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NCUA Board Approves Final RBC2 Rule by 2-1 Vote
Friday, October 16, 2015 6:45 AM

The National Credit Union Administration Board voted 2 to 1 in favor of the agency's final Risk-Based Capital Rule (RBC2). The final rule goes into effect Jan. 1, 2019, and applies to complex credit unions, which are credit unions with $100 million or more in assets. Credit Union National Association and Cornerstone have sought an extended implementation timeframe.

NCUA Chair Debbie Matz and Vice Chair Rick Metsger voted in favor of the bill, while Board Member Mark McWatters dissented. McWatters expressed a number of concerns with the rule prior to voting against it.

The most significant changes include:

  • Reducing the effective weight for equity investments in credit union service organizations (CUSOs), perpetual contributed capital at corporate credit unions, and certain other higher risk equity investments to 100 percent if the total equity exposure is less than 10 percent of the sum of the credit union's capital elements of the RBC ratio numerator. The NCUA estimates 95 percent of credit unions with such investments will receive a lower risk weight;
  • Reducing the risk weight to 0 percent for share-secured loans where the shares securing the loan are on deposit at the credit union;
  • Allowing a lower risk weight for certain charitable donation accounts; and
  • Extending the grandfathering period for certain supervisory goodwill to 2029.

Suzanne Yashewski, Cornerstone's SVP regulatory compliance, said, "The rule adopted is a significant improvement from the original 2014 proposal. However, it fails to reflect some of the additional changes we requested in response to the second RBC proposal."

The rule also comes on the heels of the House Financial Services Committee passing a Stop and Study Bill on Risk Based Capital. Just yesterday House Financial Services Committee Chairman Jeb Hensarling (R-Texas) sent a letter to Matz urging her not to have the rule considered, especially with Stop and Study just passing the committee. "It is deeply troubling that you would utterly disregard the express will of this Committee and rush to adopt a misguided rule that risks undermining the safety and soundness of credit unions in contravention of the NCUA's statutory mandate," Hensarling wrote.

In a first-ever procedure for NCUA, Matz agreed to Hensarling's request to have his letter against RBC read into the record at the NCUA Board meeting.

Cornerstone Credit Union League President/CEO Dick Ensweiler said, "We are grateful to the many advocates that united behind us in a record-setting grassroots effort over 20 months to ensure that NCUA understood the real impact this rule would have on our credit unions. We know that without the tremendous efforts of our credit union advocates, the final rule would have been much less favorable."