VAIL, Colo. – NCUA Chairman Dennis Dollar, speaking to state regulators and representatives from state-chartered credit unions assembled here for the NASCUS Annual Conference, presented his case for a risk-based approach to the federal Prompt Corrective Action law and asked for conferees' "serious consideration" of the initiative. "The present `one-site-fits-all' approach to PCA gives little incentive for credit unions with a 7% net worth ratio to better manage their risk and creates the at times false impression that a credit union with less than 7% net worth as a percentage of its total assets is not sufficiently capitalized, regardless of the risk profile of the credit union," said Dollar. The Chairman said the failure of the present PCA law to recognize credit unions' individual risk factors "makes it difficult for credit union management to have regulatory guidance for risk mitigation actions they need to take when their net worth begins to near a troublesome ratio." He described the present PCA law as a "stick" that's applied after a CU's net worth ratio drops below a "statutorily-prescribed automatic figure." Instead as regulators, he advocated, "we also need an effective `carrot' that we can apply as an incentive to encourage, reward, and yes, if necessary, to provide benefit to a credit union when we have to require them to shift their risk and balance it more appropriately." Acknowledging that a change to PCA requires congressional action, Dollar said "the present PCA law needs to be re-visited to help bring about this risk-based approach."

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