|The Robust Wizards of OB|
BLAST FROM THE PAST!
(originally published 3/18/14)
... where NCUA quadruples risk-weighting on some gov't bonds!
Well, welcome to "Day 3" in our review of NCUA's proposed regulation on risk-based capital (RBC) - part of a week long exploration of regulatory OB-tuseness.
Might help to go back and take a quick look at the posts of 3/17/2014 and 3/18/2014 where we talked about how NCUA's proposed RBC rule will significantly increase the capital costs for credit unions and, therefore, the financial costs to members seeking mortgages and business loans from their credit unions.
What ever happened to :
Today, let's take a look at the capital tax penalties which NCUA is imposing on credit unions on the other side of the balance sheet, with CU investments…
|Lend it, or invest it !|
Here's NCUA's Proposal:
1) Gov't Agencies & State/Local
General Obligation bonds:
* < 1 yr. term: 20% 20%
* > 1 yr. < 3yr. term: 20% 50%
* > 3 yr. < 5 yr. term: 20% 75%
* > 5 yr. < 10 yr. term: 20% 150%
* > 10 yr. term: 20% ! 200%
2) State/Local Revenue bonds:
* < 1 yr. term: 50% 20%
* > 1 yr. < 3 yr. term: 50% 50%
* > 3 yr. < 5 yr. term: 50% 75%
* > 5 yr. < 10 yr. term: 50% 150%
* > 10 yr. term: 50% 200%
Are the investments somehow "riskier" when they are held on a CU balance sheet as opposed to being held by a bank? Absolutely not!
"How did NCUA "come up with" the much higher risk weightings required on conservative CU investments? Why are the NCUA capital requirements "more robust" than those for institutions regulated by the OCC, FDIC, or the FED?"