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Marchant Questions NCUA's Statutory Authority on Risk-Based Capital
Monday, July 14, 2014 6:55 AM

House Ways and Means Committee member Rep. Kenny Marchant (R-TX) recently wrote to NCUA Chair Debbie Matz concerning the agency's risk-based capital proposal. NCUA is currently in the process of finalizing the revisions to the proposed rule.

In his July 10 letter, Marchant cited a number of concerns that are shared by Cornerstone Credit Union League. "The Federal Credit Union Act (12 U.S.C. 1790d (d)(2)) appears to clearly limit the Board's authority to impose risk-based capital requirements for which the adequately capitalized net-worth level does not provide adequate protection," Marchant said. He then asked Matz to identify the statutory authority on which the Board is relying to impose a higher risk-based capital requirement on well-capitalized credit unions.

Marchant also pointed out that, in some cases, the risk weights are more stringent than those imposed on small banks, and he requested an explanation as to why the NCUA is attempting to regulate concentration and interest-rate risk through the addition of new capital requirements as opposed to relying on NCUA examiners to monitor concentration risk of individual credit unions.

He pointed out the differences between the prompt corrective action structure that Congress imposed on credit unions in 1998 and the system imposed on banks. He said that, notwithstanding the distinctions, "[T]he proposed rule would reserve for the Board the ability to impose individual capital requirements on credit unions." And he asked again for Matz to explain the statutory authority on which the NCUA is relying to exercise that power.

Marchant questioned the proposed 18-month time frame for implementation, and he said, "Any proposal that exceeds the authority of the Board and imposes undue regulatory burden on credit unions would concern me." He closed with a request for a briefing on the proposed rule, the reasoning behind the weightings, and how the proposal would benefit credit unions and their members.

To read Rep. Marchant's letter in its entirety, please go to the Cornerstone website.