Removing Barriers Blog

CUNA-backed RBC Delay Provision Passes Committee
Posted May 23, 2018 by CUNA Advocacy

The House Financial Services Committee met to markup several bills, including H.R. 5841, the Foreign Investment Risk Review Modernization Act of 2018 which contains the risk-based capital provision.  Prior to the Committee's markup, CUNA sent a letter of support for Section 701 of H.R. 5841.

The provision passed the Committee by a vote of 53-0.  Specifically, the provision would delay the effective date to January 2021. It is currently scheduled for January 2019.

“Credit unions throughout the United States have expressed their significant concerns regarding the NCUA’s risk-based capital standards for credit unions. Specifically, many of these concerns pertain to whether NCUA has legal authority to impose the requirements,” the letter reads. “In addition, credit unions have a particular concern with risk-based capital standards for the purpose of determining whether a credit union is well-capitalized as the Federal Credit Union Act permits the NCUA to impose a risk-based standard for the purpose of determining capital adequacy only.”

CUNA highlighted the additional regulatory burden imposed by the rule, and questioned whether the cost is justified. CUNA also noted that the current Prompt Corrective Action system served well during the financial crisis.

“During consideration of the Dodd-Frank legislation, Congress explicitly excluded credit unions from risk-based capital requirements, in recognition of the credit union difference and the fact that America’s credit unions—nearly half of which employ fewer than five full-time employees and hold less than $20 million in assets—were neither responsible for nor participatory in the risky financial activities that predicated the 2008 financial crisis. The risk-based capital rule continues to be a solution in search of a problem,” the letter reads.