ARLINGTON, Va.–NCUA is being urged to keep in mind the “totality” of any new regulations related to risk-based capital in a comment letter by NAFCU.
The trade group’s EVP and general counsel, Carrie Hunt, wrote in the comment letter that the “totality of new regulation imposed since the financial crisis, much of which has sought to improve the safety and soundness of the financial sector as a whole,” must be a guiding principle for the agency.
The comment letter was sent in response to the agency’s proposal to delay implementation of its risk-based capital proposal to Jan. 1, 2022.
“All credit unions must now have a plan to access a contingent liquidity source, all credit unions will soon be subject to the current expected credit loss (CECL) standard, most are subject to new interest rate risk management expectations, and most credit union lending activities are subject to greater scrutiny and restrictions than existed prior to the financial crisis,” said Hunt.
Other Recommendations
In addition, the letter also offers several recommendations for the board to consider as it evaluates a community bank leverage ratio analog for credit unions, as well as how the agency should proceed with asset securitization and subordinated debt and improving certain aspects of the 2015 RBC final rule.
Hunt further urged the NCUA to work with Congress to amend the Federal Credit Union Act to achieve “comprehensive capital reform.”
“In any risk-based capital regime, NAFCU has one key tenet that needs to exist: capital must be sufficient to protect the institution, but not so restrictive as to provide a competitive disadvantage or curtail lending,” Hunt continued in the letter.
Finally, Hunt said NAFCU is concerned NCUA’s current definition of “complex” – although more favorable in the 2018 final rule – is still “overly simplistic and out of line with the approach of other financial regulators”