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Missouri Sounds Off on Risk-Based Capital Proposal

Credit unions across Missouri and the Missouri Credit Union Association (MCUA) weighed in with concerns about the National Credit Union Administration (NCUA) Risk Based Capital (RBC) proposal. As the comment period closed on May 28, NCUA received more than 2,000 comment letters regarding the proposal.

As currently written, RBC would directly impact credit unions $50 million or larger, and indirectly affect smaller credit unions. The proposal would require a well-capitalized credit union to maintain a seven percent net worth ratio and a 10.5 percent risk-based capital ratio. Credit unions of all sizes in Missouri were encouraged to send in a comment letter, especially those with $40 million in assets or more, and MCUA Compliance provided guidelines and assistance in the process. There are 42 Missouri member credit unions with assets of more than $40 million. Seven of those would fall from well-capitalized in the current system to adequately capitalized in the proposed system. Only one of the 42 credit unions would enjoy a greater cushion under the proposal. 

In part, MCUA’s letter states: “MCUA believes the proposed rule is punitive to otherwise well-managed institutions. It has not been demonstrated or explained how it was determined that additional capital to return a credit union to well capitalized status should be required by NCUA.”

Click here to read MCUA's full comment letter.

In addition to comment letters sent in by credit unions in Missouri and MCUA, all eight of Missouri’s U.S. House members signed a letter from Congress to the NCUA urging changes to the RBC proposal to ensure that the rule does not unduly burden healthy credit unions and keep them from serving the needs of their members. The letter was signed by 75 percent of all members serving in the U.S. House of Representatives  - more than 300 members - within a two-week time period. MCUA Advocacy took an active role in reaching out to the Missouri delegation to encourage their participation in NCUA's RBC letter.

The Credit Union National Association (CUNA) submitted a 47-page single spaced letterCUNA wrote that NCUA should withdraw the proposal given the flaws in the proposal and the damage it stands to cause to credit unions. The letter states that withdrawing the current proposal is vital given key defects it contains in statutory, public policy, and operational areas, including: 

  • The “well-capitalized” RBC requirements violate the FCU Act, and are not well-tailored to produce appropriate levels of credit union capital;
  • The proposal would needlessly interfere with credit union operational capabilities to meet the credit needs of their communities, particularly in the areas of business and mortgage lending, and other financial necessities;
  • Contrary to a stated goal of the proposal, it does not significantly reduce losses to the NCUSIF, nor does it effectively identify potential credit union failures (without overcapitalization of other credit unions);
  • The rigorous health of credit unions in general, in addition to their historical financial performance, obviates a necessity for the proposal;
  • And overall, the negative impact of the proposal would reduce the size of the credit union movement over the long haul.

While the comment period has closed, credit unions are urged to continue their efforts in the RBC proposal process. Click here for more information about attending the NCUA regional listening sessions, where RBC is expected to dominate discussions.