NCUA’s proposed risk-based capital system would put undue pressure on credit unions’ bottom line, CUNA Chief Economist Bill Hampel says.
The proposed system, which affects credit unions with more than $50 million in assets, would create a requirement that calls for more capital than the current risk-based requirement for capital adequacy.
CUNA estimates the rule, if made final and implemented, would push credit unions to hold as much as $7.3 billion in additional capital.
“It won’t make them less than well-capitalized, but what it will do is lower the buffer they currently have between their capital level and what it takes to be well-capitalized,” Hampel says. “This is going to be a big concern to many credit unions.”
At a packed special session on risk-based capital at GAC on Sunday, CUNA conducted an on-the-spot electronic survey to determine what the rule would mean to attendees’ credit unions.
According to CUNA’s News Now, the survey showed:
- 44% of session attendees believe their current capital cushion above PCA thresholds is "about right," and 33% said they have more than they need;
- 26% said the NCUA proposal would reduce their capital cushion below what is needed;
- More than 80% preferred the current risk-based PCA system; and
- Most of the credit unions in attendance said they'd need 3-5 years to adjust to a new system.
“If [the rule] goes through, credit unions are either going to have to really restructure their balance sheet or they’d have to build more capital, and that means they’d have to earn more money, charge higher fees or do whatever’s necessary in order to get more earnings,” Hampel says. “That could hurt their members.”