Thomas Renz, Commodore Perry
OAK HARBOR, Ohio—Thomas Renz thinks the new risk-based capital rule is “absurd,” saying the 10% threshold for a CU to be well capitalized is ridiculous.
“The 10% is definitely an improvement over the original proposal, but most likely still illegal,” said Renz, president of the $35-million Commodore Perry FCU, in his initial review of the rule, noting past arguments made by CUNA.
Renz thinks a 10% well-capitalized risk-based standard is “unnecessary.”
“While I would be willing to recognize that Congress intended for NCUA to have an amount of freedom to define levels of capitalization above the statutory limit for adequately capitalized, 10% is approaching double the limit Congress imposed for what it considers adequate capitalization,” said Renz. “If, as the NCUA argues, this is authorized under the statute, then would they be of the opinion that the statute would allow them to impose a 40% well-capitalize standard? Where is the limit? Perhaps the NCUA can regulate what we do with all of the money in question.”
Renz added that some indication of congressional intent regarding CU capital standards can be gleaned from ongressional reaction to the first RBC rule.
“We had a tremendous number of letters from elected officials on both sides of the aisle go to the NCUA. What does this say about the NCUA’s respect for the will of the body that created it and delegated the power from which it is creating this mandate? If NCUA cares about congressional intent is this really the proposal they want to make?
Renz also questions why the new rule is 450 pages.
“My background is law, and I can tell you that fully dissecting and understanding 450 pages for a single regulation is a daunting task,” Renz said. “How can most CU execs be expected to handle this? The answer is, simply, that they can’t and so they will simply follow what they are told to do by the trades, which are a good resource. Very few will ever fully understand the rule, and so examiners will have 450 pages of a single rule to pick from when they want to find something to hit your CU with.”
Like others, Renz is disappointed the new proposal did not address supplemental capital.
“CUs are supposed to raise their net worth ratios by almost half again over the existing requisite level but there is no additional authority granted to them to do so?” stated Renz. “This proposal is terrible. An improvement, yes, but still terrible.”
Related
CUToday.info Resource: Risk-Based Capital Central
McWatters Challenges NCUA’s Legal Authority To Issue Two-Tiered Rule
NCUA Board Approves Issuing New RBC Proposal
CUNA, NAFCU & NASCUS Weigh In On RBC
A Graphic Overview of NCUA's Risk Based Capital Proposal