Risk-Based Rule Hurts MBL Biz Model: CU CEO
The CEO of a $1 billion credit union told Credit Union Times the NCUA’s proposed risk-based capital rule would hurt his business model.
“The capital requirements for credit unions with concentration in member business loans is way too high at 14% – higher than what’s required for commercial banks,” said Mark Holbrook, CEO of the $1 billion Evangelical Christian Credit Union in Brea, Calif., noting that unlike banks, credit unions have no means of raising alternative capital.
The risk-based capital rule proposed by the NCUA at January’s monthly board meeting rates a credit union with more than $50 million in assets adequately capitalized if it maintains a risk-based capital ratio between 8% and 10.49%, and a net worth ratio of 6% to 6.99%. A risk-based capital ratio above 10.49% and a net worth ratio above 7% would designate a credit union as well capitalized.
School Systems CEO Mark Hatfield told Credit Union Times that the existing risk-based capital requirements could be improved greatly.