WASHINGTON (4/21/14)--Two members of the House Financial Services Committee, Reps. Peter King (R-N.Y. ) and Gregory Meeks (D-N.Y.), are circulating a letter among House colleagues urging the National Credit Union Administration to consider changes to its proposed risk-based capital (RBC) regulations. The letter expresses the concern that any final RBC rule should not unduly burden credit unions and should not adversely affect healthy credit unions' ability to meet the financial services needs of their members.
The letter notes several concerns that must be addressed before the NCUA adopts a rule. The legislators plan to forward the letter to the agency once congressional signatures are collected.
The letter encourages the NCUA to:
Take into account the cost and burden of implementing new risk-based capital requirements beyond the current leverage ratio;
Provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions; and
Give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.
"During the financial crisis, natural person credit unions served as an important source of liquidity in local communities and the overwhelming majority of them successfully weathered the downturn. These cooperatives did not engage in the risky lending practices that led up to the crisis and nearly all maintained their well-capitalized status," the letter notes. It adds that the crisis did not provide evidence for greater capital reserves for natural person credit unions, and the NCUA's across-the-board approach seems burdensome and raises concerns.
At a congressional hearing earlier this month, many lawmakers' expressed interest in the RBC proposal.
"We have urged Congress to take a particular interest in the proposed risk-based capital rule, and clearly the issue has piqued interest," Credit Union National Association President/CEO Bill Cheney said following the hearing. The questions during the hearing about the risk-based capital proposal reflect "a level of concern in Congress that the proposal is in need of significant improvements," he added.
Comments on the RBC plan are due to the agency by May 28. CUNA and the National Association of Federal Credit Unions last week repeated their call on the agency to extend the comment deadline by 90 days.
CUNA has extensive resources for credit unions regarding the RBC plan. Use the resource link.