ALEXANDRIA, Va. — The NCUA is fully aware of credit unions' concerns about its proposed risk-based capital rule, including discretionary examiner authority to set capital standards and the rule's impact on some shops' business lending.
In an interview with Credit Union Journal Monday, Matz said changes to the proposal are coming, and reiterated that NCUA may consider extending the final rule's effective date.
She outlined that the regulator is willing to make adjustments — as with any proposed rule — if the content of the comments is convincing.
The amount of comment letters, including the letter from the House members carrying 324 signatures, is not what's swaying
And the regulator has no plans to extend the deadline to submit comments, which is May 28.
In reading through comment letters herself, as well as what staff attorneys have picked up, Matz said NCUA is aware credit unions have a great deal of concern the rule — as currently drafted — suggests examiners will be able to arbitrarily set a CU's capital requirement, regardless of what the new capital rule states.
"I know there is concern that examiners will be able to tell credit unions to hold more capital, even though the credit union is not required to do that by the [risk-based] formula," Matz told Credit Union Journal. "There is a lot of concern discretionary authority will be given to examiners."
No 'Arbitrary Authority' To Examiners
But Matz said it was never the agency's intent to give "arbitrary authority" to examiners.
"Perhaps we did not write [the proposal] as clearly as we should have," she said. "Our intent was that if the examiner feels a credit union should hold more capital above and beyond what is required in the rule, they would have to go to their supervisory examiner, who would have to go to their regional director, who would then have to come to the board. Many steps would have to be worked through and, ultimately, the board makes the final determination."
Matz said NCUA is also aware of concerns regarding how the rule could negatively affect credit unions that rely heavily on member business lending, having no MBL cap since they were grandfathered in when this cap was established in the late 1990s.
After seeing the risk-based capital proposal,
The $147 million CU makes taxi medallion loans, and the risk weighting under the proposal dropped the 11.94% net worth CU drop to 6.79% on the risk-based calculation, well below the proposed 10.5% well-capitalized floor.
Matz said NCUA is looking at situations such as the one potentially facing Montauk.
"It was never our intent to put out of business credit unions whose sole purpose is making business loans — such as credit unions that make taxi medallion loans and agricultural loans," said Matz. "If that is an unintended consequence of the proposal, we need to address that."
Matz has already stated that NCUA may consider delaying the rule's effective date if "sensible reasons" are raised by comment letters. Specifically, she told the Hawaii Credit Union Association Friday that the 18-month timeframe, following a final risk-based capital rule, is not "etched in stone."
The chairman recognized how vocal credit unions and industry observers are about the proposal, submitting more than 800 letters as of Monday —
The House letter asks the regulator to consider the cost and burden from the rule, to consider giving credit unions more time to comment and comply and for "justification and more clarity" about why the risk weights in NCUA's proposed rule are different than the standards in place for other community financial institutions.
"When we put out a proposed rule, that is what it is — a proposed rule," said Matz. "We always want to hear what the comments are, get feedback from stakeholders and discuss every aspect of the rule before making it final. That is how we do business."
Nothing Came 'Out Of Thin Air'
Matz addressed credit union concern over the risk weightings, and a published report that stated NCUA pulled the risk weights "out of thin air."
"That could not be further from the truth. I cannot imagine a greater misstatement," said Matz. "Our staff has worked on this [rule] for two years and tried very hard to get it right. And if things need to be corrected they will be corrected in the final rule."
Industry insiders say that NCUA could face a lawsuit over the final rule, but Matz said the agency is paying little attention to the rumors.
"I don't think [anyone] will have any grounds for suing us," Matz said. "We will get this rule right and we will certainly be within our statutory authority. These types of threats, whether veiled or open, really don't move us one way or another, and we do what we need to do and do the best we can at what we do."
The deadline for comment letters to NCUA on the proposal is May 28. Matz has twice declined requests from CUNA and NAFCU to provide an extension. Michael Fryzel is the lone board member who supports extending the comment period.
