NCUA Board Chairman Debbie Matz told Credit Union Timesthere is no reason why a credit union with assets of $10 billion ormore should not be subject to the stress testing rule that otherfinancial institutions are required to follow under the Dodd-FrankAct.

“Our share insurance fund is $11.7 billion, so there are fourcredit unions with assets over $10 billion. Three of those four arelarger than our share insurance fund,” Matz said in an interviewfollowing the NCUA board meeting on Thursday.

“So it's a very significant risk to the fund and there's noreason why a credit union of $10 billion or more should not be heldto the same standard in terms of forward-looking testing that otherfinancial institutions are held to,” she added.

The NCUA's proposed rule would require capital planning andstress testing for credit unions with $10 billion of more inassets. Matz said the rule is essential to the protection of theNCUSIF.

“If credit unions don't have sufficient capital, then they willnot be able to absorb losses and if they are in a vulnerablesituation, they won't be able to survive,” Matz said. “So if acredit union of that size fails it will have a dramatic effect onthe share insurance fund and on the entire credit unionindustry.”

If NCUA's stress test shows that a covered credit union does nothave the ability to maintain a stress test capital ratio of atleast 5% on a pro-forma basis under expected and stressedconditions throughout the nine-quarter stress test period, NCUAwill require the credit union to take steps to enhance capitaland/or may take other supervisory action against the credit union,said the Board Action Memorandum from the October meeting.

“We are recommending that that level of capital be 5% eventhough internationally the level set for banks is 4%,” Matzsaid.

“We're looking for comments on this but I personally feel thisis extremely important not only to those particular credit unionsbut to the entire industry,” she said.

The credit unions that would be required to comply are the $54billion Navy Federal Credit Union in Vienna, Va., the $27 billionState Employees' Credit Union of Raleigh, N.C., the $16 billionPentagon Federal Credit Union in Alexandria, Va., and the $12billion BECU in Tukwila, Wash.

The NCUA's stress tests would be based on the Sept. 30 financialdata.