RBC2: 1,900 Letters and Counting
Credit unions are having their say over the NCUA’s revised risk based capital rule, also known as RBC2. Comment letters have arrived in near record numbers in anticipation of Monday’s midnight deadline.
As of 2:30 p.m. Eastern time, NCUA Board Secretary Gerald Poliquin received more than 1,900 letters and emails from credit unions, trade associations and other interested parties, including credit union members. In large part, those letters not only criticized aspects of the revised rule itself, but also whether credit unions need to be subjected to risk-based capital requirements in the first place.
“Credit unions today are better capitalized than at any time in their history, with an average capital ratio of 11%,” Kerry S. Parker, president/CEO for the $1.2 billion A+ Federal Credit Union in Austin, Texas, wrote in her April 22 letter. “Overall, we question the need for this regulation and its drain on credit union resources. Because of this [and other issues] we are opposed to its implementation.”
“As the NCUA continues to work on the RBC regulation, I would urge the agency to recognize the unique nature of credit unions with regard to how capital is considered,” credit union consultant and former NCUA board member Geoff Bacino, who is also president of Alexandria, Va.-based Bacino & Associates, wrote in a March 9 email. “Bank regulations should not be less burdensome and onerous than those confronting credit unions.”
“If RBC is truly important, then our Congress should approve the new law,” James Adams, who identified himself as a citizen and credit union member, emailed on March 13. “That’s our democratic process.”
Response to RBC2 comes close to the 2,054 comment letters sent regarding the first iteration of the rule, according to NCUA spokesman John Fairbanks. The agency declined to comment on either the proposed rule or any of the letters flooding into the NCUA’s Alexandria, Va., headquarters, according to Fairbanks.
Despite significant revisions to the original rule, credit union trade associations continue to strongly oppose RBC2 as burdensome and unnecessary, according to experts at both NAFCU and CUNA.
Read more: CUNA calls the rule unneccesary and fundamentally flawed ...
“From RBC1 to now, NAFCU’s core position hasn’t wavered,” said NAFCU Director of Regulatory Affairs Alicia Nealon. “The credit union industry does not need this rule, and the NCUA must withdraw it immediately.”
The NCUA has failed to consider the true impact on a well-capitalized credit union industry, Nealon said. RBC2’s influence will reach far beyond the 19 credit unions the agency believes would be downgraded as a result of the rule’s adoption, she added.
“NAFCU and our members believe that this proposal will impose astronomical costs and burdens on all credit unions because it will force them to park more capital on their balance sheets rather than allow them to grow and lend within their communities,” Nealon said.
CUNA also has called the NCUA on the carpet for presenting a rule that was both unnecessary and fundamentally flawed in its content and structure, according to a news release issued April 17.
“We heard from CUNA’s Governmental Affairs Committee and its Examination and Supervision Subcommittee, from members of CUNA’s CFO Council, from many credit union CEOs and volunteers and from leagues,” said CUNA President/CEO Jim Nussle said. “Their input was vital in shaping our response to what I believe is a solution in search of a problem that doesn't exist.”
In its April 17 letter to the NCUA, CUNA challenged the rule’s necessity as well as the NCUA’s legal authority to impose a two-tiered RBC system as outlined in the proposal. Should the agency continue to lobby for the passage of RBC2, CUNA’s letter called for significant changes to capital adequacy requirements, risk-weightings, the definition of complex credit unions and other changes to the rule.
“The proposal is fundamentally flawed and, in certain areas, exceeds the NCUA’s statutory authority,” said Nussle. “We urge [the] NCUA to withdraw the proposal and, in lieu of that, we strongly encourage [the] NCUA to make substantial improvements to the proposal consistent with our comments herein.”