Washington — CUNA officials continue to insist NCUA lacks statutory authority to implement a two-tiered risk-based capital rule.
"Students of the Federal Credit Union Act — and there are some of you in the room — know the law does not allow NCUA to set up a two-tier system," Mary Dunn, CUNA's deputy general counsel, said earlier this week.
Dunn appeared before an audience of more than 200 CU executives attending an "RBC2 Breakout Session" at the trade group's 2015 Government Affairs Conference (GAC) in Washington.
Another speaker, Bill Raker, president and chief executive officer of $994 million US Federal Credit Union in Burnsville, Minn., said he questioned whether the industry needed risk-based capital. "I really don't believe it's necessary," Raker said. "We have sufficient capital and we know how to manage it."
That may be, but Dunn admitted the chances of actually blocking the proposal from being implemented are slim. NCUA Chairman Debbie Matz and Vice-Chairman Rick Metsger have declared their support, and on a three-member board, their votes are all that is needed to make RBC a reality.
A legal challenge remains a possibility, though Dunn said most courts, including the U.S. Supreme Court, give regulatory agencies exceptionally wide latitude in their operations.
CUNA seems far from ready to throw in the towel, however. Even if it loses the war, CUNA can still win some battles, according to Dunn.
She characterized its strategy as an effort to "leverage its concerns" to pressure NCUA into making additional changes to its risk-based capital plan, beyond the substantial re-write the regulator unveiled in January.
The original version was made public Jan. 23, 2014.
At the top of the list of provisions CUNA would like to see reworked is one requiring credit unions subject to the RBC rule to "maintain a written strategy for assessing capital adequacy and maintaining an appropriate level of capital."
Dunn did not detail what changes CUNA would like to see, but she did outline why it finds the provision so worrisome. Dunn said capital adequacy plans would have to be approved by NCUA and could conceivably be used by examiners as a pretext to require individual credit unions to hold capital above the levels required by the risk-based proposal. "It's a very subjective standard," she said.
Suzanne Weinstein, chief financial officer at $192.4 million Orlando Federal Credit Union in Orlando, Fla., also expressed concern about how the capital adequacy plan would be used.
Dunn and CUNA chief economist Bill Hampel said a renewed letter-writing push is probably the best chance CUs have to press NCUA for additional alterations to its risk-based capital proposal. Further congressional intervention, like the letter criticizing the original proposal that 173 lawmakers sent to Matz last May, is unlikely, according to Hampel.
"NCUA has essentially addressed their concerns," he said.
