Bankers Endorse Risk-Based Capital For CUs
A representative of the American Bankers Association said last week the bankers group supports credit unions' efforts to enact a risk-based capital system for credit unions, but not the one NCUA has proposed to Congress.
"We think it's wise that you (credit unions) have risk-based standards that are comparable to the banks' risk-based standards," said ABA Economist Keith Leggett, said during a debate on risk-based capital with NAFCU President Fred Becker before the Metropolitan Area CU Managers Association. The ABA, though, continues to oppose the NCUA proposal on a risk-based system sent to Congress because it fails to properly measure certain risks for credit unions, like the capital invested in corporate credit unions and the 1% of assets deposited with the NCUSIF, said Leggett, who called on credit unions and NCUA to work with the bankers on developing a new risk-based system based on the so-called Basel 1A capital plan. He said a risk-based system for credit unions should recognize the numerous risks to capital posed by the marketplace other than credit risk, including operational risk, interest rate risk, liquidity risk and reputational risk.
But Becker said the proposal introduced by NCUA is similar to a risk-based system currently in use by the FDIC for banks. He said NCUA's current minimum capital rules, known as prompt corrective action, or PCA, need to be changed to recognize the varying degrees of risk posed by different credit unions. "The current system needs to be improved and this does it," said Becker.