Risk-Based Capital: Commenting on Your Future - Part 2: MEMBER BUSINESS LENDING

RBC - A Fork in the Road

BLAST FROM THE PAST!

(originally published 3/17/14)

... in which CU members seeking MBLs

get thrown under the bus! 

In yesterday's post we took a look at the severe threat that NCUA's newly proposed risk-based capital (RBC) rule poses for credit unions and all the folks involved with credit unions - members, employees, vendors, all consumers in general.

Inexplicable, unconscionable…
… always unaccountable.

Core thoughts are that NCUA seeks to arbitrarily impose on credit union folks: 1)  punitive capital taxes which exceed new bank RBC requirements,  2) these excessive capital taxes are "made up" by unaccountable, unnamed, NCUA "robusterians" lurking in the bowels of the Agency, and 3) these extra capital taxes increase, unnecessarily, the cost of financial services to the credit union consumer.  

But, most importantly, that you must raise your voice against this mis-regulation, this undemocratic mis-government.  So, I'm trying to find that bit of self-interest that will lurch you out of your apathy to file a comment on the proposed reg - because your voice will make a significant difference.  Yesterday, we took a look at the capital tax penalty applied by NCUA to member first mortgage loans.

Today let's take a look at member business loans (MBLs)…

If a member wishes to make a business loan (MBL) at a credit union, under NCUA's proposed RBC rule here's the capital tax penalty the member will pay for "choosing your credit union":

                                                   Capital Required
                                                        Bank     CU

MBLs  < 15% of total assets:        100%   100%
MBLs  > 15%< 25% of assets:      100%   150%
MBLs  > 25% of assets:                 100%   200%

Say What?

…as with member mortgage loans, with CU MBLs: Are the borrowers, the collateral, the underwriting riskier just because the members chose to finance at their CU?  Absolutely not! Twice the capital requirement above 25% of assets !?!

 

"Why is NCUA proposing an excessive capital tax on CU member business borrowers, which will kill jobs and hurt economic growth?"