NAFCU Director of Research/Chief Economist Curt Long estimated the NCUA's revised risk-based capital ratio proposal would cost the credit union system a total of $760 million.
“Based on our financial analysis, credit unions' capital cushions will suffer a $490 million hit if NCUA promulgates a two-tier approach to risk-based capital. The specifics are even more astronomical,” Long said.
He added, “In order to satisfy the proposal's 'well-capitalized' thresholds, today's credit unions would need to raise an additional $760 million. On the other hand, to satisfy the proposal's 'adequately capitalized' thresholds, today's credit unions would need to raise an additional $270 million.”
Long said the proposed rule “misclassifies safe, sound credit unions and imposes the unnecessary burden to raise additional capital in order to maintain their current capital buffers or avoid prompt corrective action.”
Despite the changes to the original proposal, NAFCU maintained the proposed rule is unnecessary at this time.
“Even though this rule looks better on paper than the last one, almost all of the substantive changes to the risk weights were made to investments,” Long said. “So I think we'll really have to look at this rule in tandem with the upcoming interest rate risk rule before we can know whether it is materially better than the initial risk-based capital proposal.”
The NCUA has estimated that the total non-recurring costs of implementing the proposal through 2018 would be $3.7 million.
The approximate total one-time costs for non-complex credit unions totaled 101,980 hours or $3,252,142, amounting to an average of $638 per credit union.
For complex credit unions, estimated costs totaled 58,200 hours or $1,855,998, averaging $1,276 per credit union.
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