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CUNA urges House panel to focus on CU risk system
WASHINGTON (7/11/08)--As the House Financial Services Committee proceeded with hearings on the implications of current financial markets policies, the Credit Union National Association (CUNA) urged the committee’s leadership to also consider whether a risk-based capital system is appropriate for credit unions. In a letter to the committee’s chairman, Rep. Barney Frank (D-Mass.), and its ranking member, Rep. Spencer Bachus (R-Ala.), CUNA President/CEO Dan Mica noted that the committee would be focusing on a risk-based capital system for investment banks during its hearings. Mica pointed out that credit unions are seeking a risk-based system for themselves, and recommended that now is an appropriate time to include credit unions in the mix of consideration. “The National Credit Union Administration (NCUA) has developed a risk-based capital system for credit unions,” Mica wrote. “Legislative language supported by NCUA is incorporated in Title I of H.R. 1537. The NCUA’s proposal would lower the leverage requirement for credit unions while at the same time imposing a new, risk-based capital requirement to augment the leverage ratio.” H.R. 1537 is the Credit Union Regulatory Improvements Act (CURIA), with 150 backers in the House including its authors Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.). It is known as S. 2957 in the Senate, where it was introduced by Sen. Joseph Lieberman (I-Ct.) and has three additional co-sponsors. “Unlike other depository institutions, credit unions lack access to capital markets. Without such access, in times of rapid savings growth (such as when members are concerned about the economy or financial markets) the ratio of net worth to assets can fall substantially even for healthy, well-managed credit unions.” Mica wrote. The CUNA leader added, “What should really matter is how those new assets are deployed, rather than just their sheer volume.” The CUNA letters hit the lawmaker’s desks just as the financial services panel opened what it has said will be a series of hearings on domestic and international financial markets. The committee has said it is investigating the adequacy of current oversight and regulatory tools, and the extent to which existing structures are adequate to respond to future problems. Federal Reserve Board Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson testified Thursday. Use the resource link below to read the complete CUNA letter to lawmakers.

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