By Chip Filson
The Seven Cooperative Principles make clear credit unions’ obligations as financial cooperatives, so the revised, proposed risk-based capital rule (RBC II) is a test of the our industry’s willingness to act on the vital second principle – self-governance.
Regardless of technical details and issues related to the rule the question to answer is a simple one: Is RBC is good public policy for credit unions?
It’s time to decide. The comment period for NCUA’s second proposed risk-based capital rule (RBC II) expires April 27, 2015, making it vital for credit union managers, volunteers and supporters to submit their comments.
As an information service, here are the Top 10 Reasons to (not) Support the proposed rule:
10.The rule will put NCUA in the risk-assessment business, along with Standard & Poor’s and Moody’s. NCUA can exercise greater regulatory authority and mandate credit risk weightings on every credit union asset, whether held on- or off- balance sheet.
9. All credit unions, regardless of location, history or circumstance, will follow a uniform, national legally mandated risk-assessed capital adequacy model.
8. It will enable NCUA to expand call reports to dozens of additional accounts and numerous pages of supplementary information filed four times a year.
7. It will finally make credit unions’ regulations and structure more bank-like.
6. Following the Basel precedent, NCUA can grow its administrative and analytical staff to propose the constant adjustments and rule changes to remain responsive to market trends.
5. The rule will give NCUA the opportunity to draft additional rules and legislation to explain future credit union failures. When banks’ risk-based capital rules prevented neither massive failures nor economic crisis, Congress passed the Dodd-Frank bill to dictate more regulations.
4. The rule will enhance NCUA’s status as a truly “independent” agency, able to interpret the Federal Credit Union Act however it wants, regardless of Congressional intent or NCUA’s own prior understandings.
3. It will provide a job creation boon for the economy: Vendors serving the industry will offer software and consulting solutions, new NCUA staff positions will monitor all the data, and credit union compliance staffs will expand.
2. RBC II is slightly better RBC I, so let’s pass it now, allowing more time to explain to members why their loan rates are going up and dividends are going down.
1. It’s a brain teaser: an ever-changing solution that offers a never-ending challenge of finding a problem.
Chip Filson is president/CEO of Callahan & Associates, Washington, D.C., and has more than a quarter century of in-depth experience in government, financial institutions, and business. Mr. Filson co-founded Callahan & Associates in 1985, and previously held concurrent positions at the National Credit Union Administration (NCUA), as president of the Central Liquidity Facility (CLF) and as director of the Office of Examinations.