(From The Credit Union Journal)
A regulatory-relief bill introduced in a House committee before Congress left on its monthlong recess left out a proposal backed by the National Credit Union Administration that would establish a risk-based capital system for credit unions.
The bill, like the one the House passed in the last Congress, would accomplish about a dozen industry priorities. These include letting credit unions keep their select groups after converting to community charters, letting them provide limited services to nonmembers, and letting privately insured credit unions join the Federal Home Loan Bank System.
But lawmakers drafting the bill omitted the risk-based capital provision, which had emerged as the industry’s top priority and had been endorsed by several lawmakers.
In May, Rep. Ed Royce, R-Calif., and Rep. Paul Kanjorski, D-Pa., introduced legislation that would have established risk weighting in determining credit union’s capital ratios. It also would have reduced the capital threshold for well-capitalized credit unions from 7% to 5%. (A risk-weighted capital system, similar to the one banks use, would allow credit unions to reserve less capital against less risky assets, such as residential mortgages.)
Rep. Jeb Hensarling, R-Tex., drafted the bill that came out of the House Financial Services Committee. Some industry observers wondered if he intentionally omitted the risk-weighted provision as payback to the NCUA, which recently blocked a Dallas credit union — based in Rep. Hensarling’s district — from converting to a thrift.
Rep. Hensarling has been one of the most vocal congressional critics of the NCUA’s decision last month to invalidate the ballots of members of the $1.4 billion-asset Community Credit Union in Plano, Tex., who voted overwhelmingly in favor of a conversion. He is one of 22 Texans in the House that sent a letter to the NCUA opposing the agency’s actions.
“He’s up in arms about it,” one industry source said.
But one credit union lobbyist said that the omission of the risk-based provision reflects a lack of consensus among House Financial Services Committee members when it comes to giving the NCUA the power to set its own risk-based capital standards. Gary Kohn, a lobbyist with the Credit Union National Association, said that the committee’s leadership wanted to present an uncontroversial bill so that it would have a better chance of passing.
“This means we’ll just have to work harder” to include the risk-weighted provisions in future bills, Mr. Kohn said.
A spokesman in Rep. Hensarling’s office said there “was no special intention” to omit the risk-weighted provision from the bill, which is aimed broadly at easing regulations for banks, thrifts, and credit unions.
The spokesman said the provision is included in the Royce-Kanjorski bill, though most observers expect that bill to eventually be rolled into the broader bill.
Lawmakers will return to Washington after Labor Day.
