NCUA risk-based capital plan could cut CU capital buffers by billions
02/10/2014 04:16 pm
NCUA's proposed risk-based capital rule could prove costly for many credit unions, forcing them to increase their capital levels by a net $7.3 billion to maintain their current margins above the proposed "well capitalized" thresholds.
CUNA Chief Economist Bill Hampel explains, "We looked at the 2,504 federally insured credit unions with more than $40 million in assets, and compared their current margins above being well capitalized to what they would be if the NCUA proposal were in effect. Although the rule would only apply to credit unions with more than $50 million in assets, many--if not most--of the almost 300 credit unions with between $40 million and $50 million in assets will exceed the $50 level in just a few years."
About one-third, or 863, of these 2,504 credit unions would enjoy greater buffers above well-capitalized thresholds under the proposal, but the total increase among these credit unions would be only $63 million, Hampel says. The remaining 1,641 credit unions with above $40 million in assets would see their cushions above well-capitalized thresholds shrink by a combined total of $7.4 billion if the proposal were in effect.