NAFCU breaks down risk-based capital proposal

  • Bookmark and Share
  • RSS Feed
  • Email a friend
  • Print this page

PJ Hoffman

Feb. 24, 2014 – Friday brought the first in a series of NAFCU Compliance Blog posts to come on NCUA’s proposed rule on risk-based capital, and it began with a look at the proposed rule’s flexibility for examiners on minimum risk-based capital ratios.

The proposed rule lays out specific minimum risk-based capital ratios, but it lists a number of circumstances in which a credit union’s examiner may decide that an individual credit union’s minimum ratio should be higher. Those circumstances may be related to the level of risk of a particular investment portfolio, risk management systems or other information.

NAFCU Regulatory Affairs Counsel PJ Hoffman, in Friday’s blog post, said this can lead to tremendous uncertainty for credit unions.

“NAFCU is seriously concerned about the legal authority of NCUA examiners to decide on their own the material risks not accounted for in the statutory floor prescribed by the Federal Credit Union Act,” he wrote. The act requires NCUA to take into account those material risks, but Hoffman says this should be carried out when the rules are written, not on a case-by-case basis.

“This is all the more reason why we need a legislative solution rather than the current proposed rule,” he said.

NCUA will take comments on the proposed rule for 90 days after its publication in the Federal Register. NAFCU has published a Regulatory Alert seeking its members’ input.

Related Links:
NAFCU Compliance Blog post
Regulatory Alert (login required)
Capital reform