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Matz Talks Capital Reforms In NCUA Report
ALEXANDRIA, Va. (8/27/13)--The 15-year-old, one-size-fits-all credit union capital regime "is outdated and insufficient," and is "simply not enough to protect the credit union industry during a serious crisis," National Credit Union Administration Chairman Debbie Matz reiterated in the August edition of The NCUA Report.

The NCUA editorial mirrors remarks Matz made in July, when she said credit unions "need a flexible, forward-looking standard that makes sense for today and tomorrow."

The current 7% leverage capital standard was set in 1998, and recent financial crisis and industry changes mean a newer approach is needed, she said.

So, what's the right amount of capital then, credit unions may ask? The answer, Matz said, is complicated. "The answer will vary from credit union to credit union. But just because it's complicated doesn't mean we should shrink away from finding a solution. On the contrary, it underscores just how important it is to build a new risk-based capital framework for credit unions," Matz wrote.

A developing NCUA plan could result in higher capital levels for credit unions with high concentrations of risky assets. The current 7% leverage capital standard, which is required by the Federal Credit Union Act, would remain the floor. However, Matz said, credit unions with assets of $50 million and above could be subject to improved risk-based capital requirements to better correlate required capital levels to risk.

As it moves toward a final rule, the NCUA will give credit unions and other stakeholders plenty of time to comment on the proposed changes. "It's important for us to get it right. With your help, we will. And with your help, the entire credit union industry will be stronger," Matz added.

The Credit Union National Association has supported net worth standard changes that reflect risk better than the present approach but that will not simply add net worth requirements to the current system. CUNA has also been urging the agency to adopt a more productive approach to rulemaking that focuses on problem areas rather than issuing rules with blanket applicability, regardless of the credit unions level of risk. CUNA's Examination and Supervision Subcommittee, which has met with NCUA officials on the capital ratio issue, will be talking again today via telephone conference call on risk based net worth.

For the full NCUA Report, use the resource link.
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The NCUA Report

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