TUKWILA, Wash. BECU on Thursday said it also welcomes NCUA’s proposal to conduct stress testing on the largest credit unions, adding it has been conducting its own stress tests for years to determine the proper level of capital adequacy.
“We are in favor of stress testing and look forward to NCUA proposal,” Mike Quamma, vice president Treasury for the $11-billion credit union, told Credit Union Journal yesterday.
On Wednesday NCUA proposed to start stress testing credit unions with more than $10 billion in assets to determine their risk portfolios in a variety of scenarios, something the Federal Reserve is doing for the largest banks. BECU is the second of the four $10 billion-plus credit unions to endorse stress testing, joining North Carolina SECU. The other two are Navy FCU and Pentagon FCU, which did not respond to requests for comment.
Quamma, of the one-time Boeing Employees’ CU, said it has been conducting its own internal stress testing for as long as nine years to be able to support its capital levels for NCUA and state regulators. The tests are particularly important for credit unions such as BECU, which manage toward a lower capital goal. “Upper 8s to lower 9s,” according to Quamma. “It’s all predicated on the risks, the economy, things like that,” that can be supported by the stress tests.
He suggested stress tests would be appropriate for all credit unions, with regulators developing a universal test for smaller balance sheets that differs from the sophisticated models used by large credit unions such as BECU. In fact, he said he believes every credit union with more than $1 billion in assets is already conducting some kind of internal stress testing “in some way, shape or form.”
