Links in “Risk-Based Capital”

With the NCUA expected to address its Risk-Based Capital Rule on 10/15, Former NCUA Chair Dennis Dollar cuts through all the hullabaloo and breaks down what you really need to know about the proposal as well as what you can expect going forward. Bonus points for doing it in plain English. [10/9/15]

In response to Congressional concerns that the NCUA's plans for risk-based capital might be proceeding too hastily, NCUA's chair seeks to assure Congress, even while moving forward with putting the rule on the board meetings Oct. 15 agenda, that its measure will allow credit unions to continue to support the economy. Also see Risk Watch 73 for RBC2 overview. [10/9/15]

Originally CUNA opposed the bill that would have required NCUA to stop and reconsider the merits of its proposed risk-based capital rule, as the association didn’t believe that the bill had any chance of being adopted. Now CUNA is concerned that NCUA is not moving towards making the kinds of significant changes that had been hoped for and believes that more time and thought is necessary before a final bill is announced. [9/23/15]

Wells Fargo received permission from the Federal Reserve Board and the Office of the Comptroller of the Currency to begin using the "advanced approaches" capital framework. The new framework, which will be implemented in the second quarter of 2015, will allow Wells Fargo to consider specific risk-measurement and risk-management criteria when calculating risk-based capital requirements. This new framework is built on standards developed by the Basel Committee on Banking Supervision. [4/1/15]

The OCC, FRB, and FDIC launched an automated tool to calculate risk-based capital requirements for securitization exposures in what they are calling the simplified supervisory formula approach. [2/12/15]

In a series of releases and footnotes to the January 15 board meeting minutes, NCUA Chair Debbie Matz and Board member Mark McWatters have accused each other of revealing confidential information from a legal opinion the agency obtained concerning its statutory authority for setting risk-based capital standards. McWatters voted against the revised RBC proposed rule. [2/2/15]

NAFCU staff have sharpened their pencils and have calculated that the real cost of the proposed two-tier risk-based capital proposal is $760 million more than the cost of a one-tier system. NAFCU states that the much lower costs quoted by NCUA do not take into consideration the capital cushion that most credit unions maintain in order avoid prompt and corrective action consequences. [1/26/15]

CUNA and NCUA have both obtained legal opinions concerning NCUA’s authority under the Federal Credit Union Act to establish a tiered risk-based capital system. The problem is that the two opinions reach opposite conclusions. In addition, NCUA’s claim that the revised rule will only adversely affect 19 credit unions—versus the 199 credit unions adversely impacted by the original proposed rule—begs the question of whether a risk-based capital rule is really necessary. [1/23/15]

During a webinar yesterday on the revised risk-based capital proposed rule, Larry Fazio, director of examination and insurance for NCUA, was asked whether NCUA would be providing an online risk-based net worth calculator as it had after the first proposed rule for credit unions to determine the impact of the rule on their institution. Fazio reported that NCUA will provide a spreadsheet tool, but not an online calculator as the new rule considers data not obtained on current Call Reports. [1/22/15]

NCUA has posted to its website the 58-page legal opinion letter it obtained from outside counsel to support its proposal for a tiered net worth capital ratio. Critics have argued that the Federal Credit Union Act does not provide authority to the agency to establish a tiered system. [1/21/15]