NCUA RBC Rule: Time to Save Grace?....

What are the
real issues?

Y'know, in going back over the multitude of comments made on NCUA's proposed risk-based capital (RBC) rule - in 2,000+ comment letters, listening sessions, Congressional letters, news clips, opinion pieces and conference speeches - three key questions surface repeatedly  to the point of discomfort.  The three recurring issues are 1) competence, 2) trust, and 3) grace.

Competence - No one expressed this concern any clearer than Steve Van Beek at the recent NAFCU Annual Conference, when he told the CUJournal: "The biggest concern is it feels as if NCUA did not do its homework upfront. They did not talk to credit unions, and they did not talk to the trade groups - and there were offers."

What's truly unnerving to many credit unions is that Chairman Matz effectively and almost casually confirms this lack of due diligence by the Agency in such remarks as these from the Alexandria Listening Session:

"We know that all the risk weights need to be reviewed.  We know we need to change [lower] investments, CUSOs, corporates, mortgages, and business loans." [at 3:30 on the tape]

Competence?

"I want to assure those of you who do "ag" lending and taxi medallion loans that it was never our intention to put you out of business. So for sure we will remedy that situation." [at 4:15 on the tape]

[On individual minimum capital requirements - IMCR] "What's surprising is that that exact provision is in existence today and we have never used it because it is so cumbersome and difficult to use."[at 6:30 on the tape]

Trust - Over the last few years, many credit unions have grown "to feel like Charlie Brown" in their relationship with the NCUA ....

... playing with an unreliable partner?

Especially when 1)"all" the RBC risk-weightings need review and the five categories (investments, CUSOs, corporates, mortgages, MBLs) which definitely will be lowered represent 75%+ of the core assets of credit unions (not exactly a minor "miss"); 2) "didn't mean to put you out of business"(how would you feel, if told that?); and 3) we're adding IMCR because we want to be able to make "sudden death", arbitrary, and capricious calls without the current "burdensome and difficult" requirements (should "executions" be easy?).

 ... and the Agency doesn't understand CU distrust?

Grace - So what needs to be done? Many CU folks are asking for a "second comment period", which would allow NCUA to correct the obvious oversights, reissue a revised rule, and permit the CU community another 60 day period to comment further on potential improvements.  Easy enough, allow a little cooling off period, and let everyone "save face".

Competence, Trust, Grace?

Although Chairman Matz acknowledged in her speech before the NAFCU Annual Conference that: "We have heard you loud and clear, and we will make significant changes in the final rule.", the Chairman has refused to consider a second comment period.  

"Significant changes " in a proposed rule are always a strong reason to permit a second comment period. What's the rush, what's the harm? A properly re-drafted rule could, in all probability, be adopted much quicker, without the extended implementation periods being bandied about.

Competence can be restored (we all make mistakes!), Trust can be reestablished (we all have failed at times!), and Grace requires nothing more than a strong leader with character  and integrity.... who simply says to all stakeholders: 

"Yes, we got it wrong, but now let's get it right together."