WASHINGTON-Well-managed, well-capitalized credit unions haveearned the privilege of flexibility in some of their oversight,NCUA Chairman JoAnn Johnson told officials from the Texas CreditUnion League. During a recent event at Credit Union House inWashington, D.C., Johnson outlined her plans to move forward withan update to the RegFlex initiative, lowering the required capitalratio from 9% to 7% to qualify for regulatory flexibility. "We havemore than two years experience with RegFlex, and the structure isthoroughly implemented within the agency and the examinationprocess. It's time to provide flexibility for well-capitalizedcredit unions with 7% net worth," the chairman told the Texans.NCUA staff is finalizing the language for an upcoming agency boardmeeting. "If we agree that 7% leverage is an unnecessarily highratio for "well capitalized" status under a system of risk-basedprompt corrective action, then we should not set a higher bar forRegFlex," Johnson explained. "The added risk of RegFlex activitiesis not significant in a properly-managed, well-supervised creditunion, and setting the bar at 9% causes credit unions to manage toan even higher ratio." Also coming out of the NCUA Capital Summitthat Johnson held last year, she has proposed to permit safe andsound low-income credit unions to have the option of releasing theportion of a secondary capital account that no longer counts as networth. She pointed out that not doing so only unnecessarily dragsdown the institution's net worth. Finally, Johnson noted,"Diversification and membership growth opportunities are necessaryfor maintaining the safety and soundness of credit unions." Shedefended the current reg's flexibility as consistent with theFederal Credit Union Act. She added that the agency must continueto remove regulatory hurdles, particularly in the adoption ofunderserved areas. "We must continuously strive to enhance theprocess so not to deter credit unions from serving the `unbanked'or underserved," Johnson said. "Likewise, we are not here tomicro-manage a credit union's marketing plan; but we are here tomake sure applications meet regulatory criteria in a safe, soundmanner. I support modernizing rules and will continue to encourageflexibility within the bounds of law and regulations." -

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