By Ray Birch
BIRMINGHAM, Ala.—Are CUNA and NAFCU now more focused on derailing risk-based capital via political and, possibly, legal avenues than trying to further shape the proposal through the rulemaking process?
That question was raised by several sources who spoke with CUToday.info, with those same sources suggesting that Board Member Mark McWatters’ dissenting vote on the latest rule may have encouraged what they say is a shift in the trade associations’ tactics to stress the lack of need for RBC.
CUNA and NAFCU, however, say the latter suggestion is off-base, and that they have always stressed credit unions do not need RBC due to their capital strength, and have not wavered from that position.
“I think Board Member McWatters’ thoughtful dissenting opinion at the NCUA board meeting regarding both the necessity and the legality of the revised proposal has spurred some credit union leaders and trade groups to return to their original 'necessity' argument, in addition to ongoing efforts to shape the regulation to be more balanced,” said Dennis Dollar, principal at Dollar Associates.
Rule Reshaped First
The return to the necessity for RBC argument, noted the former NCUA chairman, comes after credit unions and the trade associations were able to share comments that led to a significant reshaping of the risk-based capital proposal.
“Whether this (latest) effort (to focus on RBC necessity) has any success or gains any traction is yet to be seen. But it is a shift of strategy that
Carrie Hunt, NAFCU
actually makes some sense in how industries have historically approached controversial rulemakings,” stated Dollar.
“Since the commenters have made some progress in shaping the regulation to be less potentially damaging, they are now more comfortable returning to their initial argument regarding the necessity of an RBC rule to begin with,” continued Dollar. “This is not unexpected and is somewhat the natural flow of the process when a regulation is so far reaching and the concerns about its potential impact come from so many different perspectives.”
A source, asking for anonymity, asserts that both CUNA and NAFCU have shared inconsistent positions on the rule—saying prior to the first proposal there was no need for RBC, then stating the initial rule needed a lot of improvement, and now arguing credit unions do not need RBC due to their already strong capital position. NAFCU President Dan Berger and CUNA President Jim Nussle both issued statements immediately following the second proposal’s release stating RBC is unnecessary.
Trades Counter
But CUNA and NAFCU say that isn’t true and that they have consistently stated that credit unions do not need RBC.
“NAFCU has never wavered,” said Carrie Hunt, SVP/general counsel. “If you look at every single statement we have made, we say we will do all that what we can to make the rule better, but we don’t think this rule is needed. If we are to have a risk-based capital system, we need legislative changes.”
Mary Dunn, CUNA
CUNA Deputy General Counsel Mary Dunn also emphasized that CUNA has always stated that risk-based capital is not needed for credit unions.
“We don’t believe risk-based capital is necessary for credit unions. That said, CUNA would be doing our members a huge disservice—when it is almost inevitable that a rule will be adopted—to not do everything we can to improve the rule.”
Congressional Action
And is the attention now on the lack of necessity for RBC, and possible legal action, good moves to gain the attention of congress?
“Again, we have always said the rule is unnecessary,” said Ryan Donovan, CUNA SVP-legislative affairs, who stressed that Congress already is focused on RBC, evidenced by the fact that more than one-fourth of the Senate and three-fourths of the House weighed in during the first round of comments. “And we stand by that. We stand by the legal opinion we have received that questions the authority of NCUA to issue the two-tier capital structure. But we are at a stage right now where we can count the votes on the NCUA board. So what we are trying to do now is listen to our members’ remaining concerns and address those with NCUA with the hopes that further improvements will be made with the final rule.”