Time’s Up: Comments on Risk-Based Capital Proposal Must Reach NCUA by Wednesday

Tomorrow is the deadline for credit unions to comment on the NCUA’s Risk-Based Capital proposal, and John Trull has a message for anyone who has waited until the last minute: Do it now. Or, at the very least, add your name to the letter being submitted by the Northwest Credit Union Association.

“The proposed rule lacks sufficient justification, ignores two key statutory requirements, blatantly disregards Congressional intent and skips the standard regulatory practice of Advanced Notice of Proposed Rulemaking,” says Trull, the Northwest Credit Union Association’s director of regulatory advocacy. “There is also a litany of fundamental policy flaws that could have the unintended consequence of adding risk to the credit union system.”

If implemented as proposed, Trull says, the NCUA proposal would create volatility and instability throughout the credit union system, and have a negative impact on low-income-designated and grandfathered credit unions’ ability to offer business loans.

“That should create concern throughout the credit union movement,” Trull says.

It certainly concerns former Speaker of the House Newt Gingrich, who submitted his own letter Friday to the NCUA, calling the Risk-Based Capital proposal “extraordinarily troubling.” Gingrich, a Republican who represented the 6th District of Georgia and worked to amend the Federal Credit Union Act in 1998, is just the latest U.S. legislator to express his concerns to the NCUA.

Earlier this month, former Sen. Alfonse D’Amato (R-N.Y.), who chaired the Senate Banking Committee from 1995 to 1998, told the agency that it would exceed its legal authority if it adopts the proposal as written. And more than 320 members of Congress urged “changes and clarifications” to the proposal in a letter authored by Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.)

The NCUA’s proposal would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured “natural person” credit unions with more than $50 million in assets.
“This is not what Congress contemplated NCUA should do to establish a Prompt Corrective Action regime,” Gingrich wrote in his letter, adding, “We never intended, nor even comprehended the possibility of higher risk-based capital requirements for well-capitalized credit unions than those that apply to adequately capitalized credit unions.”

Many Northwest credit unions have already submitted their letters, and 24 have been posted by the NCUA. That includes comments from Advantis, Clackamas Federal, iQ, Maps, North Coast, Northwest Community, Numerica, O Bee, Oregon Community, Oregonians, OnPoint Community, OSU Federal, Pacific Cascade Federal, Pacific NW Federal, Peninsula, Rogue, Spokane Firefighters, St. Helens Community Federal, Sunset Science Park Federal, Tri- Cities Community Federal, United Advantage NW Federal, United Health Services, Unitus Community, and Verity.

Several of the letters are included on a resource-rich NWCUA Web page that includes key talking points and a draft letter that credit unions can use as a starting point to craft their own messages. The page also includes links to the NCUA’s Risk-Based Capital calculator and to CUNA’s RBC Action Center, which contains more information and tools.

Credit Unions Can Add Their Names to the NWCUA’s Comment Letter

Credit unions that can’t meet the NCUA’s May 28 deadline have another option.

“If you are unable to send a letter, please sign on to the Association’s RBC letter,” Trull says. “All we need is a digitally scanned copy of your signature. That will add weight to our letter, and it will increase our response rate.”

Digital signatures can be sent to Trull at jtrull@nwcua.org. For more information about the Association letter, contact Trull at 503.350.2209.

But in any case, it’s imperative that credit unions act by tomorrow.

“The comment deadline remains May 28 — that is hard and fast,” says NCUA Board Member Rick Metsger, who has signaled his willingness to consider changes to the rule. “A credit union must meet that deadline to become a part of the official record on this historic proposal.”

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

Posted in Advocacy News, CUNA, Federal, NCUA.