ARLINGTON, Va. — NCUA's proposed risk-based capital rule will force CUs with more than $50 million in assets to hold an extra $6.3 billion in reserves to achieve the same capital cushion they have today, NAFCU reports.
NAFCU Chief Economist and Director of Research Dr. David Carrier analyzed the impact of NCUA's proposed rule on risk-based capital and came up with the analysis.
"This rule as proposed will have unpredictable consequences for loan and share growth, as individual credit unions will need to adjust their balance sheets to meet the new requirements," he said. "Because credit unions cannot just raise capital from the open market, this cost will undoubtedly be passed on to credit union members."
Carrier analyzed the data by asset size and credit unions and found:
- Credit unions with assets from $50 million to $100 million will need to hold a total of $192 million more in additional reserves in order to have the same capital cushion under the proposed system.
- Credit unions with assets from $100 million to $250 million will need to hold a total of $346 million more.
- Credit unions with assets from $250 million to $500 million will need to hold a total of $1.05 billion more.
- Credit unions with assets from $500 million to $1 billion will need to hold a total of $1.28 billion more.
- Credit unions with assets above $1 billion will need to hold a total of $3.47 billion more.
CUNA examined 2,504 federally insured credit unions with more than $40 million in assets, and compared their current margins above being well capitalized to what they would be if the NCUA proposal were in effect.
CUNA Chief Economist Bill Hampel explained that though the new rule applies to CUs with more than $50 million in assets, "many-if not most-of the almost 300 credit unions with between $40 million and $50 million in assets will exceed the $50 million level in just a few years."
A final capital rule is not expected to go into effect until 2016 or later.
