This year, NCUA dropped a bombshell on the credit union industry – a proposed rule that would impose stringent new risk-based capital requirements on credit unions. Of all the rules expected from NCUA in 2014, this one is expected to have the greatest impact on credit unions.
The rule divides the industry along the $50 million asset line and sets up a framework in which some credit unions could be required to take on an unfair, disproportionate burden relative to their size and actual risk. The proposal’s risk weights are higher than those used by the Federal Deposit Insurance Corporation for banks – despite the established fact that credit unions have lower delinquency rates than banks do.
NAFCU is opposing this rule, and it is continuing to make a strong case for the reforms outlined in its five-point plan for regulatory relief, namely:
- to have NCUA conduct an industry study on prompt corrective action and recommend changes;
- modernize capital standards to allow supplemental capital and have the NCUA Board design a risk-based capital regime for credit unions that takes material risks into account; and
- establish special capital requirements for newly chartered federal credit unions that recognize their unique nature.
Comment letters are due to NCUA by May 28, in just a few weeks. But that isn’t the end of the line – we can work to prepare ourselves for the impact ahead of us.
One way to do that is to attend NAFCU’s Annual Conference and Solutions Expo in Las Vegas – my hometown – this July 22-26. There’s a reason “solutions” is in the title – NAFCU isn’t gathering its members, nonmembers, and top financial industry minds together just because Vegas is a great vacation spot (although it is!). We’re getting together to talk solutions for the biggest problems facing our industry today – and none is bigger than capital reform.
Risk-based capital will feature prominently at the conference this summer – during talks from the main stage, in other forum discussions and during the private conversation with NAFCU President and CEO Dan Berger. NAFCU’s regulatory experts will be presenting on this subject and many others affecting credit unions right now. Speakers from the association will include Senior Vice President of Government Affairs and General Counsel Carrie Hunt and Director of Regulatory Affairs Michael Coleman.
NAFCU staff are on Capitol Hill and at the regulatory agencies every day making sure the credit union message is heard and that credit unions are prepared for what’s coming down the line. Risk-based capital may be bigger and more daunting than a lot of the obstacles that we’ve faced recently, but it is no exception in terms of how diligently NAFCU is heading up the opposition and preparing to deal effectively with the rule if it is finalized. Your credit union may have already begun preparing for the rule, or it may still not be ready. Regardless, NAFCU is there for you and will bring you up to speed this year at the conference.