Prompting Speculation, NCUA to Consider RBC Rule on June 20

The NCUA board will consider a proposed Risk-Based Capital Rule at its June 20 meeting.

Agency officials refused to discuss the details of the proposal, but new NCUA Chairman Rodney Hood is on record as saying he would like to delay the controversial proposal for another year.

Last year, before Hood and Democratic board member Todd Harper took office, the NCUA board agreed to delay the RBC rule one year, until Jan. 1, 2020.

However, when the rule was first adopted in 2015, board member J. Mark McWatters questioned whether the agency had the authority to issue an RBC rule. With McWatters still on the board and Hood calling for an additional delay, there may be the votes needed to push the effective date back.

“If confirmed to the NCUA Board, I would support a further delay to the implementation of the RBC Rule, so that I and my fellow Board Members can further study and assess its real effects on the credit union system,” Hood said, in responding to written questions from senators as part of his confirmation hearing earlier this year.

He continued, “Only after that careful consideration of the costs and benefits should the NCUA Board decide whether to proceed with the RBC Rule and, if so, when. I respectfully note that the question of whether Congress should reevaluate the need for the RBC Rule rests with Congress.”

Harper, who worked for former NCUA Chairman Debbie Matz when the RBC rule was first adopted, appeared less anxious to kill the rule.

“In 2013, the Federal banking agencies adopted new risk-based capital rules,” he said, in his written responses to questions. “To maintain comparability with these rules, the NCUA Board moved ahead with efforts to modify its risk-based capital rule. Action on this regulation was also recommended by the Government Accountability Office and the NCUA’s Inspector General.”

Harper also cited the failure of credit unions that concentrated in taxi medallion lending, saying that losses to the Share Insurance Fund might have been mitigated if the rule had been in effect.

The controversial rule was adopted in 2015, amid opposition from credit unions and some members of Congress. It requires a “complex” credit union that becomes undercapitalized to take prompt corrective action to restore its net worth.

Originally, a complex credit union was defined as one with $100 million in assets. When the NCUA board delayed the rule for an additional year, that threshold was increased to $500 million.