NCUA Media Release Confuses Credit Unions (and us!) With The Use of the Word “Extended”
Thursday, a NCUA media release reminded credit unions and other stakeholders that they have until May 28 to submit comment letters to the agency on its risk based capital (RBC) proposal. We commend the agency for reminding credit unions, leagues, and others of this important deadline. We are also glad the agency is taking the calculator down after May 28. The calculator, which indicates a credit union’s net worth and RBC ratios as well as prompt corrective action classification under the proposal, should not be accessible to the public, as it is now. However, despite our concerns that some credit unions will be inadequately capitalized under the proposal, the calculator was not blocked and any member of the public can go onto NCUA’s website and use the calculator to determine any federally insured credit union’s capital adequacy.
Another concern is that the agency’s press release indicated that there will be an “extended” time period for credit unions to come into compliance with the final rule once it is adopted by the NCUA Board.
The release says that “NCUA plans an extended phase-in period for the final risk-based capital rule to allow credit unions enough time to adjust their risk profiles or capital levels, or both, to ensure compliance with the new regulation.” This is really not news and NCUA’s supplementary information accompanying the proposal states that “proposed amendments would go into effect approximately 18 months after the publication of a final rule in the Federal Register.” In other words, NCUA believe 18 months is an extended time period for compliance to be achieved.
But, we don’t think 18 months is nearly enough time for credit unions to prepare for the rule and we don’t think you do, either.
In fact, you will want to consider this: the Federal banking agencies have given their institutions up to 9 years to comply fully with Basel III, the bank version of RBC. If the NCUA RBC is supposed to be comparable to Basel III, how can 18 months be sufficient time for credit unions?
Separate from the needs of credit unions, we think NCUA will also have to have more than 18-months to comply with the RBC rule. It is fair to note that NCUA gave itself until December 31, 2015 to implement its own CUSO rule and reporting system. The CUSO rule was approved by the NCUA Board on November 21, 2013, which means that NCUA gave its staff 25 months to get the agency’s computer system operational while credit unions would only have 18 months to comply with provisions of a rule that will severely impact the operations of credit unions all across the country.
So many concerns, so little time!