Capital planning and stresstesting are important tools for credit unions to use as part of anoverall risk management process and are essential for maintainingthe health of the NCUSIF. Equally important is the method by whichthese stress tests are conducted.

The financial health of a credit union is paramount to itssuccess. When a credit union is strong it is able to maintainservice to its members and continue to grow and prosper.

There are many ingredients to achieving strong financial health.Strong capital levels, a well-balanced loan portfolio, definedpolicies on asset liability and interest rate risk combined withmarketing and member service skills are some of the mostimportant.

As important as having those fundamentals in place is alsomaking sure programs, methods, procedures and guidelines are notonly followed but also reviewed, critiqued and tested.

Although other financial institutions are required to conductstress tests, Congress did not include in the Dodd-Frank WallStreet Reform and Consumer Protection Act, a mandate that NCUAperform stress tests on credit unions. However, NCUA believes thatsuch tests should be conducted on its insured institutions withover $10 billion in assets and proposed a rule putting in place therequirements for such tests.

The rule mandates the conducting of stress tests on theseinstitutions by NCUA or its contracted vendors, to ensure that theinstitutions are financially healthy.

For some time now, most of the credit unions impacted haveconducted their own stress tests acknowledging their size andunique complexities while fully understanding that performing suchtests are a good, common sense way of running a financialinstitution of their size.

It is also sensible for the insurer of these credit unions tolikewise feel comfortable with each institution's safety andsoundness for the sake of a strong insurance fund, as well as peaceof mind for the entire industry.

Countless hours have been spent putting the capital planning andstress testing rule in place. The industry has sent in commentletters suggesting changes and ways they believe the rule could bewritten better. While some changes have been made to the proposedrule, I believe, the final rule to be voted on by the NCUA Board isin need of further revision.

Perhaps, one of the most important considerations is the cost tothe Share Insurance Fund. By the time NCUA implements the testing,five credit unions could be over $10 billion in assets. Each testis estimated to cost $1 million in the first year and $500,000 eachyear thereafter. These costs are for outside vendors, firmswith the knowledge and experience to conduct these tests.

NCUA does not have the internal expertise to conduct thecomprehensive capital planning and stress testing required in theproposed rule. Currently, most credit unions in excess of $10billion in assets engage in some form of stress testing and capitalplanning. In my opinion, the first course of action the NCUA shouldimplement is to accept the test performed by the credit union andfollow the Ronald Reagan philosophy of trust but verify.Verification of credit union conducted tests, under parametersdictated by NCUA, would drastically reduce the cost to the creditunion system.

It was originally intended that the drafting of the stresstest rule would encompass a constructive dialogue between NCUA andthe four credit unions impacted by the rule. Everyone agreed withthe concept and the need for stress tests. All that was necessarywas for all parties to come together on the mechanics of getting itdone.

The process started out well. Meetings were held and discussionstook place. But then somewhere in the process, the working togetherhit a road block. There were miscommunications, misunderstandingsand a cooperation collapse. All four credit unions affected, andeven the fifth to soon become part of the program, in the lastweek, either wrote letters or communicated to NCUA requesting therule be delayed to allow further meetings to be held to ensure thatthis rule is accurate, fair, balanced and reliable. It seemed onlyreasonable to honor such a simple request. There is no need tohurry the process. Why do it wrong when you can get it right? Thisis an expensive proposition not only for the credit unions in theprogram, but all federally insured credit unions. In addition,there has been no discussion on how these tests will impact acredit union's CAMEL rating nor any guidance developed and sharedwith the credit unions impacted.

After the financial crisis of 2008 occurred, additionalregulations were needed. All financial institutions, includingcredit unions, have had to learn to live under a barrage of newregulations not only from their regulator, but also the CFPB andother government agencies. Almost every month there is a newregulation that a credit union must make part of their everydaylife.

I believe, the time has come for regulators to take a step backand look at what has taken place since Dodd-Frank. To review whatnew regulations are really necessary and how the burden onfinancial institutions can be reduced so credit unions can go backto running their own business, making loans and providing neededfinancial services. We are not in a crisis mode. We are not dealingwith failing corporates. Instead, we have four strong credit unionsthat are cooperating with their regulator to implement a programthat will benefit everyone. These institutions were only lookingfor additional time to get it right. There should be no rush tojudgment.

I think it is time NCUA, rather than follow its sister agencies,show that it can lead and use guidance and the examination process,rather than more regulations to accomplish its objectives.

The final rule needs additional work and the best way to haveimproved this rule was to work with the industry, implement theguidance needed and resolve credit unions concerns and theambiguities in the rule. That is the direction I believe isrequired and accordingly is why I cannot support this finalrule.