Reaction continues to come in to the NCUA’s updated Risk Based Capital proposed rule.
Scott McFarland, CEO of Honor CU ($609 million), said the proposal is certainly an improvement over the first version, but he still has questions about the necessity of such a proposal.
“Overall the new proposal is an improvement,” McFarland said. “The removal of risk weightings based on interest rate risk is a positive change and the risk weightings are better aligned with the FDIC under the new proposal. Elimination of the individual minimum capital requirement provision and the 2019 compliance date that allows credit unions more time to prepare their balance sheets are also two areas where I see improvements.
“I agree with CUNA that this proposal does not solve the entire problem,” he said. “I look forward to working towards a more comprehensive solution that helps credit unions and the consumers they serve.”
But added that he thinks a more targeted approach would be better.
“It has been estimated that this will affect 37 credit unions across the entire country. Perhaps approaching those 37 credit unions on an individual basis instead of spending the vast amount of time, money and resources through the new RBC would be a wiser spend. Another viewpoint is if we are going to introduce new capital standards, why not focus on institutions whose failure would substantially impact the NCUSIF?”
Nick Montie, CEO of Thunder Bay Area CU, said the new proposal still gives the NCUA too much power.
“My primary issue with the proposed Risk Based Capital rule is that it gives the NCUA even more control over both the operations and balance sheet decisions of individual credit unions,” Montie said.
He added that he worries that the NCUA will eventually expand the rule to include smaller credit unions like his $22.4 million institution.
“Furthermore it adds to the ever-increasing cost and complexity of complying with already existing rules and regulations. As an exempt credit union, the notion that the NCUA will expand its Risk Based Capital requirements to smaller and less-complex credit unions at a future time is also a real concern.”
To share your comments about the proposal, contact Sarah Stevenson, Regulatory and Legislative Affairs Specialist for the league, at Sarah.Stevenson@mcul.org.
CUNA's RBC Action Center has a PDF of the proposal, summaries and other resources.