While we often focuson the challenges facing credit unions today, it's easy to glossover just how well positioned the system is in the financialservices marketplace. Credit unions not only have tremendousfinancial strength, but also a powerful innovative and cooperativespirit that will make credit unions a catalyst for improvingconsumers' financial lives for years to come.

Credit unions shined throughout the recession and have emergedon the other end stronger than ever. Credit unions had a record11.5% capital in 2006, the year before the economic crisis started,and we now stand at more than 10.5% and are expected to surpass 11%by year-end.

We could very well end 2014 at a record level in capital.

We've seen the system manage a corporate credit union crisisthrough grit and commitment to the cooperative system. Creditunions fought through a front-end loaded corporate assessmentsystem. Although the NCUA had 13 years to spread out theassessments, the agency strategically decided to put more of theburden in the early years, years where credit unions werestruggling with a crippling economy.

Still and all, credit unions weathered the storm.

Credit unions outpaced banks in lending during the recession.Credit unions found new ways to innovate and are now leaders inserving consumers remotely with affordable, high-quality financialproducts. Credit unions' commitment to emerging Hispanic marketsand credit unions' focus on meeting the challenges of theunderserved is leading edge.

We are stronger than ever, yet we face maybe our toughest foe todate — excessive regulation. Credit unions have proven they canmanage through tough economies. Credit unions can deal withchanging demographics. Credit unions have mastered utilizing newtechnologies to deliver a better member experience. The challengeof excessive regulation may be more daunting than all of thesechallenges combined. If credit unions are being regulated to thepast economic crisis, one that we may never see again, ourprospects for helping consumers improve their financial lives todaywill continue to be challenged.

Already the CFPB's qualified mortgage rule has changed the waymany credit unions approach mortgage lending. There are now boxesinto which applicants must neatly fit to get the types of mortgagesthe CFPB wants to see.

Credit unions have never been about cookie-cutter financialservices. Working with our members' unique challenges has been athing of pride for credit unions. Now it's being called intoquestion because of a regulatory framework that is increasinglylooking to box-in the product set of financial institutions.

While the CFPB has publicly lauded credit unions for not causingthe mortgage crisis, it has failed to use its authority to exemptcredit unions from many of its new rules that don't fit our systemand hurt members. Did credit unions really need to be harnessedwith burdensome international remittance rules if they do more than100 international remittances?

Of course not.

It has led to many CUs leaving that business and consumerssuffer by having one less option. The QM rule will see many creditunions get out of or change the way they offer mortgages.

That brings us to one of the most potentially impactful proposedregulations the credit union system has ever seen — the NCUA's RiskBased Net Worth proposal. Make no mistake, this is not anoverreaction, the RBNW proposal will have lasting impact if it isnot significantly altered. I have tremendous respect for the roleNCUA has to play in regulating the innovative, dynamic credit unionsystem that puts serving members above anything else, but NCUA mustin turn respect the system it is regulating.

The NCUA has been hard at work in recent years, promulgatingregulation after regulation, many, in fairness, in response toDodd-Frank. This latest RBNW proposal is far and away the mostvital because it will essentially allow the NCUA to “manage” creditunion growth. The NCUA will determine how deep a credit union getsinto certain loan categories. It will be able to manage investmentmodeling. It will manage investment in new products a credit unionmay make in CUSO-driven offerings. It's a proposal heavily weightedon interest rate risk versus credit risk.

While it is true that the proposed weightings on mortgages,business lending and others are not much different than Basel, theNCUA's added focus on interest rate risk and concentration risk,which Basel does not address, puts the brakes on key areas ofcredit union growth.

Many say that as a system we should not fight the concept ofrisk-based net worth. I agree. It is helpful to know where the mostrisk is and to put measures in place to address it, but a systemthat only goes in one direction is hard to support.

If the NCUA is so confident in the ability of RBNW to managerisk, it should advocate for lowering the leverage ratio so thosecredit unions that fit nicely in their RBNW box can do more to helpmembers.

The NCUA must not be allowed to “manage” credit unions with thisproposal. As a trade association CEO, I also worry about the NCUA“managing” the message. Time after time in every one of the NCUA'smajor regulatory proposals there are some major outlier provisionsthat get credit unions, and consequently credit union tradeassociations, stumping for change. Inevitably, after major industryfeedback, those outlier provisions are lessened or removed. We sawthat in the derivatives, loan participation, and many other recentproposals

That same outlier approach is present in the RBNW proposal. Someof the weightings are clearly outliers. The provisions on theprocess in how it can require credit unions to hold more capital isan outlier. You can also throw in the governor the NCUA is tryingto put on awarding member dividends as an outlier.

Even the NCUA's messaging is an outlier. For an agency thatfought tooth and nail to prevent a very large state charteredcredit union from sharing its CAMEL rating, the NCUA had no problemallowing anyone to look up a credit union's risk-based net worthweighting on a regulation that is not even approved — and was noteven posted in the Federal Register.

The NCUA's outlier provisions will likely be altered in thefinal rule, but we'll be left with everything in the middle, andit's the middle that will hinder credit unions' opportunity forgrowth. It's the middle that we can't forget. If the very high CUSOweighting is reduced, but we're stuck with a limiting investmentframework or a system focused solely on interest rate risk, creditunions will be boxed in.

The NCUA must hear in droves from credit unions on how thisproposal will affect their ability to manage their business andserve members in the future. The NCUA must not be able to “manage”us as a system by simply lessening the outlier provisions in theproposal. Credit unions must comment on the entire proposal. Creditunion associations must call for lawmakers to work with us and takea hard look at the impact of this proposal. This is no time for usto be “managed” by the regulator.

Paul Gentile is president/CEO of the Massachusetts CreditUnion League, New Hampshire Credit Union League and the CreditUnion Association of Rhode Island. He can be reachedat [email protected].