With listening sessions complete, NCUA turning comments and ideas into action

ALEXANDRIA, VA (July 21, 2014) — With Board Chairman Debbie Matz’s 2014 Listening Sessions completed, the National Credit Union Administration is incorporating comments and ideas from the sessions into its work, including the ongoing review of the agency’s proposed risk-based capital rule.

“As always, at this year’s Listening Sessions there was spirited discussion on many topics, including the proposed risk-based capital rule,” 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.”

More than 400 participants from the credit union system attended Listening Sessions in Los Angeles, Chicago and Alexandria in June and July. While the agency’s proposed risk-based capital rule commanded a great deal of attention, several other issues were also discussed, such as examinations, interest rate risk and the important role of small credit unions. Audio recordings of each session will be available in the near future on NCUA’s website.

The Listening Sessions, in addition to the formal 90-day comment process, yielded input that NCUA will take into account to improve the final risk-based capital rule, Matz said.

“Many valid questions and concerns were raised about our proposed rule,” Matz said. “We are listening carefully, and I anticipate the agency will make appropriate changes. 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 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.

Matz explained why the implementation period for the final rule should be extended beyond the 18 months originally proposed. The extended implementation period would allow any affected credit unions sufficient time to adjust their operational plans and balance sheets, and give NCUA enough time to update the Call Report system and thoroughly train field examiners.

The final rule also will make clear that only NCUA’s Board, not any individual credit union examiner, can make a determination about whether a specific credit union needs to hold more capital in extraordinary situations.

The proposed risk-based capital rule, part of the agency’s Regulatory Modernization Initiative, would require complex credit unions (those with assets above $50 million) to hold capital commensurate with their risk. The proposed rule exempts the two-thirds of credit unions with assets below $50 million. Only 3 percent of credit unions would experience a change in their Prompt Corrective Action status under the proposal’s risk-based capital framework.

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.

“This is our last significant safety and soundness rule arising from the financial crisis,” Matz said. “NCUA appreciates the thoughtful input from stakeholders from the comment process as well as the 2014 Listening Sessions. We heard from more than 2,000 commenters and audience members, and, as with many of our proposed rules, our changes will be based on what we heard. 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.”

NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the U.S. Government, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 97 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At and Pocket Cents, NCUA also educates the public on consumer protection and financial literacy issues.

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