Keith Leggett
WASHINGTON—Keith Leggett thinks NCUA “threw in the towel” with its new risk-based capital proposal.
The senior vice president and senior economist at the American Bankers Association and author of the Credit Union Watch blog, told CUToday.info that after a quick review of the rule, “My initial reaction is that NCUA raised the white flag of surrender.”
One of the more contentious issues among credit unions with the original RBC rule was the individual minimum capital requirement, which the agency removed in round two.
“NCUA gave up the ghost on that one,” said Leggett.
IMCR Needed
Leggett feels an individual minimum capital requirement is good for banks and credit unions.
“As a regulator you should have that discretion, even though I know our member banks chafe under it,” said Leggett. “But you have the responsibility to say these capital standards, while they are floors, they are not hard floors. I think NCUA should have the authority to go into a credit union and mandate a higher level of capital according to the level of risk.”
NCUA also gave up with regard to the definition of what is a complex credit union by raising the asset threshold, according to Leggett. “But I don’t find that too outrageous, going from $50 million to $100 million. With that, what NCUA is doing is trying to defuse the opposition.”
Leggett acknowledged he was surprised the new proposal did not address secondary capital as a means to help credit unions comply with the risk-based rule.
“Clearly NCUA did maintain the concentration risk, but they watered it down relative to the original proposal,” said Leggett. “The interest rate risk was removed from the risk weights, and I am certain NCUA will develop another way to address IRR.”
Leggett is retiring from the ABA Jan. 23, after more than 20 years with the organization.
Related
CUToday.info Resource: Risk-Based Capital Central
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A Graphic Overview of NCUA's Risk Based Capital Proposal