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Cheney Report: Risk-Based Net Worth Proposal on the Horizon
WASHINGTON (12/16/13)--A proposed rule on risk-based net worth could be considered by the National Credit Union Administration as soon as next month, Credit Union National Association President/CEO Bill Cheney said in this week's edition of The Cheney Report.

The agency has said its developing risk-based capital framework will protect credit unions and consumers from losses, and replace the "outdated and insufficient" one-size-fits-all capital requirement. The NCUA plan could result in higher capital levels for credit unions with high concentrations of risky assets. The current 7% leverage capital standard, which is required by the Federal Credit Union Act, would remain the floor. However, the agency has said credit unions with assets of $50 million and above could be subject to improved risk-based capital requirements to better correlate required capital levels to risk.

"Particularly since no one outside of NCUA has seen the proposal, it remains of great concern to us. In our view, the current system for net worth standards (written into the law--unlike that of other financials) is flawed, but credit unions have adjusted accordingly and are doing well. In short: If it ain't broke, don't fix it," Cheney wrote.

NCUA Chairman Debbie Matz has said the risk-based capital rule, if adopted, is unlikely to impact many credit unions.

The Cheney Report also includes a timely reminder of how credit unions continue to "unite for good": Rogue CU, Medford, Ore., has created a Hope for the Holidays Campaign, which helps local families who need an extra hand during the holiday season. Twelve needy families that were nominated by community members were presented with a combined $6,500 in donated funds. Unite for Good refers to CUNA's shared strategic vision, unveiled at the 2013 Governmental Affairs COnference, in which Americans choose credit unions as their best financial partner.

Other issues addressed in this week's Cheney Report include:
  • Details on items approved at the December NCUA open board meeting;
  • NCUA student loan guidance;
  • The positive credit union news seen in the annual "American Customer Satisfaction Index";
  • What the recent budget accord means for credit unions; and
  • The status of several regulatory relief measures.
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