One more time: Why risk-based capital is a bad idea

by Chip Filson, Just a Member

In the June 2020 NCUA board meeting, Chairman Hood’s latest RBC proposal was withdrawn from the agenda at the last moment. It did not receive the light of day, so we do not know what was in it. Even so, outgoing board member McWatters indicated his opposition to any change in a June 29 credit union press release stating; “this was not the right time for a material diminution in the RBNW capital requirement for credit unions. . .”

Even though all three banking regulators ended RBNW as a valid approach for community banks in 2019 and McWatters early opposition to the rule as “illegal” it appears this destructive concept has somehow come back to life.

With that prospect in mind, I think it is useful to remember some of the reasons why the concept Is so flawed. The article below urged credit unions to comment on the second RBC proposal by NCUA in 2015. It looks as if the battle may have to be fought again.

 

continue reading »