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NCUA passes stress test rules

In a rule that was proposed last October, the NCUA will require federally insured credit unions with assets exceeding $10 billion to develop and maintain capital plans, and undergo annual stress tests.The rule was passed in a 2-1 vote of the NCUA board on Thursday, April 24. Board member Michael Fryzel cast the dissenting vote. Board member Rick Metsger signaled a willingness to consider additional changes to the rule.

Fryzel told the board that "...the time has come for regulators to take a step back and look at what has taken place since Dodd-Frank. To review what new regulations are really necessary and how the burden on financial institutions can be reduced so credit unions can go back to running their own business, making loans and providing needed financial services. We are not in a crisis mode."

CUNA had proposed some changes to the rule and they made it in the final version including dropping a provision that would have required public disclosure stress test results and credit unions can apply to have their own stress test results used, instead of the NCUA's, for NCUA's review. Fryzel added "While some changes have been made to the proposed rule, I believe, the final rule to be voted on by the NCUA board is in need of further revision."

The stress test requirements will require covered credit unions to conduct specific capital analyses to evaluate how changes in variables, parameters and inputs used by credit unions in their capital plans could affect their capital. Credit unions would also need to test how interest rate shocks of at least plus or minus 300 basis points would impact their net economic value. The NCUA believes the cost for the planning and testing would be $5 million the first year.

Click here to read all of Board Member Fryzel's comments.