Risk-Based Capital Rule

A special message from Mary Martha Fortney, President and CEO
July 2014

Already this year, we have seen numerous rules from the Consumer Financial Protection Bureau (CFPB) take effect, and final rules from the NCUA on derivatives and stress testing. We have also seen proposed rules from the NCUA on federal fields of membership and home-based credit unions.

Impacting all credit unions is the risk-based capital (RBC) rule, which was proposed by the NCUA in January.

As an association of regulators with credit unions as advisors, NASCUS often challenges NCUA on the appropriate scope of its authority as the federal insurer of state credit unions. That’s why we are pushing back on NCUA’s authority to issue 1,250% risk-weights and Individual Minimum Capital Requirements for state-chartered credit unions without consultation and consent from the state regulator as provided in the proposed risk-based capital rule.

We recognize that designing a risk-based system is a complicated undertaking and that it has been a contentious issue. NASCUS is not alone in its belief that the proposed rule is too broad. Our May 28 comment letter addresses the need for the NCUA to include supplemental capital for non low-income consumer credit unions within its proposed risk-based regulatory framework.

“NCUA’s contention that it lacks the authority to include supplemental capital for the risk-based capital ratio is an unnecessarily narrow reading of the (Federal Credit Union Act),” writes NASCUS.

We believe that more consultation with state regulators would resolve many of the issues that the NCUA’s proposed Risk-Based Capital Rule brings. We believe such dialogue could be especially helpful where the individual minimum capital requirement is concerned. Regulators are successful when they promulgate rules that are nimble enough to address problem credit unions without encumbering the entire industry.

NASCUS’ comments focus on ensuring that the rule is right-sized for the credit union system, reflects the reasoned judgment of the actual risks, maintains predictable standards that support credit union growth and innovation, and cements the current statutory commitment by NCUA to consult and coordinate with state regulators.

By engaging with federal regulators to ease regulatory burden and protect the unique benefits of the state charter, NASCUS works diligently to serve state-chartered credit unions and regulators. We commit to working with NCUA to ensure any final RBC rule is carefully calibrated to achieve the supervisory goal of improving capital standards without unduly burdening the credit union system.


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