The recentaction by the NCUA Board to issue a revised risk-based capital rule for a 90-day comment period has createda new and unique opportunity for the two national credit uniontrade associations to shift the battleground from Alexandria, Va.,to the nation's capital.

Aside from the legal issue of whether or not the NCUA has theauthority to issue a two-tiered RBC rule, there remains in theminds of many key changes that should be made in order for the ruleto be palatable.

Improvements in RBC 2 have been noted but concerns still lingerregarding the definition of complex credit union, risk weights,capital to be raised, number of credit unions impacted and actualcost to the industry to implement the rule.

The trades and credit unions will, of course, draft commentletters pointing out areas of concern and recommending changes thatshould be made. There already have been numerous webcasts with theNCUA and trade staff exchanging their interpretations and opinionson the value or non-value of the rule.

There are some who believe that any additional concessions madeby the NCUA will not be significant enough to satisfy the concernsof those impacted by RBC 2; which is why it is widely speculatedthat the battleground for further changes is now located inWashington.

It is the belief of many that a strong possibility exists thatthe House Financial Services Committee and the Senate BankingCommittee are considering adding the NCUA to their schedule ofhearings.

The issue that has come to the forefront is the lack of legalauthority. Everyone recognizes that a legal challenge would takeyears and cost the industry millions of dollars. Fighting thefederal government is not always a losing battle but even if youwin, the financial cost has weakened you going forward. Moving thefight to Capitol Hill changes the strategy for the national groupson this and other agency issues upon which they will focus.

Regulatory overreach will be the banner that is carried up tothe Hill. Congress will be asked to take a hard look at what theNCUA has done with regulations already in place as well what theyare proposing to do with RBC 2. The argument will be that theregulator has exceeded their authority in the rule-making processand have used regulation rather than supervision and guidance.

Although it is not unprecedented for Congress to call the headof an agency to appear before them to answer questions of concern,it would be unique for the NCUA, which is rarely called, to testifyon its own. Whenever there has been an appearance it has usuallybeen as part of a group of financial regulators and industryrepresentatives.

Should such hearings take place, it would be a clear indicationthat Congress sees value in the concerns raised by those whobelieve the NCUA has overstepped its mandated authority and engagedin regulatory overreach. It would be perceived as a victory for thetrades having raised the stature and importance of the industry toa level that has peaked Congressional interest.

Would hearings before Congress be good or bad for the industryand the NCUA? Hard to say since the last time the NCUA reached sucha focal point was during the 2008-2009 fiscal crises. And, then itwas to ask Congress for the help needed to save credit unions fromfinancial disaster.

Would Congressional hearings conclude there has been overreach?And if they reached such a conclusion, what would the consequencesbe?

Whatever the outcome, perhaps the testimony will disclose thetruth rather than the rhetoric spin of a news release.

Damn the torpedoes, full speed ahead.

Michael E. Fryzel is an attorney and consultant to thefinancial services industry in Chicago. The former NCUA chairmancan be reached at [email protected].