Congressional Bill Calls for RBC Rule Review
A new Congressional bill introduced Monday takes the NCUA to task for the standards it has established for subjecting credit unions to its revised risk-based capital requirements. If passed, the bill would delay the finalizing and implementation of RBC2 and force the agency to provide more information on whether risk-based standards are even necessary.
The bill, named “The Credit Union Risk Based Capital Study Act of 2015” was introduced by Reps. Stephen Fincher (R-Tenn.), Bill Posey (R-Fla.) and Denny Heck (D-Wash.) Its language would direct the NCUA to conduct a public study of the appropriate capital requirements for credit unions, as well as other stipulations regarding their actions in the matter.
Specifically, the bill would require the NCUA to review capital requirements for both federal and state-chartered credit unions. One of the bill’s emphases focused on whether the NCUA has the clear legal authority to prescribe separate risk based capital thresholds for institutions deemed either adequately capitalized or well capitalized.
The bill would also mandate the NCUA to explain whether credit unions should have similar or different risk weights for their capital requirements from other depository institutions, given their differences as financial cooperatives.
The bill would also demands rationale for the risk weights required in the agency’s Jan. 27 proposed rule, known colloquially as RBC2, and an analysis of the impact those weights will have on excess capital above the minimum level for a well-capitalized credit union. An analysis of the weights’ ultimate impact on credit union lending and agency examination results would also be required under the bill.
The bill would allow credit unions to voluntarily provide the NCUA with information supporting their response to the bill, but the agency may not require participation by any institution during the response process.
If the bill is passed, the NCUA would have 270 days to report its findings to the Senate Committee on Banking, Housing and Urban Affairs, and the House Committee on Financial Services. Within that timeframe, the agency could also make recommendations regarding capital system improvements for credit unions or any additional RBC recommendations.
Federal lawmakers have 120 days to respond from the date when the NCUA files a report that satisfies the bill’s requirements. Until that time, the agency may not enact any risk-based capital standards, including those outlined in RBC2.
The rule provides much-needed respite and relief from what has become a thorny issue for the nation’s credit unions, according to NAFCU Vice President of Legislative Affairs Brad Thaler.
“NAFCU thanks the sponsors of this legislation for recognizing the troubling nature of the NCUA’s second risk-based capital proposal and its impact on credit unions,” Thaler said. “The introduction of this legislation is another indication that the agency should withdraw the problematic proposal and instead work with Congress to seek legislative reforms to bring about a true risk-based capital system for credit unions.”