Mixed Opinions About Further Delay of Risk-Based Capital Rule

In 2014, the National Credit Union Administration (NCUA) released the initial proposal for a risk-based capital rule to govern credit unions. By 2015, the rule was revised and approved to be effective January 2019. However, in both 2018 and 2019, the NCUA voted to delay implementation. On June 18th, the body met and again voted to delay implementation, this time moving the target deadline to 2022.

Those in favor of the delay, the majority of the NCUA board of directors, expressed a desire to settle three key issues prior to implementation of the risk-based capital rule. They want to put in place:

  1. A plan for increasing the use of subordinate debt,
  2. Regulations regarding asset securitization, and
  3. A version of the Community Bank Leverage Ratio that would apply to credit unions.

The single dissenting vote came from Todd Harper, the only Democrat on the NCUA board of directors. He expressed frustration about the slow pace at which the NCUA is moving in crafting and implementing policy in this area. Additionally, he argued that the continued delay would put the share insurance fund at risk and slow or prevent the NCUA from complying with recommendations from the Government Accountability Office (GAO).

Outside of the members of the NCUA board of directors, many bankers were surprised at the decision to delay. Rob Nichols, president and CEO of the American Bankers Association, expressed concern that the NCUA is allowing, and even encouraging, credit unions to operate like banks. He referenced losses to the credit union insurance fund that could have been prevented if the risk-based capital rule was already in place.

On the other side, representatives from a number of credit union groups are generally optimistic about the furthered delay, citing concerns about the structure of the risk-based capital rule, as it currently stands.

For further details, read the article in full at The Credit Union Journal.