Last week while discussing RBC calculators we mentioned that your capital conclusions will be worthless if an NCUA examiner decides that your credit union needs additional capital. NCUA calls this proposed requirement individual minimum capital requirements (IMCR). NCUA’s RBC proposal states that “NCUA may establish increased individual minimum capital requirements upon its determination that the credit union’s capital is or may become inadequate in view of the credit union’s circumstances.”
NCUA’s proposal also states IMCR is required because the “appropriate minimum capital levels for an individual credit union cannot be determined solely through the application of a rigid mathematical formula or wholly objective criteria. The decision is necessarily based, in part, on subjective judgment grounded in agency expertise
.” Does that mean that NCUA does not trust itself to quantify your credit union’s risk using math, so staff reserve the right to require even more capital to cover what they may have missed in the examination process?
NCUA allows a credit union to appeal IMCR to the Agency’s board. However, the mechanics of this process are far from clear in the proposal. In any event, if supervisory appeals are any indication, an appeal is a steep road to climb for a credit union. According to NCUA’s Inspector General
, 100% of supervisory appeals to the Supervisory Review Committee are denied, and NCUA doesn’t report on how often they side with a credit union in an appeal.
Math is math. Credit unions deserve the certainty of knowing that if they meet the requirements set out in the rule NCUA will agreethey have enough capital. NCUA should eliminate IMCR from this proposal in final form.