July 16, 2014

Royce: What steps can Congress take on RBC?

NAFCU witness David Clendaniel (Dover FCU) responded to Rep. Ed Royce's question about what steps Congress should take to address NCUA's risk-based capital proposal.

July 16, 2014 – NAFCU witness David Clendaniel, president and CEO of Dover Federal Credit Union in Dover, Del., told lawmakers Tuesday that NCUA's proposed rule on risk-based capital should be reviewed for its full impact before it is implemented.

Clendaniel, testifying during a hearing by the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, was asked by Rep. Ed Royce, R-Calif., what next steps Congress should take on the NCUA proposal. He responded that a number of things would help, but one thing Congress could do is require NCUA to conduct additional study on the issue before moving forward with a final rule. Similar action is proposed for community banks' Basel requirements under H.R. 4042, which the subcommittee is reviewing.

"I think the one thing that could be done," Clendaniel replied, "… is to include the NCUA proposal in H.R. 4042, and do a ‘stop and study' to make sure we know what full the impact of the proposal is and what's also the right proposal for credit unions and for their members."

Royce invited the NAFCU witness to "put a full proposal forward" on how Congress could help.

Clendaniel thanked subcommittee Chairman Shelley Moore Capito for calling Tuesday's hearing.

In his testimony, Clendaniel said "enough is enough" as he detailed the numerous new, burdensome rules coming from NCUA and CFPB that are squeezing the resources credit unions have to devote to serving members.

In particular, he said NCUA's risk-based capital proposal relies on a "one-size-fits-all" approach that will "stifle growth, innovation and diversification at credit unions."

To keep the capital cushion they have now, Clendaniel said credit unions with more than $50 million in assets would have to hold another $7.1 billion in reserves under NCUA's proposed rule. While noting that NCUA says affected credit unions will actually need less capital to remain well-capitalized under the proposed rule, but that ignores the fact "that most credit unions seek to maintain a capital cushion above the minimum needed for that level – often because NCUA's own examiners have encouraged them to do so."

He acknowledged NCUA's stated plans to make changes to its proposal, and he reiterated it is essential that credit unions have an opportunity to review those during a second notice-and-comment period.

From left: NAFCU Vice President of Legislative Affairs Brad Thaler, Rep. Blaine Luetkemeyer and Clendaniel. (Dietsch photos)

Clendaniel discussed NAFCU's five-point plan for credit union regulatory relief. He also noted support for several bills before the subcommittee that are aimed at easing some of the regulatory burden felt by credit unions and other community financial institutions. Among these are the above-noted H.R. 4042, the Community Bank Mortgage Servicing Asset Capital Requirements Study Act; H.R. 3240, the Regulation D Study Act; H.R. 3374, the American Savings Promotion Act; and H.R. 4986, the End Operation Choke Point Act (see related story).