Risk-Based Capital Doubtful In RegulatoryRelief Bill

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WASHINGTON - (03/01/06) -- The Treasury Department has refusedto endorse NCUA proposal to enact a risk-based capital system forcredit unions, making passage of the key NCUA priority extremelydoubtful. In remarks to CUNA's Government Affairs ConferenceTuesday, Emil Henry, Treasury's assistant secretary for financialinstitutions, said the Bush Administration would not endorse thesame risk-based capital system required of banks and thriftsbecause of fundamental differences with credit unions. "Of course,these fundamental differences support the varied tax treatment ofcredit unions," said Henry. In addition, he noted the differentcapital structures of credit unions and their inability to raisenew capital outside of retained earnings, which "argues fordiffering capital requirements between credit unions and otherinstitutions." Since Treasury designed the current minimum capitalrequirements for credit unions, known as prompt correct action, orPCA, Treasury's endorsement of an amended system is critical togetting Congress to go along. Henry's remarks come as NCUA ChairmanJoAnn Johnson is scheduled to testify before the Senate BankingCommittee Wednesday and urge enactment of a risk-based capitalsystem for credit unions as part of regulatory relief. The House isexpected to vote later this month on a regulatory relief packagethat does not include the risk-based capital proposal.

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