WASHINGTON (9/23/15)--Concerns over the National Credit Union Administration’s revised risk-based capital proposal (RBC2) led CUNA to write to U.S. House Financial Services Committee leadership Tuesday requesting consideration of a bill that would call for the proposal to be studied further.
In its letter to Rep. Jeb Hensarling (R-Texas), committee chair, and Rep. Maxine Waters (D-Calif.), ranking member, CUNA asked the committee to consider the Risk-Based Capital Study Act (H.R. 2769) in a markup that will occur next week.
“We’ve heard from our members on the very significant concerns they have regarding NCUA’s revised proposal to update risk-based capital standards for credit unions,” said Ryan Donovan, CUNA chief advocacy officer. “As we move closer to a final proposal, we have growing concerns that NCUA is not making as significant changes as we had hoped. We strongly believe that NCUA’s proposal must be consistent with the law and seek to minimize additional regulatory burden on credit unions.”
H.R. 2769 would delay implementation of RBC2 pending an NCUA study of the impact the proposal would have on credit unions.
“We believe committee action on this legislation would send another very significant signal to NCUA that its proposal must be consistent with the law, and seek to minimize additional regulatory burden on credit unions,” the letter reads. “NCUA’s proposal continues to be a solution in search of a problem.”
CUNA remains concerned that RBC2 contains a risk-based capital standard to determine if a credit union is well-capitalized. The Federal Credit Union Act permits the NCUA to impose a risk-based standard for the purpose of determining capital adequacy only.
CUNA has testified that the dual standard is outside of the purview of the Federal Credit Union Act, and this has been confirmed by former Senate Banking Committee Chair Alphonse D’Amato in his comments on the proposal.
D’Amato wrote in a comment letter to the NCUA that, “if we had intended there should also be a separate risk-based requirement to be well-capitalized (in addition to the 7% net worth ratio), we would have said so.”
CUNA’s analysis of the proposal shows that RBC2 would have done very little to reduce risk to the National Credit Union Share Insurance Fund during the most recent financial crisis. This has led CUNA and credit unions to question whether the costs and regulatory burden of RBC2 justify its existence.
“If the goal of a Prompt Corrective Action scheme is for covered institutions to hold sufficient capital to withstand a severe financial crisis without imperiling the deposit insurance fund, the results of the lab test that was the recent financial crisis are compelling evidence that a major overhaul of current credit union capital requirements toward a Based-style system is simply not required,” CUNA’s letter reads.