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CUNA notes risk-based rule concerns ahead of today's NCUA meeting
ALEXANDRIA, Va. (1/23/14)--The Credit Union National Association remains concerned about a proposed rule on risk-based capital that is on the agenda for today's National Credit Union Administration open board meeting. "This is not the time for gratuitous regulations," CUNA Deputy General Counsel Mary Dunn said ahead of today's meeting.

The current 7% leverage capital standard was set by statute in 1998, and it would take an act of the U.S. Congress to change the statute. However, NCUA Chairman Debbie Matz said in July that the recent financial crisis and industry changes has sparked an agency interest in implementing the law with a newer, more flexible, forward-looking approach.

NCUA board member Rick Metsger earlier this month said the pending risk-based capital proposal would impact fewer than 200 credit unions, but CUNA warns this low number does not alleviate concerns with the approach.

CUNA supports net worth-standard changes that reflect risk better than the present approach, but ones that will not simply add net worth requirements to the current system.

CUNA has also been urging the agency to adopt a more productive approach to rulemaking that focuses on problem areas rather than issuing rules with blanket applicability, regardless of the credit unions level of risk. CUNA's Examination and Supervision Subcommittee has met with NCUA officials on the capital ratio issue.

Dunn said CUNA is hopeful that the NCUA will make major changes to its final derivatives proposal, which is also on today's agenda. The NCUA proposal, released in May, would allow well-run federal credit unions to use simple derivatives to hedge against interest rate risks. The plan would allow only well-managed credit unions with $250 million or more in assets, and which have appropriate expertise, to apply for an agency derivatives investment program. Swaps and caps will be the only approved investments, and fees will be charged to cover costs related to application processing and supervision of the program.

"The costs to credit unions for complying with the provisions in the proposed derivatives rule are excessive and will place derivatives authority out of reach for many, if not most, credit unions seeking derivatives authority," Dunn emphasized in a July comment letter.

CUNA also did not support a number of the key provisions of the proposal.

Also on today's open meeting agenda:
  • NCUA's Strategic Plan for 2014 through 2017, and Annual Plan for 2014 and 2015; and
  • The Federal Credit Union Loan Interest Rate Ceiling.
Watch CUNA's News Now and Twitter feed, @NewsNowLiveWire, for full coverage of this morning's meeting.
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