May 19, 2014

Matz defends RBC rule in The NCUA Report

May 20, 2014 – NCUA Board Chairman Debbie Matz defended the agency's proposed risk-based capital rule – a proposal over which NAFCU continues to lodge serious objections – in her column for the May edition of The NCUA Report.

In her column, Matz says the proposed rule would help prevent losses like those suffered in the financial crisis. "A compelling fact about the proposed rule is that the overwhelming majority of credit unions will not be affected by it," Matz wrote. "The truth is: 92 percent of all credit unions today would be considered ‘well-capitalized' under the proposed formula."

While NCUA says most credit unions would measure up well under the proposed rule, the proposal itself would apply to all credit unions with more than $50 million in assets. NAFCU has pointed out that all credit unions covered by the proposal would have to adjust their balance sheets to meet the new requirements. NAFCU has also taken issue with the agency's proposed risk weights, particularly as they would apply to non-delinquent first mortgages, investments, member business loans and investments in and loans to credit union service organizations.

Matz wrote that the agency would "carefully reconsider" how the risk weights might be "recalibrated" if credit unions raise concerns about the certain proposed risk weights or about their unintended consequences. She added that it's "safe to say" that changes will be made based on the comments received.

In addition, she said "affected credit unions will be given adequate time" to comply and that the proposed 18-month phase-in period "is not etched in stone."

A NAFCU-supported letter from House members expressing concerns about NCUA's risk-based capital proposal garnered a total of 324 signatures before it was sent to Matz last Thursday.

The letter does three key things:

  • It encourages Matz to consider the cost and burden for credit unions of imposing new risk-based capital requirements beyond the current leverage ratio and how those requirements might affect mortgage and small business credit availability.
  • It asks Matz to give credit unions more time to comment for the record and, if the rule is adopted, more time in which to comply.
  • It calls for "justification and more clarity" about why the risk weights in NCUA's proposed rule are different than the standards in place for other community financial institutions.

The deadline for comment letters to NCUA on the proposal is May 28. Matz has declined to provide an extension thus far.