BLAST FROM THE PAST!
(originally published 3/26/2014)
... in which NCUA moves from rule making to lawmaking!
|Really can't believe this !|
We have taken a look at how NCUA's "we-know-better-than-everybody-else-despite-our-track-record" approach to RBC will 1) deter member mortgage lending, 2) damage MBL lending, and 3) severely limit safe CU investments, forcing unnecessarily lower savings returns on CU members. All proposed with utter disregard for the new, lower RBC standards now already in place for all other federally insured depository institutions.
Today let's look at how NCUA has decided to independently override the U.S. Congress and federal law with the new RBC proposal. Have always noted how proud NCUA was of being "an independent agency of the Federal government", but it had never occurred to me that NCUA believes it is independent of Congress - and above the law.
|Congress is such a bother to|
an independent federal Agency!
NCUA through a sleight-of-hand (which they hope you won't notice!) has rewritten the Congressional definition of "well-capitalized" for CUs.
Let's take a look at the proposed RBC reg:
|NCUA is becoming|
thoroughly Pinnochioan ...
"[Several sections of 216] of the
|NCUA's RBC comes with|
strings already attached...
Now I'm sure that didn't make any sense at all to most of you, because you're nice, reasonable straight-forward kind of folks - unlike the folks who wrote this proposed regulation. So, let's break it down…
Under current law: Credit unions with net worth > 7% are "well capitalized". Under the current risk-based net worth (RBNW) formula, if a credit union is determined to be "complex", it may be required to hold additional capital (none of even the 25 largest CUs are required to hold capital above their statutory net worth and most are not complex under current RBNW standards).
Under the proposed reg: NCUA unilaterally has 1) decreed that all CUs with assets > $50 million are complex! No test, no evaluation - as now required by the FCUA - to determine if a CU is simple or complex. NCUA simply changes a Congressionally approved law to make you complex regardless of your balance sheet risk; and then since you are complex(!), NCUA imposes its new RBC regime requirements on your CU.
|Weaseling Congress !|
(… robustly !!)
Here's the weasel, NCUA is attempting to change the Congressionally legislated definition of "well capitalized" to:
"To be well-capitalized a credit union must maintain a net worth ratio of 7% or greater and, if a complex credit union, (which NCUA has defined as all CU with assets >$50 million) must have a risk based capital ratio of 10.5% or greater…"
NCUA's proposed RBC reg flies in the face of express Congressional intent under the FCUA. You can always spot a weasel when you read phrases like:
1. "… replacing the term "net worth" with the term "capital categories" better describes…" - That's a Weasel!
2. "… no substantial changes … are intended…" - That's a weasel!
3. "… replacing the term "risk-based net worth" with the functionally equivalent term "risk-based capital"… - That's a weasel!
4. "… the term "capital" is generally more inclusive… and is more commonly used in the financial services industry …" - That's a weasel!
5. Changing "if you are complex" to "you are complex"… - That's a weasel!
6. "… no changes to the requirements of the statute are intended…" - That's a weasel!
Shouldn't we - on behalf of our 100+ million member-owners - demand that Congress make changes, if necessary, to credit union statutes, ...