NAFCU Statement on NCUA’s Risk-Based Capital Proposal for Credit Unions

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NAFCU Statement on NCUA’s Risk-Based Capital Proposal for Credit Unions

Washington (May 27, 2014) – National Association of Federal Credit Unions (NAFCU) President and CEO Dan Berger issued the following statement today in conjunction with the association’s submission of its official comment letter to NCUA on the agency’s proposed risk-based capital regulation:

“NAFCU supports the idea of a risk-based capital regime for credit unions based on demonstrable risk. Unfortunately, this risk-based capital rule as proposed misses the mark.  The additional capital this rule would require will gravely impair credit unions’ ability to compete in the marketplace and serve their members and will not provide additional safety to the industry. In its current form, this rule poses such widespread catastrophic consequences that it should be withdrawn.”

NAFCU has many concerns with the proposed rule, however, our major concerns include: 

  • Several issues related to NCUA’s legal authority to issue the rule as proposed, such as:

           o   Comparability with banking regulatory requirements;

           o   Substitution of statutorily defined legal terms;

           o   Individual minimum capital requirements;

           o   Definition of a “complex” credit union;

  • The need for a legislative solution in order to achieve a fair and balanced risk-based capital system;
  • NCUA’s treatment of the regulatory process including the refusal to extend the comment period and form an industry working group prior to releasing a proposed rule, and the need for an additional notice of proposed rulemaking with public comment period;
  • NCUA’s drastic understatement of credit unions that will be affected by this rule and whose balance sheets and business plans will need adjustment;
  • NCUA’s proposed risk-based capital ratio for well capitalized credit unions set at 10.5 percent;
  • NCUA’s treatment of risk-weighted assets and the lack of explanation for deviation from similar banking risk-weights;
  • NCUA’s incorporation of interest rate and concentration risk into risk-weighting for real estate, investments, and member business loans (MBL’s);
  • Individual minimum capital requirements for credit unions including issues with the subjectivity of their imposition;
  • Components not included in the numerator portion of the risk-based capital ratio, such as goodwill;
  • The 1.25 percent cap on Allowance for Loan and Lease Losses (ALLL) especially considering the Financial Accounting Standards Board’s (FASB) most recent proposal on ALLL;

  • Supplemental capital authority is needed now more than ever considering the restrictions brought on by this rule; and
  • The proposed 18-month implementation timetable is not long enough for a rule as complex and impactful as this proposed rule.

"We look forward to working with NCUA to improve the credit union system through regulatory improvements and reduction."

To access NAFCU’s comment letter, go to  For more information on capital reform, go to

The National Association of Federal Credit Unions is the only national organization that focuses exclusively on federal issues affecting credit unions, representing its members before the federal government and the public.

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