Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho) wrote to NCUA Board Chairman Debbie Matz with concerns from credit unions in their respective states about the agency's proposed risk-based capital rule.
The senators said in the June 4 letter that some credit unions located in rural areas are concerned the proposed risk-weights would negatively impact their ability to provide agricultural loans to their members.
"Credit unions play an important part in providing credit to rural communities in states like South Dakota and Idaho, and a decrease in their ability to lend could be detrimental to these communities," the senators wrote.
The lawmakers also said the proposed rule might make it difficult for some credit unions to maintain their current capital classification.
In the letter, Johnson and Crapo cited an NCUA estimate that 201 credit unions could be required to raise almost $700 million to keep their current capital levels.
The lawmaker also mentioned an industry estimate that the amount of capital to be raised could be as high as $7 billion.
"Raising that amount of capital will require substantial time and careful planning by the affected credit unions, and may reduce availability of credit in many communities," the senators wrote.
Johnson and Crapo also said credit unions are not sure how capital buffers would fit into a new capital regime, pointing out that many credit unions currently hold capital excess of the amount mandated by the agency.
"This business practice was viewed by many, including NCUA examiners, as a prudent and responsible way to plan for risk. We urge you to consider this business practice and the new rules would address it," the senators said.
The lawmakers asked Matz to take the issues raised in their letter seriously by addressing them in the final rule.
"We urge you to finalize rules that are clear, well-calibrated, and work effectively with other prudential requirements to ensure that there are no unintended consequences," Johnson and Crapo wrote.
"The NCUA should also provide clear guidance on how credit unions should plan for supervision going forward and provide sufficient time for credit unions to adjust and comply with any new standards. While it is important to get the new capital standards in place, it is as important to get the rules right," they added.
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