By David Morrison May 15, 2014
DETROIT – CUNA Deputy General Counsel Mary Dunn urged executives attending the Inclusiv 40th annual conference to write NCUA about the agency's proposed rule on risk-based capital.
The NCUA proposed credit unions of more than $50 million in assets comply with risk-based capital evaluation and requirements. While Dunn acknowledged that only some executives at the conference come from credit unions of that size, all credit unions need to be concerned about the new rule.
“I know only a few people in this room come from credit unions that might fit into this category,” Dunn said, “but even if you don't fit that category today, you will likely fit it in the future and you need to make your voices heard.”
Dunn criticized the proposal for requiring credit unions even currently considered well capitalized to carry even greater capital and because the agency lacks the authority of the Federal Credit Union Act for the rule.
“We agree that (the) NCUA has the authority under the act to propose a rule with risk-based capital requirements,” Dunn said, “but they are also supposed to take into account that credit unions do not have the same sorts of access to the capital markets that banks have to raise necessary capital, and this proposed rule does not do that.”
Dunn said 28 low-income designated credit unions are at $40 million in assets or more; half currently have assets of more than $50 million.
The new capital requirements would mean, as an industry, credit unions will have to set aside an additional $7 billion in capital to comply with this rule, Dunn said.
“That means $7 billion not available for loans, $7 billion not available for financial education or member service,” she added.
She also criticized the proposal with the observation credit unions performed well during the recent financial crisis and have not been known for taking risks with their capital, though she acknowledged the agency had been criticized for the way it has handled risk-based capital previously and that other financial regulators have acted to increase at risk capital requirements.
“We have a goal of one thousand letters,” Dunn told the group. “We are making progress but there is still a lot of work to do.”
She also reported that 345 members of Congress had agreed to send a letter to NCUA opposing the rule as proposed.