NCUAThe NCUA board voted 2-1, with Mark McWatters casting the dissenting vote, to pass a risk-based capital rule for credit unions. NCUA Board Chairman Debbie Matz said that the new rule took into consideration the more than 2,000 comment letters from credit unions and concerns from lawmakers. She said the NCUA has legal authority to create a rule and that the rule will keep credit unions safe.

“It will protect the entire credit union system. Those who dispute this are also challenging the expertise of financial regulators in the United States and around the world who have already implemented risk-based capital,” said Matz.
Here’s a look at some of the changes in the new rule:

  • Risk weight for equity investments in CUSOs, corporate perpetual contributed capital, and other higher risk equity investments were reduced to 100 percent if the total of equity exposure is less than 10 percent of the sum of the credit union’s capital elements of the risk-based capital ratio numerator.
  • The charitable donation accounts risk weight was reduced to 100 percent.
  • Principal-only, mortgage-backed security STRIPS were assigned a risk weight based on the underlying collateral.
In his dissenting remarks, McWatters said the Federal Credit Union Act is clear and the NCUA is misinterpreting it. In a move that Chairman Matz said was unprecedented, she had House Financial Services Committee Chairman Jeb Hensarling’s letter to her this week read during the meeting. Rep. Hensarling wrote that it is a misguided rule and that the NCUA should comply with the rules in H.R. 2769 instead of voting to adopt RBC 2.
The final rule will go into effect Jan.1, 2019. You can read more on the NCUA’s website.