RBC Rule: NCUA Board Deserves Thanks, but More Work Is Needed

This week, the NCUA board will vote to finalize updates to its risk-based capital rule. CUNA continues to have major concerns with the underlying regulation, which we have maintained is inconsistent with federal law and a solution in search of a problem. Nevertheless, it’s important to acknowledge the NCUA board for taking a smart, positive step toward providing regulatory relief.

The NCUA’s proposed rule is good, albeit imperfect. It would provide credit unions additional time to comply with the RBC rule, and, most importantly, it would narrow the focus of the rule, exempting 90% of credit unions. While CUNA supports a longer delay and other substantive modifications to the rule, the proposal’s changes are important and will provide relief.

In this time of political polarization, it is particularly commendable that Chairman J. Mark McWatters, who opposed the original RBC rule, and Board Member Rick Metsger, who supported it, found common ground to secure important regulatory relief for credit unions while maintaining an appropriate focus on safety and soundness. This type of smart, targeted regulatory relief should not be taken for granted. Instead, it should serve as a positive example about the importance of regulator-stakeholder engagement to service big-picture goals for the good of the credit union system and the 110 million Americans it serves.

We urge the NCUA board to finalize the proposal on Thursday, with the hope Chairman McWatters and Board Member Metsger recognize there is more work to be done to ensure the risk-based capital standard credit unions are subject to is appropriate to the risk profile of the system and consistent with federal law.

We understand that the Federal Credit Union Act requires a risk-based capital standard for determining whether a credit union is well-capitalized, but we continue to believe the current risk-based capital approach is a solution in search of a problem, and we question the legality of a dual-tiered, risk-based capital regime. These are concerns that we will continue to raise with the NCUA board members and with Congress in the months ahead.  But for now, it’s important to acknowledge when policymakers are listening, and we thank the NCUA board members for that.

Ryan Donovan is Chief Advocacy Officer for CUNA. He can be reached at 202-508-6750 or rdonovan@cuna.coop.