CUNA Pens OMB on Risk-Based Rule

CUNA took its objections to the NCUA's risk-based capital proposal to the White House Wednesday, in a letter to the Office of Management and Budget.

In that letter, CUNA said the NCUA's definition of a complex credit union is inappropriate and will contribute to increased paperwork and other burdens.

“The idea that a financial institution becomes complex the moment its assets cross the $50 million threshold is arbitrary. By any reasonable measure, a financial institution with slightly more than $50 million in assets is small and likely to be relatively simple,” said the letter, written by CUNA Deputy General Counsel and Senior Vice President Mary Dunn to OMB reviewer Shagufta Ahmed.

“In this connection, we would call your attention to the fact that the Small Business Administration defines small financial institutions, including credit unions, as those with up to $500 million in assets. Federal bank regulators frequently use $10 billion in defining community banks,” her letter also said.

Dunn also pointed out that the Federal Credit Union Act directs the NCUA to develop a risk-based net worth system for complex credit unions based on the portfolios of assets and liabilities, not only asset size.

Dunn said many relatively small credit unions would be subject to the new risk-based capital requirements. 

“We seriously question whether the agency has properly evaluated the paperwork burden of the proposal given the insufficiency of the analysis shared with the public,” Dunn wrote. “Assuming NCUA's estimate is accurate – which we do not agree that it is — the proposal would require three weeks of a full time employee's work time in a noncomplex credit union and four weeks in a complex credit union.”

CUNA urged OMB to review NCUA's data collection request and deny it until the agency amends the definition of a complex credit union, and sufficiently explains its estimate of the proposed rule's paperwork burden.