Legislation that would prohibit the NCUA from enforcing its risk-based capital rule would cost an estimated $400 million in losses over ten years to the Share Insurance Fund, the Congressional Budget Office said.
The House Financial Services Committee has approved the bill, H.R. 4464, sponsored by Rep. Bill Posey (R-Fla.) and supported by credit union trade groups.
The CBO said the cost to the share insurance fund would occur because failed credit unions would have less capital than if the rule were in effect increasing the cost to assisting those institutions.
Taxpayers would not party the brunt of those costs since credit unions pay premiums and fees. However, CBO said that there likely would be a lag time between needed fees and them being collected. As a result, the legislation would likely cost taxpayers some $50 million over ten years, the budget office said.
“There are great concerns about the cost of this rule on credits unions, the legal authority of the NCUA to implement this rule and the regulatory burden this rule will have on credit unions,” Posey said, as the Financial Services Committee approved the bill in December. “This bill will ensure that credit unions do not tie-up scarce resources that would otherwise be made available to credit union members and our communities in the form of loans and lower interest rates.”
NCUA Chairman J. Mark McWatters has expressed a willingness to revisit the rule.
However, fellow board member Rick Metsger has said that the potential losses at credit unions that have made loans based on the value of taxi medallions that have plunged in value emphasizes the need for a strong risk-based capital rule.
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