ARLINGTON, Va.-State regulators have offered their feedback to what their federal counterparts have planned.
The National Association of State Credit Union Supervisors (NASCUS) has filed its comment letter to NCUA on the agency’s proposed changes to Rules and Regulations Parts 700-703; 713, 723, and 747 regarding prompt corrective action (PCA), as well as the revised risk-based capital proposal.
In the second round of comments, NASCUS said it encouraged NCUA to take a closer look at the appropriate definition of a “complex” institution, the approval of supplemental capital for RBC purposes, and the use of concentration risk-weights for real estate and commercial loans, among other issues.
“The numerous modifications undertaken by NCUA represent a significant improvement over the original proposal,” wrote NASCUS. “Nevertheless, the current proposal requires additional refinement to ensure that it is right-sized for the credit union movement and does not create a competitive disadvantage relative to the banking industry.”
NASCUS’ comment letter calls on NCUA to refine the list of activities that is used to identify complex institutions. “Real estate loans, investments with maturities greater than five years, and Internet banking are staple activities of financial services institutions in today’s marketplace and should not be considered complex,” wrote NASCUS.
NASCUS also recommended that the threshold for complexity be set where all or most credit unions are engaged in four or more of the activities identified as complex.
“The Federal Credit Union Act requires NCUA to define a complex credit union based on its portfolio of assets and liabilities,” NASCUS wrote. “A single complex activity is generally not representative of a credit union’s entire portfolio, and arguably does not rise to that standard.”
NASCUS also urged NCUA to remove concentration risk-weights from the rule, citing supervisory tools and the new capital adequacy planning requirements under proposed section 702.101(b) as better options to target outlier credit unions: “Utilizing capital adequacy plans to address concentration risk would control for concentrations that pose safety and soundness risk without placing the wider credit union system at a competitive disadvantage compared to banks,” they said.