William J. Mellin, New York Credit Union Association president/CEO, applauded the NCUA for its efforts to attempt to give credit unions greater flexibility in meeting their net ratio requirements, and outlined comments regarding the proposed rulemaking of Parts 702 and 703 of the Complex Credit Union Leverage Ratio in a letter to the agency last week.
The NCUA board of directors, at its July 2021 meeting, voted 3-0 in favor of a 60-day comment period on the proposed CCULR rule, which ended Oct. 15. Although the July vote was unanimous, Boardmember Rodney Hood said at the time that he voted in favor of the proposal “begrudgingly,” and would prefer the matter be tabled or even repealed and the focus turned to other areas of capital, CUTODAY reported.
In the letter sent on behalf of New York credit unions, Mellin stated that, related to providing credit unions greater flexibility in meeting their net ratio requirements, the Association questions the need for, and utility of, the risk-based capital framework. Since the rule was finalized in 2015, the Association has argued that the RBC rule is an “unnecessary overreaction” to regulatory changes imposed on banks. The Credit Union Act does not mandate the creation of a more sophisticated RBC framework and, additionally, the existing capital framework was more than adequate for the task of getting credit unions through the mortgage meltdown, he said.
In addition, the two-year transition period starting on Jan. 1, 2022, ending on Jan. 1, 2024, is too short and is already quickly approaching, Mellin said, adding that the “unprecedented pandemic-fueled capital infusion” caused artificial declines in net worth ratios that are not reflective of credit union health. Further, recovery efforts have been stalled with the ongoing combination of the spread of the Delta variant, elevated unemployment rates and general consumer ambivalence.
“In light of the significant economic uncertainty and the looming effective date, a longer transition period is necessary to maximize the number of complex credit unions to be in a position to opt in to the CCULR framework,” he said.
Finally, as the Association proceeds, further guidance on off-balance-sheet exposures “would be appreciated,” Mellin stated.