Matz Questions Trades' RBC Cost Estimates
NCUA Board Chairman Debbie Matz questioned trade association estimates of the cost of the proposed risk-based capital rule, saying the groups were disseminating misinformation.
“Some trade associations have estimated that the implementation costs could run as high as $7 billion. These overstated figures are based on a questionable assumption that every federally insured credit union would seek to maintain its current capital cushion above the regulatory minimum,” Matz wrote on Friday in response to a letter from Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.), both members of the House Financial Services Committee.
The letter was signed by almost 75% of the House of Representatives.
“In reality, the decision whether to hold a capital cushion and how large that should be is a business decision that each credit union makes. I emphasize that the proposed rule does not require credit unions to maintain any specific capital cushion above the regulatory minimum standard for being well-capitalized,” Matz wrote.
Matz stressed that the measure of a credit union’s capital adequacy should not be based upon maintaining a targeted dollar amount above the regulatory minimum.
“Proper capital adequacy measurement should be much more granular and based on each credit union’s strategic plan and risk profile,” her letter said.
The lawmakers’ urged the NCUA to give credit unions additional time for implementation of the final rule. In response, Matz said she shares the same concern.
“I assure you that the NCUA Board will re-evaluate the amount of time needed before the final rule goes into effect. We recognize that it will take time for the affected credit unions to amend their risk polices and adjust their balance sheet strategies to comply with the revised regulation,” Matz wrote.
“During that same time, NCUA will need to change quarterly data collection procedures to address changes contained in the final rule. The NCUA Board is fully committed to making changes and clarifications, where warranted, based on the comments received to produce good public policy,” she added.
In her letter, Matz also addressed the points raised by lawmakers about the risk-weights in the proposal.
“As your letter recognizes, the proposed rule is more calibrated to risk than NCUA’s existing rule. NCUA developed the proposed risk weights based on the Federal Credit Union Act’s requirements, available credit union data, and comparability to the risk-based capital system for banks,” Matz said.
“By law, NCUA must adopt a risk-based capital rule that is comparable to the rules for banks but that also takes into account any material risks to credit unions, such as interest rate risk and concentration risk in addition to credit risk,” she added.
Matz assured the members of Congress that the NCUA Board would carefully consider the comments received to determine the best way to calibrate the final risk weights for real estate loans, agricultural loans, and member business loans.