December 06, 2017

RBC focus of NAFCU's 9th congressional testimony

Delivering NAFCU's ninth congressional testimony of the year, Brian Ducharme, president and CEO of MIT Federal Credit Union (Cambridge, Mass.), today will detail credit unions' concerns about the NCUA's risk-based capital rule (RBC) and the rule's impact on his institution during a House Financial Services subcommittee hearing.

The hearing, "Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part II," held by the Subcommittee on Financial Institutions and Consumer Credit, begins at 2 p.m. Eastern.

In his prepared testimony, Ducharme will share with subcommittee members NAFCU's five tenets for a healthy and appropriate regulatory environment for credit unions and the ways in which many of the legislative proposals under review today fall in line with the association's priorities.

In particular, the Common Sense Credit Union Capital Relief Act of 2017 (H.R. 4464), introduced late last month by Rep. Bill Posey, R-Fla., would repeal the NCUA's RBC rule currently set to take effect Jan. 1. "NAFCU believes this rule is ill-conceived in its current form and will have a negative impact on the credit union industry if it is implemented without changes," Ducharme will testify.

He will detail why the RBC rule is flawed and the adverse effects it will have on the credit union industry – particularly as a result of regulatory burdens and costs – even noting that NCUA Chairman J. Mark McWatters has indicated that revisiting this rulemaking is on his list of priorities.

Addressing the RBC rule on a personal level, Ducharme will testify that, if carried out, the rule will result in a downgrade in his credit union's capital level. "Recent NAFCU analysis has found that over 400 credit unions will see declines in their capital cushions when the rule becomes effective," he will testify. "Over 40 credit unions will face a downgrade in their capital level with their current portfolio under the terms of the new rule. MIT FCU is one of those facing a downgrade."

MIT Federal Credit Unions serves more than 38,000 members and has more than $540 million in assets. Discussing his credit union's wide range of mortgage services and student loan services, he will note how the RBC rule will constrain all these offerings.

"The new RBC rule has also forced MIT FCU to reconsider offering business services as well as continuing its purchase of SBA loans that are guaranteed by the federal government," his testimony states. "Regardless of how prudently we have managed these programs, they would all have a negative impact on our risk-based capital ratio, and we may have to stop providing them – which may not be in the best interest of our members."

Ducharme's testimony also provides comments on other bills to be addressed by the subcommittee today, including:

  • the Business of Insurance Regulatory Reform Act of 2017 (H.R. 3746), which would help clarify the limits of the CFPB regulating insurance; and
  • the Comprehensive Regulatory Review Act of 2017, which would amend the Economic Growth and Regulatory Paperwork Reduction Act of 1996 to include both the NCUA and CFPB as official participants and increase the frequency from every 10 years to every five years.

Representatives from the Financial Services Roundtable, Mortgage Bankers Association and Americans for Financial Reform are also set to testify during today's hearing.