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Metsger: Balance in capital, risk key to effective regulation
ALEXANDRIA, Va. (6/26/14)--National Credit Union Administration board member Rick Metsger expressed his support for a bill that would allow credit unions to have access to supplemental capital. Speaking to the Massachusetts Credit Union League Monday, Metsger echoed support given by NCUA Chair Debbie Matz for the Capital Access for Small Businesses and Jobs Act (H.R. 719). Metsger also spelled out several adjustments he would like to see in the agency's risk-based capital (RBC) proposal before it is finalized.

Click to view larger image National Credit Union Administration board member Rick Metsger, addressing the Massachusetts Credit Union League, details several adjustments he would like to see in the agency's risk-based capital proposal before it is finalized. (Massachusetts Credit Union League photo)
Regarding the NCUA's RBC plan, Metsger said there is "significant review, analysis and revision ahead" before the NCUA's proposed RBC rule could be made final. He said he has concluded that the following areas already require adjustment:
  • Lengthening the phase-in period for any final rule;
  • Clarifying that only the NCUA board, not examiners, can raise individual credit unions' capital requirements;
  • Adjusting the risk weights for investments in credit union service organizations and corporate perpetual capital;
  • Modifying the risk weight for cash at the Federal Reserve; and
  • Altering risk weights when other federal agencies have provided guarantees.
Metsger said he is looking for better ways to deal with interest rate concentration risk, and that he will continue to evaluate comments and analysis of those components.

He also recommended that supplemental capital should be permitted by regulation for RBC purposes for any federally insured credit union. The Credit Union National Association  is a proponent of this idea.

The Capital Access for Small Businesses and Jobs would allow credit unions--beyond those with low-income designation--to access supplemental capital.  CUNA strongly supports this bill and similar bills to broaden credit union access to capital.

"H.R. 719 would provide credit unions with an additional tool in their toolbox," Metsger told his credit union audience. "With Congress recognizing the statutory barriers credit unions face in raising additional capital, enactment of this bill would provide a two-pronged approach to enhancing credit union capital with both regulatory and congressional action." He added, however, that the bill is not a panacea.

Metsger also added his view that the bill is not a prerequisite for adoption of a risk-based capital rule as is being currently being considered by the NCUA.

The regulator also said he has asked the NCUA's Office of Public and Congressional Affairs to continue to educate lawmakers about the need for supplemental capital. Matz supports the bill and has said so in a letter sent last year to Rep. Peter King (R-N.Y.), the bill's sponsor. (See related story: Sen. Merkley says NCUA RBC rules add complexity without benefit: Listening Sessions start. )

Paul Gentile, president/CEO of the Massachusetts Credit Union League, commented, "We appreciate NCUA board member Metsger recognizing the importance of supplemental capital and the need for the RBNW (risk-based net worth) proposed rule to be revised."

Gentile added, "The fact that credit unions have more capital today than they did when the recession started means credit unions should not be burdened with excessive capital requirements. They should be encouraged to continue to give members a good deal, not hampered by capital requirements that don't effectively reflect the risk in the system." Gentile is also president of the New Hampshire and Rhode Island state credit union associations.


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