RBC Changes Revealed

Posted On: Jun 27, 2014

The first of three NCUA “Listening Sessions” took place in Los Angeles yesterday, and it appears that NCUA may reduce the risk weights on five specific asset classes in its final risk-based capital rule. According to NCUA Chairman Debbie Matz, mortgages, member business loans, investments, CUSOs and corporates will be reviewed, and their risk weights will be “presumably lowered.”

Matz stressed that everything is on the table to consider changing in the final rule. During the discussion, many credit union executives expressed concern that the proposed RBC rule includes compliance risk and interest rate risk – not just credit risk. Matz noted that the Federal Credit Union Act statutorily tasks the NCUA to consider all material risks to the industry, while the banking act only requires regulators to address credit risk.

The definition of a complex credit union, currently based on asset size, was also a concern to attending executives. It was explained that when NCUA researched the rule, credit unions with more than $50 million in assets were most likely to offer a full array of products and services. However, NCUA is considering raising the asset threshold level that defines small credit unions, which are exempt from the risk-based capital rule. That limit was increased in 2013 from $10 million to the current $50 million.

Matz took exception to remarks that Congress opposes the rule, stating: “Most members of Congress think risk-based capital is an important regulatory tool. They just want to make sure it’s done in a way that enables credit unions to continue doing the fine business they do.” However, an extension of the comment period is not under consideration; significant changes to the rule will trigger a second comment period.

Source: Credit Union Times