CUNA: RBC rule ‘functionally unnecessary,’ supports delay

July 23, 2019

CUNA supports a delay of NCUA’s risk-based capital (RBC) rule as proposed but maintains the rule as applied is “functionally unnecessary,” it wrote to NCUA today. NCUA proposed delaying implementation of the risk-based capital rule to Jan. 1, 2022, back from the currently scheduled Jan. 1, 2020.

“The data continues to clearly show that the rule is a solution looking for a problem. If in place prior to the crisis, the proposed RBC rule would have done almost nothing to prevent the dislocations that occurred—most capital and liquidity issues were confined to the corporate credit union arena, where the agency had already effectively addressed relevant concerns,” the letter reads. “RBC places significant unnecessary burdens on credit unions and needlessly coerces credit union asset allocations—all at a significant cost to credit union members.”

CUNA notes that the additional delay will give credit unions more time to implement the changes necessary to comply with the rule, and also supports NCUA using the two years to examine the agency’s capital standards for credit unions.

“We appreciate the NCUA’s plan to use the proposed delay to look into additional issues related to credit union capital, including whether asset securitization and subordinated debt should be addressed, and whether a community bank leverage ratio analog should be integrated into the NCUA’s capital standards,” the letter reads. “We support the NCUA’s effort to pursue a proposed regulation on subordinated debt. We believe alternative capital has the potential to benefit numerous credit unions and allow them to continue to grow their operations. We appreciate Chairman Hood’s commitment to issue a proposal by the end of this year.