WASHINGTON (5/22/14)--With just four business days remaining for stakeholders to comment on the National Credit Union Administration's risk-based capital (RBC) proposal, the Credit Union National Association shares several key points to assist credit unions, credit union leagues and other stakeholders in finalizing their own comments. CUNA will be circulating its detailed letter to association leaders prior to the comment deadline.
CUNA believes the financial health of the credit union system now and during the financial crisis demonstrates that the NCUA proposal is not justified.
CUNA also believes that while the current RBC rules are serving credit unions adequately, they understand that the NCUA is determined to move forward with a proposal. In light of that, CUNA will urge a number of key changes for any new proposal.
CUNA is opposing the proposal's 10.5% requirement for a well-capitalized credit union, stating that this number is unnecessary and will result in too much capital and dramatically limit credit union growth in the long term. This will affect credit unions' ability to serve their members and communities.
CUNA also believes that the economic impact of the proposal will be more detrimental than the NCUA has indicated.
Approximately 1,000 credit unions would be affected, based on a conservative estimate, requiring them to raise between $3 billion and $4 billion in new capital and collectively, credit unions' buffers or margins above being well capitalized would decline by $7.6 billion.
CUNA believes that there is no reason for credit unions to feel comfortable with the reduction in their buffers.
While CUNA does not support the proposal, given strong support for RBC at the agency, CUNA does not believe it is in its members' best interests to simply demand the proposal be withdrawn and will be recommending a comprehensive set of recommendations to dramatically improve the proposal, help identify the relatively few credit unions that may need to hold more capital without unduly burdening all other credit unions and condemning them to stagnation by overcapitalization.