ARLINGTON, Va.—The new year is apparently driving new optimism among CU leaders toward the economy and their credit union’s future—although CU execs aren’t so rosy about their future regulatory burden.
NAFCU is reporting its CU Sentiment Index (CUSI) rose in January after two months of decline as respondents reported strong outlooks on growth, earnings, and lending. Indeed, NAFCU reported in January the CUSI had seen a sharp drop and was sitting on the threshold of dropping into the “pessimistic” range.
But even with the new, overall optimism, respondents' outlook on regulatory burden continued to fall, nearing its lowest point on record, NAFCU noted.
The CUSI is based on NAFCU member responses to eight questions on growth and earnings outlook, lending conditions and regulatory burden.
Additional Insights
Separately, as the NCUA considers alternatives to simplify its risk-based capital (RBC) rule, NAFCU's new Economic & CU Monitor report provides insights into credit unions' perspective on the two possible simplification mechanisms.
As CUToday.info reported, NCUA in 2019 approved delaying the implementation of its RBC rule by two years to Jan. 1, 2022.
The advance notice of proposed rulemaking (ANPR) issued by the NCUA in January proposes two approaches to simplify the RBC rule:
- Replacing the RBC rule with a risk-based leverage ratio (RBLR), which uses risk attribute thresholds to define “complex” credit unions; and
- Adopting a complex credit union leverage ratio (CCULR) which would leave the 2015 RBC rule unchanged but allow eligible complex federally-insured credit unions to opt-in to the CCULR to meet the RBC requirements
Basis for Findings
NAFCU's Monitor survey revealed that, based on the conceptual information provided in the ANPR, neither option has garnered a majority of support among respondents. When asked what the most effective approach to RBC simplification would be, top responses included:
- Prioritizing simplification of the RBC calculation
- Avoiding a "capital cliff," where a small increase in a certain type of asset triggers a large increase in the capital requirement