WASHINGTON (5/19/14)--"The 18-month timeframe in the proposed risk-based capital rule is not etched in stone," National Credit Union Administration Chair Debbie Matz told a credit union audience Friday. She added, "If the comment letters raise sensible reasons to delay the effective date further, we will certainly consider doing so."
Matz was addressing the annual meeting of the Hawaii Credit Union Association.
With just seven business days to go before the NCUA wraps up the comment period on its risk-based capital (RBC) proposal on May 28, the letters of more than 550 credit unions and supporters had been posted to the agency website--detailing their concerns and questions regarding the plan--as of Friday evening.
That number includes an almost unprecedented letter signed by more than 320 members of the U.S. House urging the NCUA to consider impact on of its RBC plan on credit unions. The lawmakers ask the agency to provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions and to give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.
"Seven days is plenty of time to push the number of credit union comments even higher," said Mary Dunn, Credit Union National Association deputy general counsel said Friday. "A high number of comments clearly signals to the regulator that credit unions have concerns about the proposal. CUNA encourages more credit unions to meet the comment deadline."
All three NCUA board members have indicated in letters to CUNA that the plan will be revised before adopted as a final.
"Those assurances and Chairman Matz's newest comment show why it is imperative," Dunn said, "that credit unions weigh in in numbers on this proposal."
The RBC plan proposed by the NCUA would make changes to Prompt Corrective Action rules, replacing 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.
CUNA supports risk-based capital for credit unions but has called this proposal "the most detrimental, wide-reaching regulatory change affecting credit unions in years" and "a regulation in search of a problem."
If adopted, the amount of capital that credit unions would need to hold in order meet minimum requirements to be well capitalized would rise by $7.6 billion according to CUNA's projections. Credit unions would also face burdensome risk weightings that would serve as a disincentive for holding member business and mortgage loans, and long-term investments, CUNA has noted.
CUNA President/CEO Bill Cheney addressed the matter in the Cheney Report last week, noting that the number of comments on the proposal has tripled in the last three weeks.
"CUNA supports risk-based capital, but not along the path NCUA's proposal takes. We are finalizing our comment letter now, which will offer alternatives for the agency to consider in developing a better route forward," he said.
Once the comment period closes, the NCUA will host three listening sessions: June 26 in Los Angeles, July 10 in Chicago and July 17 in Alexandria, Va.
Use resource links for CUNA's RBC Action Center and more on the NCUA listening sessions.