ALEXANDRIA, Va. (8/15/14)--National Credit Union Administration Chair Debbie Matz responded to a letter from Rep. Steve Stivers (R-Ohio) Thursday regarding the agency's risk-based capital (RBC) proposal. Stivers, a member of the House Financial Services Committee, wrote to Matz Aug. 8 questioning the proposal's risk weights, effect on credit unions and the justification for the change.
The Credit Union National Association raised a number of concerns about the risk weights in its comment letter and in follow-up meetings with the NCUA. Matz has previously pledged that the proposed risk weights would be adjusted in the final rule, and pledged in her letter to Stivers that the agency will "continue to remain mindful" of the trade-offs between the benefits and impacts of the regulation.
According to the NCUA, 2,200 credit unions would be subject to the new rule. Of those 2,200, Matz said half would see an improvement in their capital levels relative to their risks, and would not be required to raise additional capital in order to reduce risk.
"NCUA estimates that under the proposed rule the 201 credit unions downgraded as a result of the proposed rule would need to collectively hold an addition $633 million in capital (equivalent to 0.8% of their combined assets of $80 billion) to reach the well-capitalized level, but only if all 201 choose to maintain their balance sheets' current risk exposures," Matz wrote.
CUNA has raised concerns with NCUA that the impact of the proposal will be far more negative than the agency has indicated.
In providing justification for the new rule, Matz cited several factors, including new Basel capital accounting, the recommendations of the Government Accountability Office and the NCUA's Inspector General and the issuance of new RBC rules last year by the other federal regulators.
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