ALEXANDRIA, Va. (7/22/14)--With three Listening Sessions on the books, the National Credit Union Administration affirmed Monday that its next steps will include incorporating comments from the more 400 participants who attended. The agency's risk-based capital (RBC) proposal was the primary topic of discussion at the sessions, held in Los Angeles, Chicago and Alexandria, Va., but examinations, and the role of small credit unions were also addressed.
"As always, at this year's Listening Sessions there was spirited discussion on many topics, including the proposed risk-based capital rule," said NCUA Chair Debbie Matz said. "This dialogue is what makes these events so valuable. It's an opportunity for regulators and credit unions to talk frankly, face-to-face, about policy and examination issues and exchange ideas for constructive solutions. We all have the same goals: safety and soundness, prudent lending and effective regulation."
In its press release following the last Listening Session, the NCUA reported that "only 3% of credit unions would experience a change in Prompt Corrective Action status" under the proposal. CUNA has expressed concern that several hundred credit unions would find themselves uncomfortably close to PCA thresholds, and would collectively need to raise between $3 billion and $4.5 billion in additional capital to restore previous margins above those thresholds.
Matz said the "many valid questions and concerns" received at the sessions will be added to the more-than 2,000 comment letters received when the agency considers changes to its RBC proposal.
"We are listening carefully, and I anticipate the agency will make appropriate changes," she said. "For starters, we plan to lower the risk weights on investments, mortgages, member business loans, credit union service organizations and corporates, as well as extend the implementation period."
Matz said the NCUA will review the best way to address material interest rate risk in the Prompt Corrective Action framework as the Federal Credit Union Act requires, while evaluating whether more emphasis should be placed on the supervisory process rather than on risk weights in the final rule.
The proposed 18-month implementation period was among the major concerns with the proposal raised by the Credit Union National Association, as well as many of the credit unions and organizations that submitted comment.
Extending the implementation period will allow affected credit unions enough time to adjust operational plans and balance sheets, while giving the NCUA time to update the Call Report system and train field examiners.
According to the NCUA, the final rule will make clear that only the NCUA board, not any individual credit union examiner, can make a determination about whether a specific credit union needs to hold more capital.
"CUNA is pleased that these changes, which we have strongly advocated, are in progress," interim President/CEO Bill Hampel noted. He commended the agency for holding the sessions and for agreeing to make these importance changes. He added that CUNA continues to be concerned that the agency has not adequately explained the need for a higher RBC requirement for well-capitalized credit unions than that applied to adequately capitalized credit unions.
"The risk level of well-capitalized credit unions does not justify the proposed higher requirement. CUNA will continue to seek ways to work with NCUA to address this very significant concern,",he said.
The Federal Credit Union Act requires NCUA to maintain a "comparable" risk-based capital system to the federal banking agencies, which updated their risk-based capital rules in 2013. The Government Accountability Office and NCUA's Inspector General also have recommended that NCUA's rule be updated.
"I am confident that NCUA will produce a sensible final rule that meets the requirements of the Federal Credit Union Act and not disadvantage credit unions in the market," Matz said.
Audio recordings of each session are expected to be available soon on the NCUA's website.