LAS VEGAS — Despite NCUA Chairman Debbie Matz's repeated promises of significant changes that will be made to the agency's proposed risk-based capital rule — most recently at NAFCU's annual meeting here — there's still a lot of anxiety among credit union executives about how the final rule will shake out.
Bradley Beal, president and CEO of One Nevada Credit Union here in Las Vegas, said he had three reactions: First, credit unions will have to "wait and see" what types of fixes and/or changes NCUA makes to the proposed rule. Second, he echoed what many CU leaders have been asking for all along — a new proposed rule and an accompanying second comment period.
"Third, I want to know something I have not heard anyone from NCUA address, and that is how does all this trickle down to the member level? How does it affect auto loans? How does it affect mortgages? There are all kinds of potential impacts," Beal said.
One of the things Matz brought up during her speech at NAFCU — and at each of the three recent "Listening Sessions" — was that the $7 billion cost of the proposed rule, as estimated by NAFCU and CUNA, was based on incorrect assumptions related to CUs feeling the need to raise money to have a buffer to prevent them from falling below the 7% net worth ratio.
Matz has said the figure is much more likely to be closer to $700 million, not $7 billion.
But credit unions aren't buying it. Dan Berger, president and CEO of NAFCU, told the audience the trade group "stands by" the $7 billion figure Matz disputed, and promised NAFCU would continue to press NCUA on that front.
Still, there is some optimism that NCUA will be making some key, positive changes to the rule, most notably changes to the risk weights.
Steve Van Beek, an attorney who exclusively represents credit unions at Howard & Howard in Royal Oak, Mich., said he also heard Matz speak at the listening session in Chicago and
"NCUA is aware that credit unions are unhappy with risk weightings," he said. "The $7 billion figure will be argued, but it is clear credit unions will keep a buffer. The biggest concern is it feels as if NCUA did not do its homework up front. They did not talk to credit unions, and they did not talk to the trade groups — and there were offers."
But what hasn't changed is the likelihood that NCUA will reissue the revised rule for a second comment period, rather than simply moving to a final rule — something credit unions still hope the regulator will consider.
"NAFCU continues to be concerned with how the rule will affect credit unions' ability to lend," said NAFCU SVP of Government Affairs Carrie Hunt. "There needs to be a second comment period, and we need a final rule that does not harm the industry. There is a lot of work, and Chairman Matz mentioned some risk categories may be lowered, but there needs to be parity with banks."
A second comment period, she added, would help to avoid any "unintended consequences" when changes are made to the initial proposal.
Other Concerns
Risk-based capital wasn't the only thing on credit unions' minds.
Van Beek said he was pleased to hear that NCUA is reviewing advertising requirements for online and social media.
"Everyone is concerned about the risk-based capital rule, but this is important, also. Any type of guidance from NCUA that gives credit unions flexibility with posts and tweets really helps," he said. "The current restrictions are an everyday headache."
Van Beek also was encouraged by Matz's declaration that, at next week's NCUA board meeting, the regulator would eliminate the 5% fixed asset cap. "That is a step in the right direction and will help," he assessed.
Hunt also cited Matz' discussion of fixed asset relief as a "positive development," and something the trade group has been "pushing for for a long time."
Chairman Matz spoke at length about interest-rate risk and the regulator's concern that CUs are not taking it seriously. Hunt said NCUA needs to address interest-rate risk "with a scalpel, where there is cause," rather than "creating a regulation that restricts other credit unions that do not have an issue with interest-rate risk."
