Capital Reform

After NCUA Board Chairman Debbie Matz announced in September that she intends to request that a revised proposed risk-based capital rule be issued with a new comment period—which NAFCU has been pressing for since last year—she then announced on November 21, 2014 that she will ask the board to consider issuing a new, proposed risk-based capital rule during the Jan. 15 open meeting with a 90-day comment period attached.

Matz said that based on stakeholder comments, the amended proposal will include a longer implementation period and revised risk weights for mortgages, investments, member business loans, credit union service organizations and corporate credit unions, among other changes. Stakeholders will also be invited to comment on an alternative approach for addressing interest rate risk using the supervisory process.

NCUA Listening Sessions on Risk-Based Capital

NAFCU attended all of NCUA's three listening sessions held in the summer of 2014. During each session NCUA Board Chairman Debbie Matz said the agency would reexamine the risk weights in its proposed risk-based capital rule (outlined below). Matz also said a second comment period for the proposal is unlikely and that the implementation period for any rule would be longer than 18 months.

Listen to the full recordings of the NCUA listening sessions below. 
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July 17, 2014 - Alexandria, Va

July 10, 2014 - Chicago

June 26, 2014 - Los Angeles

NCUA has received more than 2,000 comment letters from credit unions and their trades – including NAFCU – on the proposed risk-based capital rule, and NAFCU is continuing its dialogue with the agency in its effort to ensure any final rule is fair for all credit unions.

Official Comment Letter to NCUA

On May 27, 2014, NAFCU submitted its official comment letter to NCUA on the agency's proposed risk-based capital regulation. The letter explains our position in detail, including data on how the rule will gravely impair credit unions' ability to compete in the marketplace and serve their members as well as fail to provide additional safety to the industry. We firmly believe that, in its current form, this rule poses such widespread, catastrophic consequences that it should be withdrawn.

Key NAFCU actions since the release of NCUA's proposed rule

  • Wrote NCUA in January to air early concerns.
  • Held a webcast and published a risk-based net worth calculator, Regulatory Alert 14-EA-03, talking points, NAFCU Compliance Blog series, editorials in trade press.
  • Twice asked NCUA for more comment time for credit unions (jointly with CUNA).
  • Helped get 324 House members to sign on to a letter asking NCUA's chairman for more comment time, rule improvements or withdrawal of the proposed rule.
  • Submitted detailed final comment letter

NCUA's Risk-Based Capital Proposed Rule

On January 23, 2014, the NCUA Board issued a proposed rule regarding risk-based capital for credit unions. The proposed rule would make a number of revisions to NCUA regulations regarding Prompt Corrective Action (PCA) including replacement of the agency's current risk-based net worth (RBNW) requirements with new risk-based capital requirements for federally insured "natural person" credit unions with over $50 million in assets.

The proposed rule would also revise the risk-weights for many of NCUA's current asset classifications and require higher minimum levels of capital for federally insured natural person credit unions with concentrations of assets in real estate loans, member business loans (MBLs) or higher levels of delinquent loans.

Finally, the proposed rule would set forth a process where NCUA could require an individual federally insured natural person credit union to hold higher levels of risk-based capital based on supervisory concerns raised by NCUA examiners.

On September 29, 2014 NCUA Board Chairman Debbie Matz announced that she intends to request that a revised proposed risk-based capital rule be issued with a new comment period as a result of significant structural changes being considered. Matz anticipates the NCUA Board could issue an amended proposal before the end of 2014.

NAFCU's Position on Capital Reform

March 21, 2014 - NAFCU experts discuss NCUA's risk-based capital proposal and our risk-based net worth calculator available to members.

We believe that having more stringent capital requirements on credit unions larger than $50 million in assets will cause a divide in the industry. While the credit union regulatory capital system should be updated to better reflect risk, we firmly oppose NCUA's proposed risk-based capital rule that splits the industry into two groups.

Under the framework of NCUA's proposed rule for risk-based capital, some credit unions could be required to shoulder a disproportionate amount of burden related to the safety and soundness of the greater credit union system.

In addition to using the avenues available at the NCUA to weigh in on this proposal, NAFCU is also strongly encouraging Congress to stay active and help push the NCUA to make a significant changes to the rule before it becomes final. On April 8, during a House Financial Services Committee hearing, Reps. Pete King (R-NY) and Brad Sherman (D-CA) both questioned NCUA General Counsel Michael McKenna about the economic impact of the rule, the impact on credit availability for credit union members, and how the various risk weights in the proposal were derived. NAFCU worked with various members of Congress on a joint letter that was signed by an overwhelming majority of House members following this line of questioning and asking for a longer compliance timeline for credit unions. This letter was delivered to NCUA on May 15, 2014.

In response to the joint letter that NAFCU helped organize with various members of Congress, NCUA sent a letter on May 30, 2014 with the same tired, misplaced arguments that the agency is doing everything possible to take credit union industry input into consideration moving forward. NAFCU immediately responded that:    

  • the agency's proposed risk weights are inappropriate and should be aligned with the risk weights used by FDIC for community banks;
  • the proposal affects not hundreds but thousands of federally insured credit unions, which will be required to adjust their balance sheets or raise more capital to comply;
  • the current proposal should be withdrawn and a new modified proposal reissued with a new comment period.

Ultimately, NAFCU believes NCUA lacks the legal authority to issue the rule as proposed.

NAFCU has outlined a legislative solution that will institute fundamental changes to the credit union regulatory capital requirements in our Five-Point Plan for Regulatory Relief. The plan, as it relates to capital reform:

  • Directs the NCUA to, along with industry representatives, conduct a study on prompt corrective action and recommend changes;
  • Modernizes capital standards to allow supplemental capital, and direct the NCUA Board to design a risk-based capital regime for credit unions that takes into account material risks; and,
  • Establishes special capital requirements for newly chartered federal credit unions that recognize the unique nature and challenges of starting a new credit union.

Recent Media Outreach

NAFCU has stayed at the forefront of this issue and continued to champion credit unions in major media nationwide.

NAFCU Lauds NCUA Chairman Matz's Announcement of Second Proposal on Risk-Based Capital Rule (September 29, 2014)

Congress: 'Measure twice, cut once' on proposed risk-based capital rule (The Hill, September 11, 2014)

On Risk-Based Capital, Let's Get It Right (Credit Union Times, September 5, 2014) 

Congressional Interest Could Force NCUA's Hand On Second Comment Period (Credit Union Journal, August 13, 2014)

NCUA: Credit Unions Deserve a Fair Shake (Credit Union Times, July 20, 2014)

NAFCU, Members Attend NCUA's Alexandria Session to Voice Concerns(July 17, 2014)

NAFCU, Members Attend NCUA Listening Session in Chicago (July 10, 2014)

NAFCU, Members Attend NCUA Listening Session in L.A. (June 26, 2014)

NAFCU Applauds Chairman Johnson and Ranking Member Crapo Letter to NCUA on Risk-Based Capital Proposal (June 4, 2014)

NAFCU: NCUA Response to Rep. King and Rep. Meeks on Risk-Based Capital Proposal Inadequate (May 30, 2014)  

NAFCU Statement on NCUA's Risk-Based Capital Proposal for Credit Unions (May 27, 2014)

NAFCU Statement on NCUA Response to Request for Extension on Risk-Based Capital Proposal (May 14, 2014)

NAFCU Statement on NCUA Risk-Based Capital Video (April 18, 2014)

NAFCU and CUNA urge 90 day extension on risk-based capital (March 3, 2014)

CU Times Dan Berger Editorial: NCUA's Capital Proposal:Cure Could Kill Patient (February 24, 2014)

Credit Unions Will Take $6 Billion Hit with NCUA's Proposed Rule on Risk-Based Capital (February 11, 2014)

NAFCU Statement on NCUA's Action on Risk-Based Capital (January 23, 2014)

Additional Information & Resources

Take Action

Calculate the impact of the proposed rule on your credit union

Letters on Risk-Based Capital

U.S. Congress

Letters to NCUA 

NAFCU Compliance Blog Posts

(View series of Risk-Based Capital posts)

More info

Updated December 2014