Risk-Based Capital Rule Is Unnecessary: CUNA

The NCUA’s proposed revised Risk-Based Capital rule is “functionally unnecessary,” Monique Michel, CUNA’s senior director of advocacy and counsel, said Thursday.

“The data continues to clearly show that the rule is a solution looking for a problem.,” she said, in the trade group’s comment letter on the agency’s revised plan. Comments on the proposal are due Sept. 7.

As originally adopted, NCUA planned to institute a risk-based rule for credit unions with more than $100 million in assets. The rule was scheduled to go into effect next year. However, that plan drew opposition from some House members as well as credit unions.

Those House members included a two-year delay in the rule in several pieces of legislation, but none have been enacted so far.

The NCUA board earlier this month proposed a one-year delay and increased the threshold for compliance to $500 million.

The rule would exempt 90% of credit unions, Larry Fazio, the agency’s director of the Office of Examination and Insurance, told the board at its August meeting. He added, however, that the approximately 10% of the credit unions that would be covered, hold 90% of the system’s assets.

In her letter, Michel said that if the rule had been in effect during the financial crisis, it “would have done almost nothing to prevent the dislocations that occurred.”

“RBC places significant unnecessary burdens on credit unions and needlessly coerces credit union asset allocations—all at a significant cost to credit union members,” she wrote.

Michel said if the agency wants to adopt such a rule, the threshold should be increased to $10 billion, saying that level would align with the eligibility of supervision under the NCUA’s Office of National Examinations and Supervision and the Bureau of Consumer Financial Protection.

“Maintenance of disparate asset thresholds among rules from myriad departments and divisions across federal and state regulatory bodies contributes to duplicative and inconsistent oversight,” she said.

Other credit union officials have been divided on the issue, according to comment letters submitted to the NCUA.

The League of Southeastern Credit Union and Affiliates supports the proposed changes, according to Mike Lee, the league’s director of regulatory advocacy.

The Maryland/District of Columbia Credit Union Association said that the rule stems from the FDIC’s response to the financial crisis. However, credit unions and the NCUA responded well to that crisis and so the rule is not needed, John Bratsakis, the association’s president/CEO said in his comment letter.

But if the NCUA is determined to adopt a risk-based capital rule, the $500 million threshold is more appropriate than the $100 million level, he added.