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Sens. Shelby, Begich: RBC proposal is solution in search of problem
ALEXANDRIA, Va. (7/24/14)--Calling the National Credit Union Administration's risk-based capital proposal a solution in search of a problem, Sens. Richard Shelby (R-Ala.) and Mark Begich (D-Alaska) weighed in with letters to the agency.

Shelby, the past chair of the Senate Banking Committee, said the proposal would require Alabama credit unions to raise capital levels by approximately $129 million to remain well-capitalized, "with potentially no beneficial upside."

He also raised concerns that the proposal may exceed the authority granted by Congress in the Federal Credit Union Act, because the act only gives authority to the NCUA to establish a risk-based standard to weigh risk in circumstances where the net worth ratio does not provide adequate protection.

"The proposed rule, however, would impose a risk-based standard to be deemed well-capitalized, which is arguably beyond the scope of the Federal Credit Union Act," Shelby wrote.

Both senators noted that credit unions, along with the National Share Insurance Fund, performed properly during the financial crisis. Begich, in his letter, said credit unions "demonstrated remarkable strength and durability" during the financial crisis, and he praised credit unions for avoiding "the same risky practices as large banks," which allowed them to avoid the need for taxpayer assistance.

"Particularly in markets underserved by traditional financial institutions, as in Alaska, credit unions stepped in and filled the void that was left as credit from other institutions dried up," he wrote. "And they did so effectively and responsibly under current and existing regulations.

The letter goes on to request that the NCUA take into account the "overwhelming feedback" on its risk-based capital proposal as to not unfairly burden credit unions.

Begich, who was first elected in 2008, has been a vocal proponent for credit unions, advocating for credit unions to keep their tax status, and vowing to "twist arms" of other members of Congress to raise the member business loan cap to 27.5% of assets from the current $12.25%.


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