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ARLINGTON, Va.-In response to a request from Senator Mike Crapo’s (R-Idaho) office for comment on his regulatory relief matrix, NAFCU wrote strongly in support of including a provision permitting a risk-based capital calculation for credit unions in any legislation introduced. “NAFCU strongly supports PCA reform as the current one-size-fits-all system does not accurately reflect risk,” NAFCU President and CEO Fred Becker wrote. “Simply stated, the current system unfairly penalizes well run, risk-averse credit unions even though the credit union community, as a whole, has a very good loan loss history. Finally, the system fails to reflect the true cost of credit unions that actually do have risky portfolios.” For example, he said, a $10,000 unsecured personal loan is rated the same as a 30-year mortgage in its last year of repayment. “Simply stated, this makes no sense,” he concluded. Becker pointed out that credit unions are not seeking access to secondary capital as part of this package. However, NCUA’s proposal does advocate a system with leverage and risk-based standards working in tandem; sets the requirements comparable to the banks’ system; and keeps BASEL II objectives in mind. One difference for the credit union risk-based model is NCUA’s proposal does not take into consideration internal risk models. “The proposal developed by the NCUA,” he said “in fact, closely resembles the bank-like risk-weighted capital system and was developed with input from the Treasury Department.While NCUA may in the future make that part of the risk mitigation credit, we have no assurance that this will be the case, so one could objectively conclude that the proposed risk-base capital system for credit unions is, in fact, more stringent than that currently applicable to banks and thrifts.” “Including PCA reform in any regulatory relief package you introduce would enable the NCUA to better manage the risk of the National Credit Union Share Insurance Fund (NCUSIF) and enhance the safety and soundness of the industry,” Becker stressed. “In addition, the capital that credit unions are currently required to keep in reserve could otherwise be used to provide services to members.” NAFCU also supported other items that have been added to the matrix since last year that would amend the definition of net worth for a proposed Financial Accounting Standards Board change; eliminate the limit on the number of NCUA Board members with credit union experience; and provide a filing exemption for Current Transaction Reports on customers who regularly conduct transactions over $10,000. NAFCU reserved judgment on some other items in the matrix at this time. -

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