We believe that capital standards for credit unions must be modernized and reflect the realities and challenges of the 21st-century financial marketplace. NAFCU remains concerned about the impact the risk-based capital rulemaking will have on the credit union industry, including regulatory burden and increased costs. NAFCU will also continue to advocate for improved access to subordinated debt (also referred to as alternative capital), including both secondary capital and supplemental capital, which is a proposed form of regulatory capital that would be available to all credit unions.
Risk-Based Capital Rule
NAFCU supports an appropriate risk-based capital system for credit unions, but has been opposed to the NCUA's risk-based capital rulemaking since its passage and has urged the rule be modified or the effective date delayed, particularly because of increased regulatory burdens and costs. Although the NCUA acted in October 2018 to delay the rule by one-year and to implement a higher asset threshold for a credit union to qualify as “complex,” NAFCU continued to push for an additional delay. NAFCU supports the NCUA’s June 2019 proposal to further delay implementation to January 1, 2022. NAFCU continues to advocate for changes to the rule, including a definition for complex credit unions that takes into account risk-based activities and does not rely on an arbitrary asset-based threshold.
NAFCU has long advocated for regulatory reform that would authorize credit unions to issue supplemental capital. We believe that this is an option for improving capital buffers, encouraging growth, and meeting regulatory capital requirements – so long as it is compatible with the not-for-profit, cooperative structure of credit unions. NAFCU’s approach to alternative capital emphasizes the following general principles:
- Preserve the non-for-profit, mutual, member-owned and cooperative structure of credit unions and ensure that ownership interest (including influence) remains with the members.
- Ensure that the capital structure of credit unions is not fundamentally changed and that the safety and soundness of the credit union community as a whole is preserved.
- Provide a degree of permanence such that a sudden outflow of capital will not occur.
- Allow for a feasible means to augment supplemental capital.
- Provide a solution with market viability.
NAFCU also supports changes to the Federal Credit Union Act that would permit credit unions to count certain forms of supplemental capital towards the net worth ratio calculation to alleviate current constraints on building net worth.