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Metsger Talks Capital, Risk and Balance
Thursday, June 26, 2014 6:30 AM

Balance is the key to effective regulation, particularly in issues of capital and risk, according to National Credit Union Administration Board Member Rick Metsger. At a recent credit union speaking engagement, Metsger declared his support for legislation to allow credit unions without a low-income designation to access supplemental capital. The bill is H.R. 719, the Capital Access for Small Businesses and Jobs Act. Metsger also discussed the agency’s proposed rule on risk-based capital and changes he is likely to support.

“H.R. 719 would provide credit unions with an additional tool in their toolbox, but it is not a panacea or a prerequisite for adoption of a risk-based capital rule as required by current law,” Metsger said. “With Congress recognizing the statutory barriers credit unions face in raising additional capital, enactment of this bill would provide a two-pronged approach to enhancing credit union capital with both regulatory and congressional action.”

NCUA Board Chairman Debbie Matz announced her support of the legislation in a letter sent last year to Congressman Peter King, the sponsor of H.R. 719.

Metsger has asked NCUA’s Office of Public and Congressional Affairs to continue to educate lawmakers and staff on Capitol Hill about the need for supplemental capital.

Metsger said there is significant review, analysis and revision ahead before the proposed risk-based capital rule could be final, and he noted some areas he has already concluded require adjustment:

  • Lengthening the phase-in period for any final rule.
  • Clarifying that only the NCUA Board, and not examiners, can raise individual credit unions’ capital requirements.
  • Adjusting the risk weights for investments in CUSOs and corporate perpetual capital.
  • Modifying the risk weight for cash at the Federal Reserve.
  • Altering risk weights when other federal agencies have provided guarantees.

Metsger said he is looking for a better way to deal with interest rate risk and concentration risk, and he continues to evaluate various comments and analysis of these important components.

Metsger said making changes to the proposed risk-based capital rule to better reflect the risks with a particular credit union, “may require additional information to be collected on the Call Report,” adding he is interested in credit unions’ willingness to accept that additional burden in order to improve the risk-based analysis.