WASHINGTON — While CURIA has essentially the same provisions as previous versions some of the details have been tweaked.

For example, the Credit Union Regulatory Improvements Act (H.R. 1537)–introduced March 15 with 12 co-sponsors–still has a provision to provide credit unions with a modern risk-based capital structure. However, each capital category has been increased 25 basis points. In addition, a 10% risk-based capital ratio for well-capitalized credit unions was included where it had only been 8% for “well-capitalized” credit unions in previous versions of CURIA. The risk-based ratio was set at 8% for “adequately capitalized” and “undercapitalized” credit unions and 6% for “significantly undercapitalized”. “When a credit union's capital deposit to the [NCUSIF] (equal to 1% of insured deposits) is added to these ratios, the result would equal or exceed the current leverage and total risk-based capital requirements for well-capitalized FDIC-insured banks and thrift institutions,” a congressional summary read.

Congressman Ed Royce (R-Calif.), the lead Republican on the bill, stated, “Based on the recent recommendations of the federal credit union regulator, these enhanced risk-based and prompt corrective action standards will ensure the efficient allocation of capital, while protecting taxpayers.”

NCUA Director of Public and Congressional Affairs John McKechnie commented, “We've reviewed the proposal contained in the bill and we support it.” He added that the agency would continue its discussions with Treasury on the risk-based capital framework for credit unions.

According to NAFCU Director of Legislative Affairs Brad Thaler, the changes were the result of negotiations between NCUA and Treasury to bring the credit union proposal closer in line with what commercial banks already have in place.

CUNA Vice President of Legislative Affairs Dean Sagar explained, “We ran into a problem when we tried to bring the risk-based capital proposal–PCA proposal–into the reg relief bill in the Senate because their view was that they could not deal with the bill unless Treasury was willing to endorse it and come out for a specific proposal.” Current bank capital requirements, he said, include a minimum 5% leverage ratio of Tier 1 capital, risk-based of 6%, and total risk-based of 10%; the new CURIA requirements “make it directly comparable and actually exceed the bank requirements” with NCUSIF deposit included, he said. However, Treasury also recently announced that Assistant Secretary for Financial Institutions Emil Henry was resigning his post and his deputy, David Nason, is expected to step in. “Given the change in the administration, I think we've seen differences of opinion just in the last year…They will probably say that it is acceptable, which we're hoping to get the House Committee to raise the issue or at least send a letter to ask that question,” Sagar said. “NCUA is fairly confident; it was negotiated with the idea of getting it close to what Treasury has publicly said could endorse.”

A Treasury spokesperson declined to comment at this time.

When asked if the adjustments to the risk-based capital requirements made the provision any more palatable, America's Community Bankers President/CEO Diane Casey-Landry replied, “Not really.” She added, “There's no redeeming value to CURIA…There is no way we're going to say there is one iota of a reason for CURIA to exist.”

Independent Community Bankers of America Chairman James P. Ghiglieri Jr., president of Alpha Community Bank, Toluca, Ill., agreed. “This legislation is not regulatory relief, rather it vastly expands credit unions' powers to do more commercial lending and would weaken credit unions' capital requirements,” he said in a statement from the group. A section was also added to give NCUA greater authority and flexibility in dealing with natural and man-made disasters.

Though NASCUS President/CEO Mary Martha Fortney said the group is still analyzing the new CURIA provisions for risk-based capital, she did say, “We believe additional enhancements in capital, including alternative capital, would provide additional safety and soundness for credit unions.” Upping the MSB Ante

Another key adjustment from previous versions of CURIA is the section pertaining to conversions to mutual savings banks. The new bill, with Congressman Paul Kanjorski (D-Pa.) taking the lead in the Democratic-controlled Congress–would up the minimum voter participation requirements for credit union conversions to mutual savings banks to 30%; earlier versions of the bill included a 20% floor, but current law has no minimum requirement. “Maybe we can get that number of people to participate in congressional elections,” Casey-Landry quipped. She questioned the rationale of increasing minimum voter participation requirements while prohibiting the institution from offering incentives to vote. “With the apathy we have in the electoral vote…you're going to make it more difficult to get people to vote?” In 1998, credit unions wishing to convert to a mutual savings bank were required to obtain 50% member approval to convert to a mutual savings bank. Prior to H.R. 1151 in 1998, credit unions wishing to convert to a mutual savings bank were required to obtain 50% member approval to convert to a mutual savings bank. Historically, Thaler said, when a credit union had “a good reason to convert,” it has been able to get the votes. “If it's in the best interest of the members, their best interest should be enough to get them to vote.”

Additionally, the bill requires a special meeting of the membership at least one month before sending out any ballots and prohibits voter incentives like raffles or other contests. The member meeting is straight out of NAFCU's white paper on the subject. “We were pleased to see that included. It's something we think is an important step in the process,” Thaler said. Congressman Patrick McHenry (R-N.C.), who has tried to rein in NCUA's authority over conversions in the past, has even endorsed the idea.

Here again, NASCUS had a different take on conversion requirements. “NASCUS supports full and transparent disclosure in the conversion process,” Fortney said. However, the organization of state regulators has previously stated that deference should be given to the chartering body, meaning state law and regulation. NASCUS is working on Capitol Hill to get this clarified in law as conversions are not an insurance-related issue. Serving the Underserved

Based on NCUA's decision to halt non-multiple common bond credit unions from adopting underserved areas after the American Bankers Association brought a lawsuit against the agency, H.R. 1537 clarifies that all federally chartered credit unions can adopt underserved areas. “The new bill would allow all [federal] credit unions to operate in such places enabling them to assist in community revitalization and economic renewal efforts,” Kanjorski commented.

The provision incorporates two definitions for underserved areas already in law: the Community Development Financial Institutions Fund's “investment area” definition or the “low income community” definition under the New Market Tax Credit program. Credit unions could apply either definition, Thaler explained.

Credit unions' adoption of underserved areas has declined significantly since NCUA issued its moratorium and final rule preventing single sponsor and community chartered credit unions from adopting underserved areas. None of Your Business

Like earlier versions of CURIA, the bill would increase the credit union member business lending limit from 12.25% of assets to 20%, similar to the thrifts' cap, as well as excluding loans under $100,000 and those to faith-based organizations.

These provisions are where the ABA really unleashed its consternation with the legislation. President/CEO Edward Yingling vowed to “vigorously” oppose the legislation again, stating, “By raising the cap on business lending, the Credit Union Regulatory Improvements Act moves credit unions further away from their original mission. Supporters of the bill need to ask themselves why credit unions should be encouraged to make even more multi-million-dollar loans to real estate developers and hotel operators, yet keep their special status.”

He continued, “If [large credit unions] want to be treated like any other full-service financial services provider, then Congress should encourage these large credit unions to become mutual savings banks and be subject to bank-like regulation and taxation.”

“Inaccurately promoted as 'regulatory relief,' upon examination, H.R. 1537 is a far-reaching expansion of powers for credit unions unrelated to their tax-exempt statutory mission to serve people of modest means,” ICBA President/CEO Camden Fine wrote in a letter to Congress. “The current limits on business lending were specifically put in place by Congress to help preserve credit unions' tax-exempt focus on serving 'people of modest means' instead of making business loans for office buildings, restaurants, or luxury hotels.”

ACB's Casey-Landry agreed, calling the business lending provisions “an abomination.” She said the recent report by the Government Accountability Office showed credit unions were not serving the underserved so their business lending authorities should not be expanded. According to her, the bill would push credit union business lending allowances above that of thrifts. She, too, invited them to convert to thrifts.

“They continue to play a game for that,” CUNA's Sagar said of her assertion that CURIA has more for credit union business lending than thrift authorities. They have “a huge almost open-ended exception” for loans that are secured by commercial real estate, he explained, which accounts for the bulk of their lending. Au Contraire

“We believe CURIA is essential to maintaining the viability of credit unions and ensuring that they remain a low-cost financial alternative for millions of Americans,” NAFCU President/CEO Fred Becker said in response to CURIA's re-introduction.

CUNA President/CEO Dan Mica added, “The ultimate goal of any credit union is to better serve its members. CUNA's aim is to ultimately enact legislation that gives credit unions as much flexibility as possible to realize their goal.”

At least 12 members of Congress agreed with CUNA and NAFCU. In addition to Kanjorski and Royce, Representatives Carolyn Maloney (D-N.Y.), Brad Sherman (D-Calif.), Luis Gutierrez (D-Ill.), Grace Napolitano (D-Calif.), Solomon Ortiz (D-Texas), Steven LaTourette (R-Ohio), Dan Burton (R-Ind.), Ron Paul (R-Texas), Steve Chabot (R-Ohio), and Ken Calvert (R-Calif.) signed on. By the end of the 109th Congress, the bill had garnered 125 co-sponsors.

NAFCU's Thaler said he was pleased with CURIA's original co-sponsorship this Congress. He added, “We continue to work with people in the Senate.” However, the Senate appears willing to allow the House to deal with it first. –[email protected]