In one of his last official acts as NCUA Chairman, Dennis Dollar called on lawmakers to enact a risk-based capital system for credit unions as part of their regulatory relief initiative.
In separate letters to Senate Banking Committee Chairman Richard Shelby (R-AL) and Sen. Michael Crapo (R-ID), who is drafting a Reg Relief bill, Dollar said a risk-based system would allow NCUA and credit unions to better measure, monitor and evaluate risk than the current system of prompt corrective action, which sets a minimum standard of 7% for credit unions of all sizes and structures.
Dollar sees the risk-based capital system as a way to ease some of the strains on net capital caused by the last three years' massive inflows of new savings into the credit union system, which has diluted capital ratios. While some observers see the ability to raise secondary capital as one cure, Dollar maintains that secondary capital may not be necessary with a risk-based system.
The risk-based capital proposal, which will likely take years to enact, is seen by Dollar as one of his legacies to the credit union movement.
Dollar also reiterated his support for provisions in the version of a Reg Relief passed by the House last month, including giving NCUA, instead of Congress, authority to set limits on loan maturities, permissible credit union investments and investment levels in CUSOs; easing of restrictions on voluntary mergers; and allowing credit unions to provide limited services, like check cashing and wire transfers, to non-members within a field of membership.
