To effectively address material interest rate risk, the NCUA will evaluate whether emphasis should be placed on the supervisory process rather than on risk weights in the final risk-based capital rule.
“Many valid questions and concerns were raised about our proposed rule,” said NCUA Chairman Debbie Matz said in a press release Monday about the agency's Listening Sessions. “We are listening carefully, and I anticipate the agency will make appropriate changes. For starters, we plan to lower the risk weights on investments, mortgages, member business loans, credit union service organizations and corporates, as well as extend the implementation period.”
In total, more than 400 participants from the credit union system attended the Listening Sessions in Los Angeles, Chicago and Alexandria, Va., in June and July.
Matz said an extended implementation period in the final rule would allow credit unions ample time to adjust their operational plans and balance sheets as well as provide the NCUA enough time to train field examiners and update the call report system.
The final rule would also make clear that an individual credit union examiner is not able to set capital requirements.
The proposed risk-based capital rule requires credit unions with assets of more than $50 million to hold capital that matches their risk.
“The proposed rule exempts the two-thirds of credit unions with assets below $50 million. Only 3% of credit unions would experience a change in their prompt corrective action status under the proposal's risk-based capital framework,” the NCUA said in the release.
Matz called the risk-based capital proposal the agency's last significant safety and soundness rule arising from the financial crisis.
“NCUA appreciates the thoughtful input from stakeholders from the comment process as well as the 2014 Listening Sessions,” she said. “We heard from more than 2,000 commenters and audience members, and, as with many of our proposed rules, our changes will be based on what we heard. I am confident that NCUA will produce a sensible final rule that meets the requirements of the Federal Credit Union Act and not disadvantage credit unions in the market.”
The NCUA is incorporating comments and ideas from the Listening Sessions.
“This dialogue is what makes these events so valuable. It's an opportunity for regulators and credit unions to talk frankly, face-to-face, about policy and examination issues and exchange ideas for constructive solutions,” she said. “We all have the same goals: Safety and soundness, prudent lending and effective regulation.”
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