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The proposed changes to credit union capital requirements illustrate the difficulty the NCUA faces in writing regulation and administering the prudential supervision of approximately 6,700 vastly different financial institutions.

The proposal seeks to address credit risk, interest rate risk, and concentration risk. Its focus is very different from the Basel III capital requirements, which concentrate on increasing the quantity and quality of capital for banking organizations with $500 million or more in assets. The differences likely produce the unintended consequence of making credit unions less competitive and less able to accumulate capital.

In short, the proposal as written works against its own purpose.

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