Oct. 16, 2015
RBC OK’d, but without supplemental capital
On a 2-1 vote (with Board Member J. Mark McWatters dissenting), the NCUA Board Thursday approved a risk-based capital (RBC) final rule that is significantly improved from that first proposed nearly two years ago. But the final rule still represents a missed opportunity in at least one area – supplemental capital. In our comment letter last spring to the agency on the proposal that became final Thursday, NASCUS offered more than a dozen refinements – but generally stated support for the proposal. Among the refinements NASCUS sought: ensure the rule is “right-sized” for the credit union system (so as not to put credit unions at a disadvantage in the marketplace), and address the counting of supplemental capital toward risk-based capital. We had urged the agency to take the opportunity of the RBC proposal to “strengthen the utility of supplemental capital for credit unions, while the system advocates for a wider legislative solution that will redefine the net-worth ratio.” NCUA, however, in its preamble to the final rule, explained that it would have to issue a separate notice of proposed rulemaking with specific criteria and requirements before approving a final rule on supplemental capital. The agency stated that “therefore, there is no need to delay release of this final rule” to work on a supplemental capital component. In our view, now is an opportune time. As we stated in our comment letter, NCUA could “drop a placeholder in this rule that would include supplemental forms of capital, as defined by the NCUA Board and approved by the NCUA or appropriate state supervisory authority, in the risk-based capital numerator.” But there is hope on the horizon for supplemental capital – see the item below.
But there is hope for supplemental capital’s future
While the NCUA Board chose not to take action on supplemental capital for now, there is hope for the future. In her comments about the final rule, Chairman Debbie Matz said at Thursday’s meeting that the board plans to “address supplemental capital as soon as possible in a new proposed rule.” She added “the new proposed rule will present stakeholders with a specific outline of our plans to count supplemental capital, and provide opportunities for further comments.” Both Vice Chairman Rick Metsger and Board Member J. Mark McWatters also voiced support for a supplemental capital rule. We welcome the positions of all of the board members, and urge them to listen to those who already regulate credit union supplemental capital rules – state credit union supervisors. In fact, a suggestion made by Board Member McWatters would provide the venue for doing so. McWatters urged the agency to set up an “advisory committee” of stakeholders on supplemental capital, to consult with the agency as it proceeds with a rulemaking. That’s a terrific idea – and state regulators who have first-hand experience supervising credit unions and other financials with supplemental capital authority should be part of the group. But “as soon as possible” could yet be a while. In a briefing following the board meeting, NCUA’s Fazio would give no timetable for a proposed rule, adding that the agency would likely take its time in developing a proposal. Further, as Chairman Matz pointed out, ultimately the effective date of a final supplemental capital rule would coincide with the effective date of the new risk-based capital rule in 2019. In other words, it will likely be three more years before supplemental capital comes to pass.
Key dates for the new rule -- and a ‘revamp’ for the call report
The final RBC rule has an effective date of Jan. 1, 2019, which coincides with the full phase-in of FDIC’s risk-based capital measures that same year. In a follow-up briefing, NCUA Office of Examination and Insurance Director Larry Fazio said that examiner guidance on the new rule would be completed by the beginning of 2018. (He also noted he would be sending a message to all examiners – Thursday or today – underscoring that the new RBC rule doesn’t go into effect for three more years.) In the meantime, he said, NCUA will also be working to “revamp” the 5300 Call Report, an activity which will get underway early next year and which will include adding data items necessary to compute the risk-based capital ratio. He said the agency was aiming to complete the call report changes by the end of 2017. Separately, Fazio said the agency will be looking at the “whole call report,” primarily at reorganizing it – not necessarily adding data, and quite possibly dropping some.
Summit 2015 kicks off next week
That noise you’ll hear from down south beginning next Wednesday (Oct. 21) will be state credit union system supporters as they celebrate the 50th anniversary of NASCUS, and get down to business in discussing and analyzing the key issues facing state credit unions. With more than 20 speakers, nine hours of general sessions, up to seven issues briefings and dialogs, six separate breakout sessions, numerous networking opportunities and a terrific location -- New Orleans – there will be quite a buzz. Watch this space next week for a report on the meeting, as well as nascus.org and our Twitter feed for daily and hourly reports.
BRIEFLY: CUBroadcast features Lucy Ito
NASCUS President and CEO Lucy Ito is a guest this week on CUBroadcast, a web-based video program that features interviews with credit union leaders and personalities. In the segment, part I of which is posted today (Oct. 16), she discusses with host Mike Lawson (at left in image) the state credit union system, conversions and field of membership, the overhead transfer rate. Check it out today!
Patrick Keefe, NASCUS Communications, email@example.com or (703) 528-5974