Cheney on Risk-Based Capital: ‘If It Ain’t Broke, Don’t Fix It’
CUNA President/CEO Bill Cheney said CUNA remains greatly concerned about the upcoming risk-based capital rule from the NCUA, arguing that credit unions are operating well under the current system.
"Particularly since no one outside of NCUA has seen the proposal, it remains of great concern to us. In our view, the current system for net worth standards (written into the law – unlike that of other financials) is flawed, but credit unions have adjusted accordingly and are doing well. In short: If it ain't broke, don't fix it," Cheney wrote in the latest edition of The Cheney Report.
Cheney predicted that a risk-based capital rule could be proposed as early as next month.
The 7% capital standard under the Federal Credit Union Act would remain the floor requirement. However, credit unions with more than $50 million in assets could be subject to new requirements.
“The result would be a higher cap for credit unions with higher concentrations of risky assets,” said NCUA Chairman Debbie Matz in July.
Credit Union Times asked Matz about the status of a risk-based capital rule proposal on Thursday after the NCUA’s monthly board meeting.
“This is a very complicated rule and we want to be sure to get it right. The idea will be to risk rate the capital so credit unions that are holding riskier capital on their books will have to hold higher capital levels,” she said.
“It’s very complicated. The staff has been working diligently on it and they simply needed more time and we encouraged them to take the time that they need because we want to make sure they do get it right,” Matz added.
Board Member Michael Fryzel said he expects the rule to come before the board in the first quarter of 2014.