Listening Sessions Provide a Peek at Risk-Based Rule Changes
The NCUA revealed at two July Listening Sessions several areas of the risk-based capital proposal the agency is planning to change.
Credit unions have been calling for more time to comply with the new capital requirements once the rule is finalized. At the Chicago Listening Session July 10, NCUA Chairman Debbie Matz announced the implementation period would be extended. July 17, at the Alexandria, Va., Listening Session, Matz was more specific, telling credit unions the phase-in period would be “considerably longer” than the 18 months originally proposed.
Matz informed credit unions with agricultural lending issues that their concerns would be addressed in the final rule.
“Here in the Midwest, I especially know how critical agricultural loans are to farmers and to rural communities,” Matz said in Chicago. “So it was not our intention to put you out of business or prevent you from making those loans. I share your concerns and we will make sure to address it in the final rule,” she added.
The NCUA also told credit unions the agency plans to rewrite part of the proposal dealing with examiner authority.
Matz assured credit unions that their examiners would not have the independent authority to raise capital requirements. Instead, they would need the approval of the supervisory examiner, regional director and the NCUA board.
Credit unions also learned that the agency is reviewing all of the risk-weights in the proposal. The NCUA is looking to lower the risk-weights in five asset categories; specifically, investments, mortgages, member business loans, CUSOs and corporates.
“We understand all risk weights should be reviewed, and in many cases we need to lower them,” Matz said.
“We want to be cooperative. We want to be helping each other out,” David Surface, president/CEO of the $154 million St. Jean's Credit Union told CU Times after the Alexandria, Va., session. “We want to be looking for new and innovative ways to give back value to our membership and then in that case, you don't want to discourage investment in CUSOs. Essentially, most CUSOs are individual credit unions or leagues getting together – you don't want to discourage that, it's very important,” he added.
Matz stressed that everything in the proposal is on the table for revisions, including concentration risk provisions. And in a July 21 release, the agency said it would reconsider interest rate provisions in the rule.
Credit union executives pressed Matz several times at the events for a second comment period.
“We are doing a top to bottom review and if after we do that review and look at our proposed changes. If under the Administrative Procedures Act, we determine that we are required to because we have made significant changes to the intent of the reg, we will,” Matz responded.
“But, if we determine that these are changes consistent with what we have proposed and it's just really more of a fine tuning and we are not required to re-propose it, we probably will not,” she added.
“Maybe the law shouldn't be the governing thing, maybe it should be what's right for the credit unions,” a credit union executive said to applause from the audience.
“You all applaud, but we’ve been through a crisis and if we had done all the things that we had been recommended to do before the crisis, there probably wouldn't be a credit union system here today,” Matz responded.
Linda McFadden, president/CEO of the $154 million XCEL Federal Credit Union in Bloomfield, N.J., said the NCUA has not explained why there is a rush to finalize the rule without a second comment period.
“I think everybody in the room would like to see a second comment period. NCUA's made it clear that there will not be one and they did not answer the question as to why is there a rush for this,” she told CU Times.
Surface said he is not concerned about a second comment period.
“I don't really have an issue with that to be honest with you. I think they’ve been inundated with 2,200 letters,” he said. “I think we had enough time to put those letters together and I think the listening sessions were important and I think a way to almost have a second comment period.”