ARLINGTON, Va.—NAFCU President and CEO Dan Berger is urging NCUA to grant credit unions "additional capital flexibility to address the economic crisis" and provide parity with banks in light of the coronavirus outbreak.
Berger specifically asked the agency to provide capital relief that is equivalent to what is being offered to banks by the federal banking agencies and Congress, citing the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which reduces the community bank leverage ratio (CBLR) from 9% to 8%.
The huge $2-trillion CARES Act passed the Senate late Wednesday on a 96-0 vote.
"Community banks that use the CBLR framework and maintain this new leverage ratio would be considered to have satisfied the risk-based and leverage capital requirements in the banking agencies’ generally applicable capital rule," noted Berger.
Berger also suggested NCUA "seek to maintain parity with regulatory efforts to ease leverage and liquidity requirements for banks," highlighting that the current crisis may lead to a temporary deterioration in net worth ratios at some credit unions.
CECL Request
Regarding the Financial Accounting Standards Board's current expected credit loss (CECL) standard, Berger asked NCUA to join other federal financial regulators in calling for a delay of the implementation date and request greater interpretive control over the standard itself.
In the letter to the NCUA, Berger also detailed steps the agency could make regarding subordinated debt, approval of secondary capital applications, and modification of stress testing and capital planning rules to provide additional capital flexibility for credit unions.
"The NCUA must act quickly to implement capital relief for credit unions that is, at the very least, equivalent to what is being offered to banks during this time of crisis. The NCUA should also use the full extent of its regulatory powers to promote additional capital flexibility and reduce operational stress on credit unions so that they might prioritize helping their members," Berger concluded.