.
"The proposed rule will likely decrease the availability of these loans or increase the cost for the average citizen," he wrote.
According to Jordan, one estimate suggests Ohio credit unions could face increased capital requirements of up to $125 million to remain well capitalized.