NCUA Shirking Its Responsibility in Proposed RBC Delay: Bankers
The ABA and ICBA believe the delay gives credit unions an unfair advantage over banks.
There is no justification for the NCUA to delay its Risk-Based Capital rule for an additional two years, two banking trade groups said in recent letters to the agency.
The American Bankers Association and the Independent Community Bankers of America said a further delay gives credit unions an unfair advantage over banks and put taxpayers at risk.
Adopted in 2015, the NCUA board viewed the RBC rule as a necessary step to avoid potential drains on the Share Insurance Fund by credit unions making bad financial decisions.
Last year, the two-member NCUA board agreed to delay the effective date of the rule from 2019 to 2020. Now, the three-member board is soliciting comment on an additional delay—to 2022.
“As community banks have strengthened capital standards under Basel III and the NCUA has continued to delay and exempt credit unions from a sensible risk-based capital framework, credit unions have now become risky enterprises in the consumer and commercial lending landscape,” James Kendrick, the ICBA’s first vice president for accounting and capital policy, wrote in a letter to the NCUA.
He called on the NCUA to immediately institute capital standards that are at least as stringent as those followed by community banks.
“Credit unions should not be permitted to expose taxpayers in the United States to elevated lending risks associated with financial institutions that are tax-exempt and whose capital levels are not based on the level of risks that an institution is engaged in.,” he wrote.
And he cited the taxi medallion debacle as evidence that the agency needs the standards now.
“Had these credit unions been subject to risk-based capital rules that called for elevated levels of capital, the disastrous outcomes that resulted could have been avoided,” he said.
Kenneth Clayton, the ABA’s chief counsel agreed.
“NCUA has not explained why another delay could be necessary, or why it believes credit unions are so ill prepared to do what other types of financial institutions have done for nearly a decade,” he said in a letter to the agency.