LOS ANGELES — NCUA Chairman Debbie Matz said the NCUA willlikely reduce the risk weights on five specific asset classes in its finalrisk-based capital rule.

Mortgages, member business loans, investments, CUSOs andcorporates will get a second look and their risk weights will be“presumably lowered,” Matz said Thursday at the Westin BonaventureHotel in downtown Los Angeles.

Approximately 150 credit union executives attended the event,along with a large contingency of NCUA employees that included allsupervisory examiners in Region V.

The NCUA will review every risk weight, Matz said, not just fivespecifically mentioned. However the five are “most obvious forchange,” she added.

During the question and answer session, many credit unionexecutives expressed concern about how the proposed RBC rule alsorequires compliance with compliance risk and interest rate riskcomponents, and not just credit risk.

Matz stressed that everything is on the table to considerchanging in the final rule, including concentration risk andinterest rate risk. However, she added that the Federal CreditUnion Act differs from the banking act in that the NCUA is taskedstatutorily to consider all material risks to the industry, whilebanking regulators are only required to address credit risk.

Larry Fazio, director of the Office of Examination andinsurance, added that if the NCUA doesn't address interest raterisk or concentration risk limits in the risk-based capital rule,it would have to do it in the exam process.

“The bottom line is that it's not a simple solution,” Faziosaid.

Executives also indicated concern with the proposed rule'sdefinition of a complex credit union, which is based upon assetsize.

Fazio said when the NCUA researched the rule, credit unions withmore than $50 million in assets by and large offered a full arrayof products and services.

“We could have done something more complex in the sense of aformula, but 99 times out of 100, everybody over $50M would havetriggered that, so (using asset size) seemed like a good way tosimplify things,” Fazio said.

However, Matz said the NCUA is considering raising the assetthreshold that defines small credit unions, which are exempted fromthe risk-based capital rule. That limit was increased to $50million from $10 million in 2013.

Matz also said she hopes to present a final risk-based capitalrule sometime this fall.

And despite how many executives requested the NCUA permit asecond comment period on the rule, Matz said the NCUA is notconsidering that at this time.

“Our position has always been that if there are significantchanges to the rule there should be a second comment period, andthe risk weights (Matz) mentioned are significant enough,” saidMike Coleman, NAFCU director of regulatory affairs.

However, Matz also said the agency created an advisory group ofcredit unions to review the risk-based capital rule. That group metfor the first time last week, Matz said.

The NCUA chairman also took exception with a comment thatCongress opposes the rule, based upon a letter signed by 324representatives and others from lawmakers.

“The congressional letters support risk based capital andapplaud the direction we're taking,” she said. “I want to be clearabout that: Most members of Congress think risk-based capital is animportant regulatory tool. They just want to make sure it's done ina way that enables credit unions to continuing doing the finebusiness they do.”

Mary Dunn, CUNA vice president and assistant general counsel,said in general, many people agree that risk-based capital could beproductive. And, Dunn said Matz was correct that Congress supportsthe rule in terms of its direction.

“However, it's also true the letters raised serious concernsabout the rule,” she said.

Coleman said the NCUA can't downplay the seriousness ofresponding to congressional letters.

“They're looking for meaningful feedback,” he said. “Whether ornot they are satisfied with the response, we'll have to wait andsee.”