Streifel Implores Credit Unions to Gauge Impact of Risk-Based Capital Proposal
April 8, 2014
April 8, 2014
Susan Streifel is convinced that the future of the credit union system rests on the NCUA getting its proposed Risk-Based Capital rule right. Getting it wrong, she says, “will hinder growth, affect service to members and cause us to send our members to our competitors.”
That’s why Streifel, as the president and CEO of Woodstone Credit Union in Federal Way, is using online calculators and other tools to assess the long-term impact of the proposal. And it’s why, as the vice chair of CUNA’s executive committee, she’s urging other credit unions to follow her lead.
“There’s certainly a need for comprehensive capital reform,” Streifel says, “but I’m at a loss as to what exactly the NCUA is trying to accomplish with this proposal. I would expect the NCUA or any state regulator to require good risk-management programs, but a one-size-fits-all rule will do nothing more than add another layer of regulation.”
All of the available data shows that credit unions performed relatively well during the last recession, Streifel says, and there’s a reason for that.
“We have been charged with managing all of the components of risk — interest rate, collateral, concentration and repayment,” she says. “That’s just good business. And our business plans and measurement tools reflect these management practices.”
But all of that compliance information is available to examiners now, Strefiel says. So rather than simply add another layer of regulation, “I would support a more comprehensive plan that includes a review of the current leverage ratio, adds an accurate approach to evaluating risk and provides access to supplemental capital.”
Unless a more comprehensive plan is adopted, Streifel says she fears a repeat of what happened when credit unions entered the mortgage lending market several years ago and the NCUA limited the amount of home loans that credit unions could hold on their balance sheets.
“Once a credit union reached those thresholds, we raised our rates (one way to control growth) and sent away members who wanted to finance their homes through us,” Streifel says. “Today, many years later and after credit unions spent millions of dollars on marketing, many members still do not know that we have mortgage loans.”
“We are supposed to be in the business of supporting the needs of our members in a balanced way,” she says.
Streifel says that Woodstone is just beginning to assess the impact of the NCUA’s Risk-Based Capital proposal. Like other credit unions, Woodstone’s capital is strong, she says, and the credit union is in a “great position to do great things for our members,” including an expansion of member business lending programs.
“But I won’t rest easy without fully understanding the impact of the proposal on the long-term future of our business,” Streifel says. “So today, we are focusing on three things: what our numbers are today under the ‘new’ proposal, what they will be at the end of our three-year balance-sheet growth plan, and what they would look like based on our earnings growth plan.”
Every credit union should be doing exactly the same, Streifel says, using the resources available at CUNA’s online Risk-Based Capital Action Center. Just this week, an improved calculator was added to the site that automatically loads a credit union’s data and quickly gauges the impact of the NCUA proposal over time.
“Please join me in using the resources available on CUNA’s website,” Streifel says. “The future of the credit union system rests on the NCUA getting this right. Let’s all play our part in making sure that happens.”
Questions about this story? Contact Gary M. Stein: 503.350.2216, firstname.lastname@example.org.