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WASHINGTON-Well-managed, well-capitalized credit unions have earned the privilege of flexibility in some of their oversight, NCUA Chairman JoAnn Johnson told officials from the Texas Credit Union League. During a recent event at Credit Union House in Washington, D.C., Johnson outlined her plans to move forward with an update to the RegFlex initiative, lowering the required capital ratio from 9% to 7% to qualify for regulatory flexibility. “We have more than two years experience with RegFlex, and the structure is thoroughly implemented within the agency and the examination process. It’s time to provide flexibility for well-capitalized credit unions with 7% net worth,” the chairman told the Texans. NCUA staff is finalizing the language for an upcoming agency board meeting. “If we agree that 7% leverage is an unnecessarily high ratio for “well capitalized” status under a system of risk-based prompt corrective action, then we should not set a higher bar for RegFlex,” Johnson explained. “The added risk of RegFlex activities is not significant in a properly-managed, well-supervised credit union, and setting the bar at 9% causes credit unions to manage to an even higher ratio.” Also coming out of the NCUA Capital Summit that Johnson held last year, she has proposed to permit safe and sound low-income credit unions to have the option of releasing the portion of a secondary capital account that no longer counts as net worth. She pointed out that not doing so only unnecessarily drags down the institution’s net worth. Finally, Johnson noted, “Diversification and membership growth opportunities are necessary for maintaining the safety and soundness of credit unions.” She defended the current reg’s flexibility as consistent with the Federal Credit Union Act. She added that the agency must continue to remove regulatory hurdles, particularly in the adoption of underserved areas. “We must continuously strive to enhance the process so not to deter credit unions from serving the `unbanked’ or underserved,” Johnson said. “Likewise, we are not here to micro-manage a credit union’s marketing plan; but we are here to make sure applications meet regulatory criteria in a safe, sound manner. I support modernizing rules and will continue to encourage flexibility within the bounds of law and regulations.” -

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