NCUA Urges Passage of CU Supplemental Capital Bill

WASHINGTON — The National Credit Union Administration issued a comprehensive report Monday defending the agency's risk-based capital rule and urging lawmakers to make several legislative changes.

The NCUA finalized its risk-based capital rule for credit unions last month after a bruising, multi-year battle with industry officials and lawmakers.

Now the agency has issued a lengthy report detailing its authority to issue the rule and its rationale for different capital risk-weights prescribed within the rule. NCUA Chair Debbie Matz agreed to write the report after the rule was finalized, based on legislation by Rep. Denny Heck, D-Wash., that passed the House Financial Services Committee in late September.

The report finds that the industry could benefit from the passage of a banking panel bill, by Reps. Peter King, R-N.Y., and Brad Sherman, D-Calif., that would allow healthy credit unions to issue supplemental capital that would count as net worth. The report notes that the NCUA has long supported the proposal.

"This legislation would result in a new layer of capital, in addition to retained earnings, to absorb losses at failed credit unions, protect the Share Insurance Fund from losses, and safeguard taxpayers," the report says.

Regulators, meanwhile, are already working on their own rule to ease use of supplemental capital towards the risk-based standard, which will be effective Jan. 1, 2019.

The NCUA also recommended in the report that Congress consider several technical changes to the rule, along with its analysis of the rule and potential impact on credit unions.