Listening Sessions Over: Time for Action

Posted On: Jul 23, 2014

Now that the 2014 Listening Sessions are completed, the National Credit Union Administration (NCUA) will be reviewing comments and ideas from the sessions into its work, including the ongoing review of the agency’s risk-based capital rule. Noting that there was “spirited discussion on many topics,” NCUA Chair Debbie Matz said the events were “valuable” and an opportunity for open, frank discussion between regulators and credit unions.

Although the risk-based capital proposal commanded much of the attention from the 400+ participants attending the three sessions, several other issues were discussed, such as:

  • Examiner subjectivity and poor communications,
  • Supplemental capital,
  • The 1% NCUSIF deposit,
  • Reducing regulatory burden,
  • Goodwill calculations under an RBC rule,
  • “Approved ALM System” usage;
  • Long Term Asset to Assets Ratio, and
  • Net worth ratios for “adequate” and “well” capitalized CUs.

Although Matz acknowledged that all the risk weights “should be reviewed, and many lowered,” credit union executives attending the session in Alexandria had differing opinions on the most important to tackle. Linda McFadden, president/CEO of XCEL FCU (NJ), thought that the risk weight being placed on federally backed investments was “ridiculous…obviously NCUA doesn’t have enough faith in the government to back the securities” being used. Noting that credit unions look for “new and innovative ways to give back value to our membership,” St. Jean’s CU (MA) president/CEO David Surface argued that the most important risk weight for the agency to lower would be CUSO equity investments.

Another major concern, expressed by Michael Tucker, president/CEO Of West Virginia Central CU (W.VA), was the idea that NCUA is using the FDIC as a role model for the proposal. He urged MATZ and the NCUA Board to “remember how credit union s are significantly different than for-profits and take that into consideration when they set these rations.”

These comments, coupled with the 2,052 comment letters received by the agency, yielded input that the NCUA will take into account to improve the final risk-based capital rule, according to Matz. Changes already under consideration include lowering the risk weights on investments, mortgages, member business loans, credit union service organizations and corporates, as well as extending the implementation period. Extending the implementation period will allow affected credit unions time to adjust operational plans and balance sheets, while also providing NCUA with time to update the Call Report system and thoroughly train Field Examiners. In addition, the final rule will clarify that determination about a specific credit union’s capital requirements could only be made by the NCUA Board, not by individual credit union examiners.

Matz thanked the commenters and audience members, stating that “…our changes will be based on what we heard. I am confident that NCUA will produce a sensible final rule that meets the requirements of the Federal Credit Union Act and not disadvantage credit unions in the market.”

Source: ncua.gov   

Source: CUNA News Now  

Source: CUNA News Now