ALEXANDRIA, Va. (6/11/14)--An organization formed solely for the purpose of promoting "a modern and effective regulatory structure for capital markets" said it has "strong concerns and reservations" regarding the National Credit Union Administration's proposed Prompt Corrective Action, Risk-Based Capital (RBC) proposal.
The Center for Capital Markets Competitiveness (CCMC), created by the U.S. Chamber of Commerce to promote fully functioning capital markets in the 21st century, warned the NCUA's attempt to impose Basel III-type bank capital standards on credit unions is a "mismatch of tools and business models."
"The CCMC believes that the NCUA has failed to take into account critical aspects of how capital is used and, in some cases, has not paid sufficient attention to procedural detail," the organization said in a May 28 comment letter to the federal regulator.
The CCMC said its specific concerns include:
The proposal would allow only an 18-month implementation period.
The CCMC said of credit unions that they are "an important and integral part of the diverse mosaic that makes up the financial system. Credit unions are a key fixture that provides the ability of individuals and families to save and borrow to meet the needs of everyday life, prepare for the future or engage in endeavors such as starting or running a business.
"Additionally, credit unions, while not as large a lender as banks, are an important provider of liquidity for small Main Street businesses."
The letter goes on to say that credit unions have fulfilled this mission through a low-risk model that avoids over-leveraging and excessive risk-taking.
It continues, "The CCMC is concerned that the NCUA has not considered how the use of bank-style capital levels may adversely impact credit unions or the implications of this rulemaking upon the non-financial business community and the broader economy.
"This is particularly concerning as capital and liquidity requirements that are too high are as dangerous as capital and liquidity requirements that are too low (original emphasis)."
Use the resource link to access the complete letter.