WASHINGTON (6/18/14)--Rep. Scott Perry (R-Penn.) became the latest congressman to weigh in on the National Credit Union Administration's risk-based capital (RBC) proposal with a letter Tuesday. Perry requested further clarifications and changes to the proposal, which sets a higher risk-based requirement on top of the 7% leverage ratio required of credit unions to be well-capitalized.
His letter specifically requests: that the NCUA board to take into account the cost and burden of implementing the proposed rule and an NCUA board perspective on how the proposed concentration-based risk weights are calibrated and why they differ from bank weights.
Perry classified credit unions' function as "an important source of liquidity" during the financial crisis of the past few years, adding "these cooperatives did not engage in the risky lending practices that led to the crisis, and nearly all maintained their well-capitalized status."
The letter cites the NCUA's report that the 10 credit unions that would become undercapitalized as a result of the proposed rule would need to retain $63 million in in risk-based capital to become adequately capitalized. It also mentions the estimate from industry representatives, including the Credit Union National Association, that the number could be as high as $7 billion in capital drawn out of the economy.
"Because of credit unions' limited avenues for raising capital, this proposal likely would force them to charge higher lending and financial services fees, reduce dividend payments to members and deter new depositors," the letter reads. "Before proceeding with a final rule, I urge the NCUA to consider the economic impact and consequences of reduces liquidity and financing for families and small businesses."
Perry also expressed reservations over the 18-month implementation timeline currently proposed by the NCUA, citing concerns that it is "much too short for credit unions appropriately to recalibrate their books without adversely impacting service to their members" and urging the NCUA to give more time to stakeholders who wish to comment and for credit unions to implement the rule once it becomes final.