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Commentary

RBC2 Encourages More Auto Lending

The final rule only impacts 24% of credit unions and will not inhibit low-risk lending.

By Mark Treichel | Updated on October 22, 2015
In an Oct. 16 article, “Capital Concerns Weigh on RBC2,” CU Times quoted David Giesen, a managing director at Navigant Capital Advisors, as talking about risk weights prior to the final approval of the NCUA’s new risk-based capital rule and includes this statement: “Auto loans, which currently are in about 6.5% under the current standard, are moving up to 100% assets at 10%.” Mr. Giesen then says this “may make it more difficult to originate as many auto loans as a credit union may like.”

Before any credit unions begin to worry about making auto loans after the new rule goes into effect in 2019, a review of the impact of the rule is in order.

First, 76% of all credit unions will be exempt from this rule, as it applies to credit unions with assets of $100 million or greater. This is unlike the banking industry, where all banks are required to comply, regardless of asset size. Even among the complex credit unions covered by the new rule, nearly 99% would remain well-capitalized. So there is no reason for credit unions to cut back on auto lending.

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