NCUA to Propose Revised RBC Rule, Open Second Comment Period

“Even though the changes we are developing would pose less of a regulatory burden than the original proposal, some changes would affect the rule’s structure. Based on discussions with NCUA’s general counsel, I now believe it is prudent under the APA to ask for additional comments.”
— NCUA Board Chairman Debbie Matz

National Credit Union Administration (NCUA) Board Chairman Debbie Matz announced today that she will request a new risk-based capital (RBC) proposal, and that revisions to the original proposal will be significant enough to trigger a new comment period.

According to Matz, the amended proposal will include a longer implementation period and revised risk-weights for mortgages, investments, member business loans, credit union service organizations and corporate credit unions, among other changes. The revisions reflect a wave of feedback from credit unions, legislators and other stakeholders.

“We applaud the agency’s leadership in their response to the outpouring of feedback from credit unions and legislators,” said NWCUA President and CEO Troy Stang. “I trust the agency’s leadership will diligently take the feedback from the industry to heart and utilize all the tools at the agency’s disposal to present a much more appropriate rule in this second round.”

The NWCUA mobilized a full advocacy press to urge the NCUA to revisit the rule and open up a second comment period, including a letter to the NCUA, an eight-minute video highlighting the challenges the original proposal would cause for credit unions (part for which can be seen online), and face-to-face meetings with both legislators and NCUA officials. Nearly a third of Northwest credit unions filed comments or signed onto letters during the original comment period. The entire Oregon congressional delegation and the majority of Washington’s wrote letters or signed onto letters expressing similar concerns.

Matz said that the new proposal would be structurally different from the original, triggering the second comment period. “I have always said that another comment period would only be appropriate if we decide to make significant structural changes that would exceed the parameters of the Administrative Procedure Act,” she said. “Even though the changes we are developing would pose less of a regulatory burden than the original proposal, some changes would affect the rule’s structure. Based on discussions with NCUA’s general counsel, I now believe it is prudent under the APA to ask for additional comments.”

According to Stang, RBC regulations impact the fundamental value proposition of credit unions, and so must be developed with care. “There has never been a more important proposed rule from the regulator to finalize and implement in a correct manner,” said Stang. “The appropriate treatment of capital standards in a member-driven, cooperatively structured institution is paramount to the credit union charter being allowed by its regulator to produce the intended member value a credit union is inherently structured to deliver. I believe this can be done in a safe and sound manner while meeting the proper standards in managing to the share insurance fund.”

NCUA Vice Chairman Rick Metsger praised Matz’s decision to consider structural changes to the proposed rule. “As I have often said,” said Metsger, “I believe interest rate risk is important and must be addressed in the risk-based capital rule, but it should be addressed separately from credit risk. Weighting credit risk and interest rate risk with a single numerical value created conflicts that ultimately made it difficult to accurately weigh the risk of either.”

“While an amended proposed rule has not been drafted,” he continued, “I believe that when people do review it, they will conclude that we have both listened to — and heard — the comments that were submitted during the initial comment period. Those who weighed in thoughtfully on the original proposal will see the agency has been responsive to fact-based analysis.”

Metsger will speak next week at the NWCUA’s Amplify Convention in Spokane, delivering the opening keynote on the afternoon of October 7. You can register for Amplify online.

Questions about this story? Contact James Pearson: 206.340.4790, jpearson@nwcua.org.

Posted in Advocacy News, NCUA.