Sept. 7, 2018

SUPPORT FOR RISK-BASED CAPITAL RULE DELAY AND A SUPPLEMENTAL CAPITAL RULE

NASCUS supports delaying the rule on risk-based capital for one year, and for raising the rule's applicability threshold, but also urges the agency to work with state regulators during that year to develop a supplemental capital framework for insured credit unions. 

ARLINGTON, Va. – In response to NCUA’s proposed changes to the risk-based capital rule, NASCUS has written a comment letter supporting the risk-based capital rule delay – and urging NCUA to utilize the delay to revisit aspects of the rule that remain problematic and to promulgate a supplemental capital rule.

“In some respects, delay of the effective date of the rule might disappoint those credit unions that have spent the past two years preparing to manage their balance sheets to the new regulatory framework, as well as those that have awaited the supplemental capital rulemaking NCUA assured would be completed prior to the effective date of risk-based capital,” NASCUS Executive Vice President and General Counsel  Brian Knight wrote in the association’s official comment letter on the proposal. “However, supervisory guidance has yet to be issued to examiners and industry to assist in implementing the rules and uncertainty remains related to fields 22-46 on the 5300 Call Report intended to capture risk-based capital related information.”  

In calling for a supplemental capital rule, Knight argued that, “NCUA has the authority to define the elements of the risk-based capital ratio” and that including supplemental capital in the risk-based capital numerator could “help protect the National Credit Union Share Insurance Fund from losses by encouraging credit unions to attract additional loss-absorbing forms of capital that they would otherwise forego.” 

Knight further reaffirmed that NASCUS and state regulators are committed to working with NCUA to ensure the final prompt corrective action rules are effective and efficient and noted that “NCUA should leverage state regulator expertise, as mandated by Congress, in reviewing comments to the risk-based capital proposal before issuing a final supplemental rule.”

In general, the NASCUS letter touches on six significant areas:

  • NCUA should delay the risk-based capital implementation and use the additional time to issue a supplemental capital rule simultaneously;
  • NCUA should consult and cooperate with state regulators on the prompt corrective action aspect of the risk-based capital final implementation and supplemental capital rulemaking; 
  • NASCUS supports raising the complex credit union asset threshold;
  • Changes were needed to the Original Complexity Index (OCI);
  • NCUA should consider developing an “off-ramp” for complex credit unions that choose to hold higher capital; and
  • NCUA should revisit the risk weightings during the delay in the effective date.

LINK:
NASCUS Comments: NCUA proposed RBC rule supplement

Information Contact:
Shelton Roulhac, Vice President, Communications, sroulhac@nascus.org  or (703) 528-5974

The National Association of State Credit Union Supervisors (NASCUS) is the primary resource and voice of the state governmental agencies that charter, regulate and examine the nation’s state-chartered credit unions. NASCUS membership is made up of state-chartered credit unions, state regulators and other supporters of the state credit union system. NASCUS is the only organization dedicated to the defense and promotion of the state credit union charter and the autonomy of state credit union regulatory agencies.