New CUNA Video Says NCUA’s Risk-Based Capital Proposal Could Hinder Future Growth

CUNA’s senior staff and the credit union CEOs who make up its executive committee express their concerns about the NCUA’s Risk-Based Capital proposal in a new video that makes an eloquent plea for credit unions to add their voices to the national debate.

The 10-minute video doesn’t question the need for comprehensive capital reform, and it acknowledges that many credit unions may have already used the calculators in CUNA’s Risk-Based Capital Action Center and decided that the NCUA proposal won’t negatively affect them. But the video paints a clear picture of what the proposal can mean to credit unions’ future growth, and to their ability to meet the needs of members.

“The risk right now is that it doesn’t impact a lot of credit unions. We’re all pretty well capitalized, and it’s a little easy to be complacent about what the implications are,” says Dennis Pierce, CUNA’s board chair and the CEO of CommunityAmerica Credit Union. “But I think the challenge is not so much today, as what it will do to us going forward from a business perspective.”

If implemented as written, CUNA says, the NCUA proposal would require credit unions to hold as much as $7.3 billion in additional capital. That’s a pretty big price tag, the video says, for a movement that — under the current system — withstood the worst financial crisis in 80 years.

And it’s a requirement, says Woodstone Credit Union President/CEO Susan Streifel, that could have a major impact on how credit unions do business in the future.

“If this proposal is adopted, we will really have to calculate our decision-making differently than we’re doing today,” says Streifel, who is also vice chair of the CUNA board. “Our capital is strong. But when it comes to the growth of our business, which equates to service to our members, (the proposed rule) is going to hinder our ability to meet the needs of our community.”

“Every time that I have to make a decision that’s limiting, because of another regulation, I’m sending my members down the street to my competitors.”
— Susan Streifel, president/CEO,
Woodstone Credit Union

The reality, Streifel says, is that Woodstone and other credit unions must compete for business in a crowded and competitive financial marketplace. “Every time that I have to make a decision that’s limiting, because of another regulation,” she says, “I’m sending my members down the street to my competitors.”

In the video, CUNA Senior Vice President Mary Dunn and Chief Economist Bill Hampel use a series of charts and graphs to explain the proposal’s implications. In addition to Pierce and Streifel, they’re joined by board members Rodney Staatz and Maurice Smith, who say those implications include the possibility of lower dividends and higher loan rates for members.

Another possibility, Smith says, is that credit unions may have to consider “a rationing of services. With this regime of risk-based capital,” he says, “we’d basically have to find a way to slow our growth down.”

The answer, the video argues, is a comprehensive capital reform package that also includes access to supplemental capital, so that credit unions can continue to grow. To that end, the video renews CUNA’s call for individual credit unions to gauge the proposal’s specific impact and then submit detailed comments to the NCUA.

CUNA’s Risk-Based Capital Action Center includes the new video, as well as a recording of this week’s “Can It Be Fixed?” webinar. On the site, credit unions can also:

  • Use Risk-Based Capital calculators from CUNA and the NCUA to determine how the proposal would affect their risk-based capital ratio — both now and in the future;
  • Learn more about the proposal in detailed articles; and
  • Use templates as a framework for comment letters, which must be sent to the NCUA by May 28.

“Just expressing emotion, just expressing your dislike, is not going to do any good,” says Eric Richard, CUNA’s executive vice president and general counsel. “What NCUA really needs to hear is the specific impact on your credit union and what you’re trying to do for your members. The more you can make that particular, the more likely NCUA is to pay attention and to make the rule better.”

Questions about this story? Contact Gary M. Stein: 503.350.2216, gstein@nwcua.org

Posted in Advocacy News, Compliance, CUNA, NCUA.