ALEXANDRIA, Va. – Credit union executives and league representatives said the NCUA's Listening Session Thursday did not eliminate their concerns about the agency's risk-based capital proposal.
“The concerns are still there. The regulators gave us their perspective of it but they didn't give us enough concrete information to move forward and make plans, so we're still waiting,” said Linda McFadden, president/CEO of the $154 million XCEL Federal Credit Union in Bloomfield, N.J.
NCUA Board Chairman Debbie Matz told the crowd the agency understands all of the risk weights should be reviewed and many need to be lowered.
“The top one that needs to be lowered is the risk weight they're placing on federally backed investments. [It's] ridiculous when it's a federally backed instrument. There is no risk involved other than the full faith of the government, so obviously NCUA doesn't have enough faith in the government to back the securities that we're using,” McFadden said.
David Surface, president/CEO of the $154 million St. Jean's Credit Union, said the most important risk weight for the agency to lower would be CUSO equity investments.
“We want to be cooperative. We want to be helping each other out. We want to be looking for new and innovative ways to give back value to our membership. In that case, you don't want to discourage investment in CUSOs, and essentially most CUSOs are individual credit unions or leagues getting together – you don't want to discourage that, it's very important,” Surface said.
Michael Tucker, president/CEO of the $131 million West Virginia Central Credit Union, urged the NCUA to remember credit unions are much different from banks.
“I wasn't really surprised that while we talked about potential changes, I think NCUA is still really trying to get their arms around what they can address legally and regulatorily, and I think it's going to take them a little bit of time to determine that,” he said.
“I like the idea that they are using the FDIC as a model, but they really need to continue to remember how credit unions are significantly different than for-profits and take that into consideration when they set these ratios,” he added.
Matz was asked during the event if she had raised the issue of supplemental capital in her meetings with lawmakers about the risk-based capital proposal.
“We have not talked about supplemental capital with lawmakers. It's more about the nitty gritty of our rule,” she said.
John McKechnie, partner at Washington advocacy firm Total Spectrum and former NCUA official, said the risk-based rule has increased the importance of proposed supplemental capital legislation.
“I think supplemental capital is an issue whose time has come. I think it's been a good issue for years, but now that we've got the risk-based rule out there, that's injected a new degree of urgency to it. I think that in the next Congress, I hope we can make this a priority. I do think it's going to help credit unions do a better job. It will give them more flexibility and enhance their ability to serve,” he said.
“The problem with that bill is not anything NCUA is doing or not doing, it's the fact that the banks are opposed to almost everything we try to do,” he added.
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