WASHINGTON (1/21/15)--As discussion continues on the National Credit Union Administration's revised risk-based capital proposal (RBC2), both the Credit Union National Association and the NCUA have circulated legal opinions on the matter. CUNA has posted to its website, for its members only, the legal opinion it obtained earlier this year regarding the proposal.
"Our fervent efforts, this strong legal opinion included, led to significant changes in NCUA's proposal," said Jim Nussle, CUNA president/CEO. "Many associations, including CUNA, have used legal opinions like this to help alter proposed regulations regardless of any intent to challenge a proposal in the courts. In this case, CUNA's legal opinion allowed us to shape the revised proposed risk-based capital rule with the agency, most notably in the reduction of the initial 10.5% for well-capitalized credit unions and changes to risk weights."
Nussle added that the opinion is used as a tool to push for changes in the proposal, and not a prelude of any sort of legal action.
Nussle has served as president/chief operating officer of Growth Energy, successfully navigating several regulatory and legislative challenges. CUNA Chief Operating Officer Rich Meade previously worked with leading constitutional law experts to help shape opinions for several trade associations as managing director of Prime Policy Group.
"It is rare that opinions like this result in successful legal challenges in the courts. The fact is that courts are reluctant to reverse the authority of regulators," Nussle said.
In response to Freedom of Information Act requests from CUNA, as well as other organizations, the NCUA released the legal opinion it solicited last year, justifying its ability to issue such a rule.
CUNA has not challenged the NCUA's authority to issue a RBC rule, but firmly believes that the proposal isn't necessary. CUNA did seek an outside legal opinion, however, on whether the NCUA has authority to create a two-tiered RBC approach that distinguishes between credit unions that are "well capitalized" and those that are "adequately capitalized."
Under the original proposal, roughly 200 credit unions would have seen their capital classifications downgraded, and credit unions would have been required to hold an additional $8 billion in capital. The revised proposal would see less than 30 credit unions downgraded, and initial analysis from CUNA indicates the additional capital needed would be less than $1 billion.
CUNA is continuing its analysis of RBC2 and will host a webinar with Nussle, Chief Policy Officer Bill Hampel, Deputy General Counsel Mary Dunn and NCUA Director of Examination and Insurance Larry Fazio Jan. 26.
See the resource link to access CUNA's legal opinion (members only).