ARLINGTON, Va.—In response to NCUA’s proposed rule on capital planning and supervisory stress testing, NAFCU has sent a letter recommending the agency work to increase transparency and flexibility.
In the letter, Regulatory Affairs Counsel Andrew Morris identifies key areas NAFCU believes the NCUA should consider in an effort to help credit unions continue to grow. Those areas include:
- Covered credit unions' tiers and stress testing parameters should be scaled to promote more meaningful relief.
- NCUA should evaluate the capital plans of very well capitalized credit unions through the supervisory process.
- When NCUA reserves the right to conduct its own stress testing, it should adopt transparent procedures for collection and validation of stress test data.
"NAFCU believes that a tiered regulatory approach is a good first step, but is fundamentally limiting – particularly for the largest credit unions," wrote Morris. "Capital planning requirements should not only be tailored based on the complexity and financial condition of covered credit unions, but also contextualized in terms of overall industry risk."
Morris continued, "Credit unions are less risky than banks, as evidenced by the industry's resiliency during the financial crisis, so it would be appropriate to adopt flexible supervisory guidance with respect to evaluation of capital plans. Furthermore, credit unions continue to demonstrate exceptional financial health. Based on these factors and the strong capital position of the credit union industry, NAFCU believes that NCUA's safety and soundness mission can evolve beyond the capital planning assumptions which arose out of the financial crisis."