Scott Wilson, SeaComm FCU
NORTH LIBERTY, Iowa—Amid opposing legal opinion letters on NCUA’s authority to issue a two-tiered RBC rule, and discussions about whether a risk-based capital plan is necessary at all, several CU executives see the new proposal as a significant improvement over its predecessor and workable.
Execs pointed to NCUA listening carefully to comment letters, evidenced by the changes in the new rule.
Todd Fanning, SVP and CFO at the $2.5-billion University of Iowa Community Credit Union, emphasized key changes that make the second version of RBC better for his credit union.
“Generally, I feel it is a step in the right direction, if, in fact, we have to have the rule at all—and it appears that we will,” said Fanning after a preliminary review.
Fanning reacted first to the lowering of the minimum capital threshold from 10.5% to 10.0% and the lowering of risk weights for mortgages and CUSO investments.
“We are now at the correct minimum and I don’t believe our operations will need to change in any way to be well-capitalized by the time this becomes a rule in 2019,” said Fanning. “The extension of the implementation timeframe and a second comment period are also very positive developments for the industry.”
Rule Should Account For The Well-Performing
Fanning thinks the rule can be improved, particularly around measures to account for well-performing credit unions.
“I still believe there should be some credit given for those who have been historically profitable and had low delinquency,” he said. “In this way, there could be some distinction between those credit unions who may be a lower risk. Additionally, I was hopeful that there would be credit given for the NCUSIF funds and a lowering of the MSR weighting. Maybe these issues will come out during the comment period.”
Greg Smith, PSECU
In Massena, N.Y., Scott Wilson, CEO of the $482-million SeaComm FCU, is more positive this go-round after a glance at the new rule.
"Initially, I would have to say I like it much better than the initial proposal,” said Wilson shortly after the new rule was approved. “NCUA giving it another look after the previous comment period and the voluminous comments speaks loudly to the fact that credit unions and the industry’s trade associations showed NCUA the flaws in the initial proposal.”
Wilson noted that he is pleased the individual minimum capital requirement is no longer part of the proposal. “That is beneficial. But I will reserve any other opinions related to the new rule until I have time to deeply delve into the entire proposal.”
Greg Smith, CEO at the $4-billion Pennsylvania State Employees CU in Harrisburg, Penn., said the size of the rule makes a quick opinion difficult.
“I am encouraged to see in the rule’s preface that the agency took the 2,000 comments into consideration,” said Smith. “It’s hard for me to imagine that this second proposal could be worse than the first, especially if the agency seriously considered the feedback from the industry. I’ll be optimistic until further notice.”
Related
CUToday.info Resource: Risk-Based Capital Central
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A Graphic Overview of NCUA's Risk Based Capital Proposal