MONTREAL – The NCUA’s proposals on risk based capital have raised concerns among credit unions, trade associations and even members of Congress. Earlier this month, the Congressional bill H.R. 2769 was introduced (informally known as the “stop and study bill”), which directs the NCUA to reevaluate its proposed RBC rule and justify its merits, as well as explain the agency’s authority to impose this directive on the credit unions it regulates.

CUNA and NAFCU agree that the RBC rule, both in its current iteration and the revised version that has fallen under Congressional scrutiny (RBC2), still raises significant concern for credit unions. However, while NAFCU strongly supports the stop and study bill, calling it a crucial element of giving RBC2 the scrutiny it deserves, CUNA President/CEO Jim Nussle deemed it remote, according to the contents of a confidential email from CUNA President/CEO Jim Nussle to league executives obtained by CU Times.

“When the RBC2 proposal was issued earlier this year, we gave a lot of consideration to pursuing a legislative strategy andconcluded that the second round of the rulemaking was not the best time to engage Congress,” Nussle wrote in the June 18 email. “We concluded at that time that the challenges facing legislation with broad Congressional support are significant, making the prospect of enacting a bill like this remote, particularly before the rule is final.”

From a strategic perspective, Nussle continued, a legislative effort like a stop and study bill seemed unlikely to positively impact the final rule and may impede progress CUNA has been making on other matters. CUNA instead urged credit unions to continue to comment on the issue while the trade group sought to engage the agency in ongoing discussions about the proposed rule.

“We considered once again how a legislative strategy at this time might impact the rule, and came away with largely the same conclusion: It’s not likely to have a positive impact on the final outcome,” Nussle’s email said. “Further, it would likely distract from our efforts on 1-4, CFPB reform, data security, NCUA budget transparency, privacy notification and other issues that have a chance for real progress during this Congress.”

Nussle also questioned the cost involved in having NCUA re-evaluate its own RBC rule with the thought that the agency might arrive at a different conclusion.

RBC2 and the stop and study rule also sparked some chatter among attendees at NAFCU’s Annual Conference in Montreal, some of whom voiced their firm opposition to RBC2 and uncertainty as to whether H.R. 2769 will have any effect at all.

“They [the NCUA] had no business getting it out,” Daniel Maynard, CFO/treasurer for the $69 million Crossroads Community Credit Union in Cheektowaga, N.Y., asserted in regard to the RBC rule. “They are overstepping their powers, and it really has no benefit to any credit union. The NCUA’s budget is growing, and they’re just getting too big, right along with the CFPB.”

When asked about his opinion on H.R. 2769, Maynard said he doubts it will help take RBC2 off the table because the NCUA has likely already formed its opinion on risk-based capital.

“It’s amazing that Congress was able to do that [introduce the bill],” Maynard said. “I hope it does some good, but I’m not optimistic.”

Stanley Chapman, board chair for the $1.1 billion, San Jose, Calif.-based Meriwest Credit Union – who has served the credit union for 48 years – said Meriwest CU has been very vocal about its opposition to RBC2 and has stood in line with NAFCU’s stance on the issue since day one.

“It’s a bit of an overkill,” Chapman said. “Right now we’re still recovering from a recession, and the NCUA is being a bit overbearing. They appear to be using the lowest common denominators in determining their supervision criteria.”

Guy Petroro, senior vice president and chief lending officer for the Miami Lakes, Fl.-based, $172 million Jetstream Federal Credit Union, said while his experience isn’t heavy in credit union financials, he still opposes RBC2 for the industry as a whole.

“When it comes to analyzing your financials, the NCUA is becoming more stringent,” he said. “This could really hurt a lot of credit unions.”

Read more about RBC2 and H.R. 2769 in the July 1, 2015 issue of CU Times.

Instant Insights /

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