ALEXANDRIA, Va. – Even after three, three-plus hour discussion sessions, credit unions were not "talked out" about their concerns with NCUA’s risk-based capital proposal (RBC) Thursday. That energy and engagement is what is needed going forward to ensure revisions will be significant enough to bring the kind of improvements credit unions need in a final regulation, according to CUNA.
CUNA Deputy General Counsel Mary Dunn urges the NCUA during its final Listening Session to reduce the proposed risk-based capital requirement for well-capitalized credit unions, which CUNA says is out of proportion with the level of risk that credit unions present. (Photo courtesy of CUNA).
At the agency's final Listening Session of the year yesterday, credit unions of all sizes continued to underscore that the RBC plan, as written, is seriously flawed and unworkable. NCUA Chair Debbie Matz continued to assure that there will be numerous changes to the proposal before a rule is made final.
She also stated, "The bottom line is, our goal is not to have a consensus. Our goal isn't to have everybody here think it's the best rule they've ever seen. Our goal is safety and soundness."
NCUA has pledged to add time to the proposed 18-month implementation period and to adjust risk weights, especially in the areas of mortgages, member business loans, investments, CUSO’s, and corporates credit unions.
NJCUL Chairman and XCEL FCU President/CEO Linda McFadden shares her concerns with CUTimes following the listening session.
NCUA Board member Rick Metsger said the proposed rule will not replace examinations or proper supervision; it is a tool the agency will use to try to more accurately assess an institution's capital situation.
"The fact is, under our current requirements, there are two credit unions that are undercapitalized. I don't think there's anybody here that believes out of all the credit unions in the country, that only two are struggling with capital," Metsger said. "Obviously the current rule isn't giving us a very good picture of what the capital requirement should be."
CUNA Deputy General Counsel Mary Dunn urged the agency during the session to reduce the proposed RBC requirement for well-capitalized credit unions, which CUNA says is out of proportion with the level of risk that credit unions present. She commended positive comments from the chairman and others that the agency is considering changes to risk weights, revisiting its treatment of goodwill in a merger, reviewing the treatment of the 1% National Credit Union Share Insurance Fund deposit in the RBC calculation, how interest rate risk is addressed in the proposal, and revising provisions regarding minimum additional capital.
For instance, to a credit union's expressed concern regarding how auditors will view the 1% NCUSIF deposit in RBC calculations, NCUA Director of Examinations and Insurance Larry Fazio responded that the agency staff continues to study options to deal with the deposit.
Also during yesterday's session, credit unions expressed many concerns about examiner subjectivity and poor communications with them. During her comments at the meeting, Dunn urged the agency to work with the credit union system to address the disconnect between positive positions taken by the NCUA board and what is implemented by examiners.
One credit union official sought an assurance by the agency that examiners will not ask for more capital than required in a new RBC rule, stating he believes examiners currently ask for more capital than necessary. NCUA's Fazio responded that individual examiners will not "make that call."
Another credit union officer—who heads a $3 million-asset financial cooperative—urged the NCUA to act to reduce regulatory burden and said the examiner "disconnect" just exacerbates the problem: Examiners don't always understand what regulations apply to small credit unions and which ones don't—increasing unnecessary regulatory burden.
The Credit Union Times posted a video on its site that features credit union executives and league representatives’ feelings after the Listening Session, including those of NJCUL Chairman and XCEL FCU President/CEO Linda McFadden.
“The concerns are still there. The regulators gave us their perspective of it but they didn’t give us enough concrete information to move forward and make plans, so we’re still waiting,” McFadden told CUTimes.
Other topics that arose during the Listening Session were goodwill calculations under an RBC rule, the need for credit union access to supplemental capital, and perceived problems with a variety of the risk weights proposed by the NCUA's plan.
Attending the Listening Session from New Jersey were some 17 credit union advocates from more than a dozen New Jersey credit unions and the NJCUL.
Listening Session audio recordings are available here.
CUNA’s Risk-based Capital Action Center is available here.
Additional information on CUNA’s and the NJCUL’s legislative and regulatory advocacy efforts is available through CUNA’s weekly The President’s Report, Legislative Update, Regulatory Advocacy Reports, and monthly Legislative Affairs Webcast, as well as reported in various NJCUL publications such as the Daily Exchange.