The NCUA’s risk-based capital rule will force many credit unions to curtail much-needed services simply to comply with an ill-conceived regulation, Brian Ducharme, president /CEO of the MIT Federal Credit Union, told a House subcommittee Thursday.
“With the rule set to take effect a year from now, credit unions must soon begin shifting their portfolios to come into compliance,” Ducharme said, in testimony prepared for a hearing before the House Financial Institutions Subcommittee. “This could lead to some institutions constraining lending in 2018 as they seek to maintain their capital level and capital cushion under the new regime.”
MIT Federal Credit Union is located in Cambridge, Mass. and has more than 36,000 members and almost $545 million in assets.
Testifying on behalf of NAFCU, Ducharme said that NCUA Chairman J. Mark McWatters has said that the NCUA should reexamine the rules before they go into effect.
However, Ducharme said that with two vacancies on the NCUA board, there is some political uncertainty at the agency.
Rep. Bill Posey (R-Fla.) has introduced legislation that would repeal the rule.
Ducharme said that a recent NAFCU analysis found that more than 400 credit unions will see declines in their capital cushions when the rule becomes effective. More than 40 credit unions, including his own, would face downgrade in their capital level with their current portfolio under the new rule, he added.
He said that his credit union is the third-largest private student lender in the nation—a service the credit union might have trouble continuing under the new capital rule.
The rule also has forced his credit union to reconsider offering business services and continuing the purchase of Small Business Administration loans that are guaranteed by the federal government.
However, Marcus Stanley, policy director of Americans for Financial Reform, said that the NCUA must ensure that credit unions are well-capitalized.
“Any significant losses on insured deposits due to credit union insolvency would trigger the need for solvent credit unions to pay significant amounts into the insurance fund, and/or create public exposure that could require greater government resources from taxpayers,” he told the subcommittee.
