ALEXANDRIA, Va. — In casting the lone vote Thursday against passing the final rule on capital planning and stress testing, NCUA Board Member Michael Fryzel held some of the same concerns voiced by credit unions and the CU trade associations about the proposal.
At the open board meeting Thursday, Chairman Debbie Matz and Board Member Richard Metsger, voted in favor of the rule that requires all federally insured credit unions with assets north of $10 billion to develop and maintain capital plans, and undergo annual stress tests.
In interviews with Credit Union Journal, all three members of the NCUA board shared their viewpoints on the stress testing rule.
Fryzel emphasized that NCUA could have delayed the vote for a short period.
"All this rule needed was a little more time to work with the four credit unions right now that are involved. And we could make it a better rule to give them a better understanding," said Fryzel.
The board member, whose six-year term as an NCUA director expired last August and will officially end when Mark McWatters takes the seat, said he spoke this week with CEOs of the affected CUs. Today, four credit unions have more than $10 billion in assets: BECU, Tukwila, Wash.; Navy FCU, Vienna, Va.; Pentagon FCU, Alexandria, Va.; and State Employees FCU, Raleigh, N.C. A fifth CU, SchoolsFirst FCU, Santa Ana, Calif., is poised to join the club soon.
"All indicated to me that some of the assumptions that they were told, some of the things that were expressed to them within the rule were different," said Fryzel. "And all I said was, let's take another 30 days and work it out. Let's get everybody to understand.' Not that we wouldn't go forward with a stress test rule--absolutely it's needed. Let's just get a better understanding between the regulator and the industry."
Fryzel pointed out that the agency is not "in a crisis mode; there's no need to rush it. This isn't a corporate crisis."
A significant issue is cost, which NCUA has raised from its original projection of $4.2 million in the first year to $5 million. Fryzel told Credit Union Journal that as the rule's versions were adjusted, he shared concerns inside the agency about expense.
Fryzel explained that he said the costs would be "major" and that Metsger has discussed increasing NCUA staff to be able to do the tests internally. "Can you imagine the cost of that—getting enough people on board to be able to do those tests by ourselves? It's going to be astronomical."
The agency adjusted the final rule to possibly allow credit unions to do their own stress testing after three years. Third parties will be working with NCUA to conduct the initial stress tests.
Matz disagreed with Fryzel that more time was needed to develop a final rule.
"I feel that reasonable people can disagree and I understand why he [Fryzel] feels the way he does, but I just don't agree with him," Matz told Credit Union Journal. "I think we've had ample time. We only had 22 comments. They were thoughtful comments. We responded to many of them, and we were ready to move on it."
Matz added that NCUA wanted to synchronize stress tests to the Federal Reserve's testing.
"If we waited we would have lost a whole year because we needed to put out the RFP and get the contractor on board quickly in order to meet that schedule," said Matz. "We knew that this was really our last chance to do it this year."
Metsger also pointed out to CU Journal that comments received from the four covered credit unions all supported doing stress testing.
Both Matz and Metsger expect the rule will be fine-tuned over time.
"We're doing it for the first time so once its implemented we might have to make some... adjustments," said Matz. "But right now I think it's a good, thoughtful rule."
Metsger said he expects NCUA will "learn lessons" in the first few years of the rule. "We'll make adjustments to it and that's one of the reasons why I changed my original position to disclose those results...a future board can let those results out."
