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ALEXANDRIA, Va.-NCUA Board Member Debbie Matz raised two problems she had with the capital proposal that recently came out of Chairman JoAnn Johnson’s office, to which she said agency staff was receptive. “The staff has done a really terrific job on a very complicated issue,” she said. The proposal will be good for credit unions and NCUA with some tweaking in her opinion. First, Matz pointed out that with respect to low-income credit unions secondary capital could be included in net worth to the extent permitted by the board. She asked that parameters be set in place for future boards that may not be so supportive. She said the staff is looking at ways to “tighten up the language on that.” Additionally, Matz said, “The way it’s written now, interest rate risk is not taken into account in the calculation of risk.” Instead, risk is calculated then the regional director can unilaterally lower a credit union’s CAMEL rating. Matz emphasized that she believes the regional directors ought to have this authority, but “under carefully prescribed circumstances.” Matz said that as the proposal is currently written, the regional director does not have guidelines as far as when to down grade a CAMEL code and by how much. “The way it’s written is very open-ended,” she commented. NCUA staff briefed the various trade associations during CUNA’s Governmental Affairs Conference last week. It is also soliciting comments from the groups on these modifications. CUNA, NAFCU, and NASCUS subsequently met on the issue, but were keeping mum about their discussions Prior to the meeting, the trade groups noted that they had been working with NCUA for some time on the issue but were cautious to endorse it at this point. NAFCU Public Relations Manager Rebecca Somers told Credit Union Times, “The association has been working with NCUA on the issue for quite a while. We’re studying the latest proposal and we’re going to continue to gather input from members and other sources.” CUNA President and CEO Dan Mica said that CUNA would raise its concerns regarding changes with the agency if they arise. “CUNA has been working on changes to PCA in general for some time, and we are gratified that issues we raised during NCUA’s summit on PCA and capital last fall are reflected in this proposal,” he said. “Above all, our goal is to ensure the safety and soundness of credit unions, as well as provide them the flexibility to best serve their members. We also appreciate the support Board Member Matz has given to the issue of PCA improvements.” NASCUS, too, said it was pleased to see a proposal on the table. “NASCUS has a policy supporting risk-based capital.” NASCUS President and CEO Mary Martha Fortney stated. “It is also important to note the Credit Union Membership Access Act of 1998 requires the NCUA to consult and cooperate with state credit union supervisors in the implementation of capital and net worth considerations for credit unions. State regulators look forward to working with NCUA to address capital reform.” -

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