ALEXANDRIA, Va. (10/9/15)--The National Credit Union Administration will provide an analysis of its revised risk-based capital proposal (RBC2) shortly after the final rule is considered by the board on Oct. 15. NCUA Chair Debbie Matz, in a letter, sent Thursday, was in response to a letter sent this week from Reps. Stephen Fincher (R-Tenn.), Denny Heck (D-Wash.) and Bill Posey (R-Fla.).
However, the legislators asked Matz to provide the analysis to Congress prior to the board finalizing the rule.
Fincher, Heck and Posey sponsored the Risk-Based Capital Study Act (H.R. 2769), which would delay RBC2 until the agency studied the effects of the proposal on credit unions and reported to Congress. The bill passed the House Financial Services Committee last week 50-9.
The bill would require the NCUA to report to Congress on four issues: an analysis of the legal authority to require a two-tiered risk-based capital system; a comparison of bank and credit union risk weights; a discussion of the rationale for each of the risk weights; and an overview of how the proposed rule would apply to credit union capital buffers.
According to the NCUA, the revised proposal would apply to 22% of credit unions, those with assets exceeding $100 million. The risk weights have been calibrated so that 71.8% of complex credit union assets would have equivalent risk weights to banks and thrifts. The remaining 18.6% of complex credit union assets are weighted lower than banks and thrifts.
Matz said the rule has been calibrated to affect a few dozen credit unions “not carrying sufficient capital to match the risks on their balance sheets.”
She added that the NCUA estimates less than two dozen credit unions would not meet the proposed risk-based requirement to be well-capitalized.
Those credit unions would have several options until the Jan. 1, 2019 implementation date: reduce risks on their balance sheets; raise capital to cover those risks; or a combination of both.
“For the vast majority of credit unions, the existing 7% net worth leverage ratio established by Congress in the Credit Union Membership Access Act of 1998 will remain the primary governing capital measure,” Matz wrote.