July 17, 2014

NCUA responds to Royce on RBC, MBL

July 18, 2014 – NCUA, responding to questions posed this April, told Rep. Ed Royce, R-Calif., the agency does have authority to allow a credit union – with a significant proportion of its portfolio in member business loans for the last five years – to be exempt from the MBL cap.

NAFCU is pressing for more credit union MBL authority in its five-point plan for credit union regulatory relief.

Royce's questions were put to agency General Counsel Mike McKenna in follow-up to an April 8 House Financial Services Committee hearing on regulation and supervision of financial institutions. The questions addressed the risk weights in NCUA's risk-based capital proposal and credit unions' small business lending efforts and member business lending in general.

On the risk-based capital proposal's risk weights, NCUA replied that the weights "reflect material risks that must be accounted for in a risk-based capital system for credit unions. NCUA's existing risk-based net worth standard has higher risk weights for higher concentrations of mortgage loans and member business loans."

NAFCU disagrees with NCUA on what constitutes a material risk; it has urged against risk-weighting that places credit unions at a competitive disadvantage with community banks.

Rep. Mick Mulvaney, R-S.C., also sent follow-up questions regarding the National Credit Union Share Insurance Fund, Central Liquidity Facility and Temporary Corporate Credit Union Stabilization Fund. He asked for a more detailed breakdown of the agency's operating budget and accounts. NCUA gave few specifics and focused instead on the budgeting process and where the agency's budget and related documents can be found.

NAFCU strongly supports additional transparency as to NCUA's funds.