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Cheney Report highlights CU concerns on risk-based capital
WASHINGTON (2/3/14)--This week's edition of The Cheney Report underscores that the Credit Union National Association ontinues to analyze proposed risk-based capital regulations, and details some early issues CUNA has found in the National Credit Union Administration's proposal.

Among the areas of concern:
  • Lack of necessity: The impressive way that credit unions came through recent "great recession"--especially compared to other financial institutions--indicates that credit union capital requirements were more than sufficient;
  • Loan concentration measures: The high risk-weights on high concentrations of loans (such as those for business loans) are excessive. In our view, if a credit union has a high amount of business loans in its portfolio, why should the credit union's portfolio be deemed twice as risky as a credit union that has a small amount of business loans?;
  • Treatment of interest-rate risk: IRR cannot be based only on the assets, but has to be considered in terms of matching up to long-term deposits--which is not picked up in the system; and
  • Individual capital requirement: Even if a credit union's risk-based capital ratio is well above the industry average of 10.5 percent, an examiner could--under certain circumstances--assign a higher net worth ratio.
CUNA is working with the CUNA Examination and Supervision Subcommittee, as well as with individual Leagues and the CUNA Lending Council to gather more information and insights, Cheney notes in the Report.

Credit union comments on the proposal will be needed, Cheney adds.

For the full Cheney Report, use the resource link.
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