Trades Stress on Stress Tests
CUNA expressed concerns on Monday over the cost of complying with the NCUA’s proposed stress test rule, which would affect the four largest credit unions in the nation.
“The agency [NCUA] will be conducting the stress testing and it’s going to cost, according to them, $4 million just in the first year to conduct this stress testing – that’s $1 million for each one of them,” said Mary Dunn, CUNA senior vice president and deputy general counsel on a conference call Monday.
Dunn added, “We think it’s really unclear – where did this number come from? Why is it going to cost so much and why is it necessary that the agency actually be the entity that conducts the stress testing?”
Dunn said the NCUA continues to indicate that they have talked to the four credit unions with more than $10 billion that are going to be subjected to stress testing from NCUA.
“We also are going to be talking to those credit unions because there are a number of concerns about the stress testing proposal,” said Dunn.
She said NCUA Board Member Michael Fryzel made a “really good point” at the October board meeting when he mentioned that these credit unions already conduct their own stress testing. When Fryzel asked what would happen if the test results conflict, Dunn said he did not receive a “great answer.” Scott Hunt, director of the Office of National Examinations and Supervision, said the NCUA's test would supersede a credit union's test.
Paul Gentile, executive vice president of strategic communications and engagement, downplayed the importance of the superiority of the NCUA's stress tests, saying CUNA does not support the need for the new regulation at all.
“Additionally, the proposed rule on stress testing is put forth by the agency even though the NCUA is aware that the largest credit unions already conduct stress testing on their own,” he said.
“All four credit unions that would be affected by this rule already do stress testing. We don’t think the cost of stress testing is justified and that NCUA can monitor credit unions’ own stress testing and evaluate them without having to implement a new regulation that is expected to cost $4 million in year one,” Gentile told Credit Union Times on Monday.
NAFCU shares similar concerns about the rule.
“While NAFCU understands NCUA’s policy goals, two of the NCUA’s actions today are symptomatic of the agency’s regulatory plunge into areas where new regulations are simply unnecessary. The liquidity rule, for example, was issued despite the fact that credit unions already have access to multiple sources of liquidity,” NAFCU CEO Dan Berger said last week.
In an interview with Credit Union Times on Thursday, NCUA Chairman Debbie Matz stressed the importance of the proposed stress test rule.
“Our share insurance fund is $11.7 billion, so there are four credit unions with assets over $10 billion. Three of those four are larger than our share insurance fund,” Matz said after the NCUA board meeting on Thursday.
“So it’s a very significant risk to the fund and there’s no reason why a credit union of $10 billion or more should not be held to the same standard in terms of forward-looking testing that other financial institutions are held to,” Matz said.
The credit unions that would be required to comply are the $54 billion Navy Federal Credit Union in Vienna, Va., the $27 billion State Employees’ Credit Union of Raleigh, N.C., the $16 billion Pentagon Federal Credit Union in Alexandria, Va., and the $12 billion BECU in Tukwila, Wash.
The NCUA’s stress tests would be based on Sept. 30 financial data.