January 28, 2014

NAFCU questions NCUA's proposed risk weighting

Jan. 29, 2014 – NAFCU President and CEO Dan Berger, pointing to input from member credit unions, reiterated concerns regarding the risk weights included in NCUA's proposed rule on capital in a letter to NCUA Board members Tuesday.

"We question whether the risk weighting proposed actually matches real risk in the system," Berger wrote. "The proposed rule assigns rigid risk weights to many investments that, when properly examined, represent much less risk than the assigned risk weights. As NAFCU has stated previously, capital requirements should not be a substitute for proper credit union management or appropriate examinations."

Berger said NAFCU members also have "significant concerns" about language in the proposal that allows examiners to make subjective judgments in imposing additional capital requirement on individual credit unions. He said NAFCU will submit further feedback from its members before the end of the proposal's comment period.

NCUA's proposal would revise how some credit unions calculate net worth within current statutory capital and prompt corrective action requirements. NAFCU, through its five-point plan for credit union regulatory relief, is urging Congress to correct the law's one-size-fits-all approach to capital and continues to seek NCUA's support in this effort.