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NCUA proposal could have a big effect on credit unions' capitalization


A risk-based capital plan that could cut credit union capital buffers by billions of dollars has become a top industry concern, but credit unions still have time to that understand how it could impact their balance sheet and comment on the issue before a final rule takes effect.


The National Credit Union Administration’s proposed risk-based capital rule would apply to all federally insured credit unions (including those with state-charters) above $50 million in assets. According to CUNA, some credit unions affected by the proposal would enjoy greater capital buffers above well-capitalized thresholds, while others would not.


Because of how certain assets like real estate and member business loans are risk-weighted under the proposal, CUNA reports that some credit unions collectively would have to increase their capital levels by a net $7.3 billion in order to remain within the proposed "well-capitalized" range.


It has also been suggested that the proposal could force credit unions to preserve their capital cushions by rebalancing assets—such as their income-producing investments—or rationing or repricing member services.


Under the proposal, NCUA could also raise the risk-based capital requirement of an individual credit union above the normal threshold levels based on subjective factors.


To learn more, use resources in CUNA’s RBC Action Center (login required), including:


  • CUNA’s Comment Call, which provides an overview

  • CUNA’s video explaining how the proposal could impact credit union balance sheets

  • CUNA’s recent RBC webinar

  • Calculators provided by NCUA and CUNA to apply the proposal to their own credit union


Space is also being limited for NCUA's upcoming listening sessions that will offer a forum to discuss the proposal. Registration is required.


While The League will urge the NCUA to consider whether the rule is needed at all given how well most credit unions came through the recent recession—and suggest ways to narrow the rule to minimize unintended consequences—credit unions can add their feedback and comment on the proposal by sending comments to Jo Whiting or Paul Guttormsson by May 1 (deadline extended) to be reflected in The League’s Comment Letter or directly to NCUA by May 28.


The League advocates for Wisconsin credit unions on regulatory issues to ensure their voice is well represented on issues affecting the service that Wisconsin's 2.4 million members receive.


Credit unions are represented in the regulatory advocacy process by The League's Regulatory Advocacy Council.


©2005 Wisconsin Credit Union League. All rights reserved.
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