WASHINGTON (5/15/14)--Sen. Al Franken (D-Minn.) sent a letter Wednesday to National Credit Union Administration Chair Debbie Matz urging her to consider the input of Minnesota's credit unions as the agency considers its risk-based capital (RBC) proposal.
Franken added his voice to a growing chorus of lawmakers who are urging the federal regulatory agency to heed credit union concerns that the RBC plan, as written, could adversely affect small businesses and credit union members. A bipartisan collection of more than 320 House lawmakers joined Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.) this week to urge the NCUA to be judicious as it works to finalize a RBC rule. (See News Now May 14: Concerned about RBC proposal, 75% of U.S. Reps. sign letter to NCUA.)
In his separate letter Franken wrote, "Minnesota credit unions have contacted me with a number of concerns regarding the proposed rule. Capital rules must be tailored to the circumstances of credit unions and their customers."
The NCUA's proposal would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
Under the proposed rule, an adequately capitalized credit union would need to maintain a net worth ratio of 6% and an RBC ratio of 8% of equity to risk assets, while a well-capitalized credit union would need 7% and a higher RBC ratio of 10.5%, meaning the RBC ratio for well-capitalized credit unions exceeds that for adequately capitalized credit unions. This violates the Federal Credit Union Act, the Credit Union National Association says.
The act directs the NCUA to set any risk-based component for the well-capitalized threshold no higher than the component for the adequately capitalized level.
CUNA opposes the NCUA's current proposal and is developing a comment letter with its Examination and Supervision Subcommittee. The trade association is also encouraging all credit union with assets above $40 million to consider how the proposal will affect their operations and to file a comment letter by the May 28 deadline.