Monday, March 03, 2014

NCUA Risk-Based Capital… Dissing the FED?

Jumping into 
the "Wild NCUA Yonder?
Hopefully, everybody and his sister will take time to comment on NCUA's recently released risk-based capital (RBC) proposal. One needs only look to the current risk-based net worth (RBNW) system that NCUA has in place - and which has never been updated! - to understand how much help the Agency desperately needs from CU expert practitioners. 

Robustly essential or
essentially robust?
If you don't weigh-in on this important issue, then the best you can hope for is that "the NCUA risk experts"
 (think "jumbo shrimp", "pretty ugly", "Holy war", "educational TV", "working committee", "non-essential government employee","Rapid City, S.D."!) will be able to "copy off the paper" of its compadres over at the FDIC and OCC.  

Unfortunately, in looking at NCUA's draft
Less weight, more fat?
proposal; the credit union movement can't even count on the Agency "to crib off" the already published and implemented 
 FDIC/OCC risk-based capital rules.  Let me give you the most embarrassingly obvious NCUA faux pas (among several!) in the proposed rule….

The FDIC/OCC rules give a 0% risk rating for:  

"Direct and unconditional claims on the U.S. government, its central bank, or a U.S. government agency."

Very logical and rational - right? Well, if you take a look at the inner workings of that cute little, on-line "NCUA risk calculator"; it would appear that "the Agency robusterians" have  imposed a 20% risk rating on all CU deposits with the FRB! 

Of course this in line with NCUA's "Chicken Little" view - not under oath and not before Congress - that interest rates are poised to soar for credit unions, despite the statements by Bernanke/Yellen - under oath and before Congress - that rates will remain low for an extended period of time and for certain through 2015.  But what does the FED know?!?

For at least one credit union with which I am familiar, that "fat finger" or logical robusterian error reduces its RBC by almost  20% - not exactly a minor matter. 




Anonymous said...

Effective Regulator!!!!!!!

Anonymous said...

Not only should we all submit comments, we should send seperate comments for each major area, otherwise you would be submitting a book. And, have senior staff weigh in too. Their opinions matter too.