CUNA’s President/CEO Jim Nussle highlighted the advocacy strength of the organization's three-tiered system, during a webinar Monday on NCUA’s revised risk-based capital (RBC2) proposal.
Working together, CUNA, the state leagues, and individual credit unions sparked positive changes to the proposal, published in the Federal Register today. The 90-day comment period ends April 27.
"Our work has paid off by greatly reducing the impact and reach of NCUA's risk-based capital proposal," Nussle said. "Over the last 10 days, we’ve had a chance to look very carefully the rule. While we still believe it may be a solution in search of a problem, there's been some substantial improvements over where we were a year ago, and we're pleased about that."
More than 600 credit unions attended the webinar, which included a presentation by Larry Fazio, NCUA director of examination and insurance. He explained the reasoning behind the agency's changes to the proposal.
The risk weights were better calibrated in the RBC2 proposal, recognizing that credit unions perform better in a financial crisis, Fazio said. The weights were also fine-tuned to better identify only outlier credit unions when it comes to risk.
Based on CUNA's analysis of the proposal using September 2014 data, 14 credit unions would be downgraded in their risk-based capital standard in the RBC2 proposal, a "significant improvement," Nussle noted, over the 163 that would have been downgraded under the first plan.
The original proposal increased the amount of capital credit unions would need to hold to remain well-capitalized by $6.4 billion. With RBC2, the increase would be $632 million.
"CUNA continues to question the need for a new risk-based capital proposal," said Mary Dunn, CUNA's deputy general counsel, during the webinar, but added, "Having said that, we are very pleased about the number of changes included in the revised proposal."
A few of the many notable changes include:
Although NCUA did not add a provision on supplemental capital to RBC2—as advocated by CUNA—the agency board asked stakeholders to comment on whether supplemental capital should be permitted in the context of this rule.
CUNA's Chief Advocacy Officer Ryan Donovan stated CUNA's strong support for the ability of credit unions to use supplemental capital, both for this proposal and for the purposes of meeting prompt corrective action requirements.
"This will be one of the issues we raise in our comment letter," he noted after the webinar.
CUNA’s ongoing concerns regarding the RBC2 plan include:
(Via News Now)