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26% of Senate, 76% of House Now Have Voiced RBC Plan Concerns

(FROM CUNA's NEWS NOW)WASHINGTON (8/8/14)--Two more U.S. senators have sent a letter of concern to the National Credit Union Administration regarding its risk-based capital proposal, bringing the total number of Senate lawmakers to weigh in to 26. That's 26% of the chamber's members. And on the House side, the number rose to 332.

Georgia Sens. Saxby Chambliss (R) and Johnny Isakson (R) sent a joint letter Thursday echoing many concerns raised by their colleagues about the limited ability of credit unions to raise capital quickly, as well as if such a proposal is permitted by the Federal Credit Union Act (FCUA).

"The FCUA established a floor for risk-based net worth to take into account situations where the 6% requirement to be adequately capitalized was not sufficient, but it does not allow for a dual risk-based system that your proposed rule would create," the letter reads.

The letter goes on to question whether or not the NCUA has adequately explained the need for the proposed rule, citing the National Credit Union Share Insurance Fund's "exceptional performance" during the financial crisis.

And on the House side, Rep. Mark Meadows (R-N.C.) and Steve Stivers (R-Ohio) sent letters Thursday to the NCUA outlining issues with the proposal. For Meadows, Thursday's letter was a follow-up to the letter he signed in May that was also signed by 323 other representatives. Meadows, along with Rep. Kenny Marchant (R-Texas), signed that letter and submitted an individual one. A total of 332 representatives--76% of the House--has signed a letter with concerns about the proposal.

The May letter asked the NCUA board to take into account implementation costs and burdens, as well as for the agency to provide justification and more clarity as to why proposed risk weights differed from those applied to other community financial institutions.

In his recent letter, Meadows, a member of the House Committee on Oversight and Government Reform, as well as its subcommittee on economic growth, job creation and regulatory affairs, thanked the NCUA for pledging changes to the rule's implementation period and risk weights. He also encouraged the agency to put the rule up for comment again, after it has been revised to incorporate submitted comments.

"While the changes the NCUA have expressed are substantial, I still encourage the NCUA to put the revised rule out for comment again so that stakeholders can weigh in before the final rule is finalized," he wrote.

The Credit Union National Association has also advocated for a second comment period once a revised rule is issued. At the NCUA's Listening Session July 17 in Alexandria, Va., Chair Debbie Matz said there likely would not be a second issuance of the rule. Though, she has emphasized that if the intent of the rule is changed or other reasons under the Administrative Procedure Act require a second round of comments, the agency would follow those statutory requirements. 

"Unless we are in violation of the Administrative Procedures Act, as determined by our general counsel, we don't intend to re-propose the rule," she said. "It's like every other rule we've done, we put it out for comment, we get excellent comments from stakeholders, we review every single one of them, we accept those we think have merit and then we finalize the rule. This rule will not be an exception to that."

Stivers, a member of the House Financial Services Committee, said he was concerned that the proposal places more of an emphasis on "the basic measure of an asset size of an individual credit unions than the holistic assessment of a credit union's portfolio of assets and liabilities," which is the description given in the FCUA.

"Over 4,000 credit unions offer mortgage products that equate to a little over 6.5% of the entire mortgage market and enjoy loss rates well below the national average," he wrote. "The proposed rule will cause credit unions to reduce the availability or affordability of loan products, restricting credit availability to their members."

He went on to say that the supervision of concentration risk might be mort appropriately conducted duing the examination process, which is a concern raised by many of his colleagues.

Other concerns raised by a number of legislators in their letters include the proposed implementation timeline, proposed risk weights and the effects the proposal would have on member lending, particularly in communities with a strong agricultural base.                 

Tags: RBC, Risk-Based Capital, Congress, NCUA

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