Proposal calls for NCUA stress tests of big CUs
Oct. 25, 2013 – NCUA’s board on Thursday released a proposed rule for periodic stress testing by NCUA of credit unions with $10 billion or more in assets.
The rule would require federally insured credit unions with assets of $10 billion or more to submit to stress tests conducted by the NCUA, and to give NCUA capital plans each year. Affected credit unions would be required to perform capital analyses such as a sensitivity analysis to look at the effect of changes in variables, parameters and inputs on capital.
NAFCU Chief Economist David Carrier said, “We question the need for NCUA to conduct independent stress tests since the four credit unions subject to the rule are already conducting their own.” NAFCU plans to closely scrutinize the proposed rule for its potential impact on all NAFCU members.
NCUA said the rule is aimed at protecting the National Credit Union Share Insurance Fund. NCUA Board Chairman Debbie Matz said, “As the insurer of deposits at federally insured credit unions, our job is to anticipate risk. The math is simple: A $1 trillion industry is insured by an $11.7 billion fund, and we currently have four credit unions that each has assets greater than $10 billion. This proposed rule will further our efforts to dedicate more resources to the largest credit unions, which by their sheer size pose the greatest risks to the Share Insurance Fund.”
NCUA staff said the cost of stress testing would be approximately $1 million per credit union for the first year, and half that in following years. Costs would be paid by the NCUSIF. Board Member Richard Metsger suggested the public use the comment period to give input on whether the stress test results should be made public like those of banks’.
NCUA announced a comment period of 60 days for the rule.