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NAFCU's Carrie Hunt urged the NCUA to consider "the totality of new regulation imposed since the financial crisis, much of which has sought to improve the safety and soundness of the financial sector as a whole," as it seeks ways to moderate the effects of its risk-based capital (RBC) rule. Last month, the board moved forward with a proposed rule to further delay the rule's implementation date to Jan. 1, 2022.

"For example, all credit unions must now have a plan to access a contingent liquidity source, all credit unions will soon be subject to the current expected credit loss (CECL) standard, most are subject to new interest rate risk management expectations, and most credit union lending activities are subject to greater scrutiny and restrictions than existed prior to the financial crisis," added Hunt NAFCU's Executive Vice President of Government Affairs and General Counsel in a letter sent to the agency yesterday.

In the letter, Hunt shares several recommendations for the board to consider as it evaluates a community bank leverage ratio analog for credit unions as well as how the agency should proceed with asset securitization and subordinated debt, and improving certain aspects of the 2015 RBC final rule. Hunt also urges the NCUA to work with Congress to amend the Federal Credit Union Act to achieve "comprehensive capital reform."

NAFCU has led efforts to ensure credit unions and their members benefit from a modern capital regime, working closely with policymakers on Capitol Hill and at the NCUA. Following the enactment of S.2155, which made changes to bank capital, NAFCU President and CEO Dan Berger encouraged the NCUA to "consider its entire rulemaking anew." Furthermore, a NAFCU-backed provision to delay the rule by two years from its original implementation date passed the House three times in 2018.

"In any risk-based capital regime, NAFCU has one key tenet that needs to exist: capital must be sufficient to protect the institution, but not so restrictive as to provide a competitive disadvantage or curtail lending," wrote Hunt.

Hunt also shared the association's concern that the NCUA's current definition of "complex" – although more favorable in the 2018 final rule – is still overly simplistic and out of line with the approach of other financial regulators.

The association will continue to encourage the agency to design a true RBC system for credit unions and a longer delay of its rule to ensure the NCUA has time to consider other regulatory changes that will impact credit union capital and revise the rule as needed.