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RBC Front and Center as NCUA Continues to Sort Through Record Number of Comment Letters

The number of comment letters related to the National Credit Union Administration's (NCUA) RBC proposal continues to grow. NCUA said more than 2,050 people wrote to the agency, a number that seems to increase by the day as the agency sorts through letters submitted before the May 28 deadline. The Missouri Credit Union Association (MCUA) submitted their comment letter. The U.S. Chamber of Commerce wrote to NCUA, and noted that the proposal "is a mismatch of tools and business models" and that "the NCUA has failed to take into account critical aspects of how capital is used and, in some cases, has not paid sufficient attention to procedural detail."

Likewise, even though the proposal’s comment period officially closed, Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho) of the U.S. Senate Banking Committee wrote to NCUA this week with their own concerns. In their joint letter to the NCUA Board, the committee leaders urged the agency to finalize rules only if they are "clear, well-calibrated, and work effectively with other prudential requirements to ensure that there are no unintended consequences." They added that NCUA should also, "provide clear guidance on how credit unions should plan for supervision going forward and provide sufficient time for credit unions to adjust and comply with any new standards." Johnson and Crapo, both from largely rural states, also counseled the agency to carefully consider any negative impact the risk-based capital proposal could have on credit unions’ agricultural lending and on a credit unions’ ability to raise and maintain certain capital levels.

The Credit Union National Association (CUNA) continues to review comment letters; and a few caught their attention.

  • CliftonLarsonAllen LLP, (CLA) an accounting firm with a long track record auditing credit unions, stated "the current NCUA proposal does not mirror the risks associated with the credit union industry based on its past performance, including the period of time during and after the recent recession" and could "reduce [credit union] ability to provide the same historic level of service to their members. CLA believes this proposed regulation (or any future revised versions) would likely receive a more positive reception from the credit union industry if the NCUA were to justify the need for these requirements by demonstrating how implementing these risk-weightings would have mitigated the corporate credit union collapse or prevented recent credit union failures. As many respondents and industry economists have noted, there is some question as to whether this proposed regulation, as it is currently written, would have had any impact during the recent recession."
  • Kathleen Kanipe, a director at Parish Credit Union in Ohio noted, "Each credit union balance sheet is unique to that credit union. The Board of Directors of each credit union determines the appropriate mix of loan products and investments. Credit unions exist to provide a safe place for members to save and from that pooled savings to make loans to members. Of course, loans have a higher risk than insured investments but we are a credit union, not a savings club."
  • Sean Ferrell, VP of Finance for LGE Community Credit Union in Georgia noted that it "believes financial regulatory reform measures should promote economic stability and transparency without imposing undue burdens on Natural Person Credit Unions. LGE also believes the proposal is likely to discourage Credit Unions from prudently managing their business risks and/or will drive up the costs of risk management. In particular, the proposal will have a more pronounced effect on small and medium sized credit unions."
  • John E. Keet Jr., of Personal Care America FCU said that he is "very concerned about the NCUA’s ability to impose higher capital requirements on credit unions on a case by case basis. I have personally experienced differences in "philosophy" with examiners. If an individual examiner doesn’t happen to like a particular type of lending or an investment strategy (assuming the credit union isn’t violating any regulations) they can make life miserable for the credit union now; if this arbitrary and highly subjective element is left in, a credit union can be ruined because of a "difference of opinion," which is not only grossly unfair but in the long run potentially harmful to the movement as a whole."

Listening sessions are scheduled this summer. The first session is in Los Angeles on June 26, and credit unions are urged to attend. CUNA is coordinating with Leagues to insure credit union spokespersons will have ample opportunities to voice their concerns about the RBC proposal. The next sessions are in Chicago on July 10, and in Alexandria, July 17. Interested parties can register on NCUA’s website.



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