BOSTON — Former NCUA Board Member Dennis Dollar weighed in on aspeech by current NCUA Chairman Debbie Matz on Friday in which sherevealed new details regarding a proposed risk-based net worth rule under development by the regulator.The proposed rule is expected by year-end.

During a breakout session on mergers at the NAFCU AnnualConference, Dollar broke off topic and said he supports the needfor a rule that would build upon the current 7% net worthrequirement for well capitalized credit unions.

However, he also said he hopes the NCUA will approach the rulefrom both ends, allowing low-risk credit unions more authoritieswhile requiring more net worth of credit unions with more risk ontheir balance sheets.

For example, Dollar said, maybe a credit union that has a lowerrisk profile would be allowed more blanket waivers for member business loans.

Additionally, he pointed out that while smaller credit unionshave less risk and higher net worth, they also generate far less return on average assets than large creditunions.

He shared statistics from the NCUA that revealed as of Dec. 31,2012, credit unions with less than $10 million in assets average14.65% net worth but generated negative ROAA of -0.02%.

Comparatively, credit unions with more than $500 million inassets averaged 10.17% net worth, and presumably have riskierbalance sheets. However, those large credit unions averaged apositive ROAA gain of 1.02%.

“One of the fallacies in the risk-based capital scenario is thatsmall credit unions would almost all be low risk under therisk-weighted calculation, but yet they are all losing ROAA,” hesaid. “Meanwhile, high-risk credit unions are making 1.02%.”

He cautioned against putting so many restrictions on creditunions that take risk but earn good profit margins that they reduceearnings, saying “you don't want to kill the goose that's layingthe golden eggs for credit unions.”

Further, Dollar said, earnings are the only way credit unionscan build net worth.

Also at NAFCU Annual Conference:

• 4 Big Things from Confab
• Becker Calls it a Wrap
• Matz Reveals New Risk Rule
• Thursday in Pictures
• Non-Interest Income Balance
• Berger Promises Training Boost
• CFPB is Good for You
• Beantown Vox Populi
• Wednesday in Pictures
• Non-QMs Offer Opportunity
• Managing Outsourced Collections
• Losing Money at Loan Closings
• New Officers for 2013-2014