Risk-Based Capital: Commenting On Your Future - Part 13: Absence Of Democratic Controls

Attitude and hubris...

NCUA's proposed risk-based capital (RBC) rule is set to become 
"The Kodak Moment" in the history of America's credit unions.  

The reference is to the fundamental, crucial mistake the Kodak camera/film company made in deciding that "digital photography" was of little importance nor threat to the future of its business model.  Kodak quickly lived to rue its misjudgment, moving from virtual market monopoly to bankruptcy in less than a decade.  NCUA's RBC rule is a mistake of comparable magnitude, which should lead to similar results.   

 

"The NCUA Board
 sat on a wall,
The NCUA Board,
had a great…"

The NCUA Board today (4/24/2014) will perhaps take a "test drive" in fiduciary irresponsibility as it votes on the issue of a new "stress testing" regulation for larger credit unions. The "stress testing" rule is a "stalking horse" for the soon-to-follow RBC rule which will apply to all credit unions. Both rules suffer severely from similar logical flaws, consistency lapses, and implementation gaps. Both the stress test and RBC rules will result in substantial "collateral damage" to credit unions, resulting from a clear absence of adequate research, dialogue, and due diligence by the senior leadership at the Agency.

A Question of Leadership 
at the Board level...

Each individual NCUA Board member - Ms. Matz, Mr. Metsger, and Mr. Fryzel - has been directly and respectfully advised that the stress test rule needs greater review, more thorough validation, and additional discussion between the Agency and all affected credit unions.  There is universal support among the affected credit unions for the concept of stress testing and no resistance to moving forward thoughtfully and expeditiously.  

All agree there are no economic, legislative nor safety and soundness imperatives which compel the Agency to act pre-emptively, abruptly, or recklessly today (4/24/2014) on a final stress test rule. Affected, experienced credit union boards and staff have urged the NCUA Board "to temporarily table" the final stress test rule and create additional forums for discussion and review.  The affected credit unions don't feel they have the luxury of risking "unintended consequences" and "unforced errors" resulting from a hasty implementation.  NCUA seems indifferent to those prudential risks...

Picture this... !

As noted, today's NCUA Board vote will foreshadow the Agency's attitude toward listening to and working with you - all credit unions - on the upcoming RBC rule.  

Stay tuned! The NCUA Board meeting starts today at 10:00 EST.

regcomments@ncua.gov

(Prediction?  I'm betting on "attitude" and "hubris"…)

Z-Z-Z-Z-TAM !