NCUA’s RBC Proposal Gives Banks A Capital Advantage

NCUA’s RBC Proposal Gives Banks A Capital Advantage

Doug Alldredge, CPA and chief financial officer of First Credit Union in ($402.5M, Chandler, AZ) has compared the capital requirements for two $100 million institutions — a bank and a credit union — with the same asset composition. In the table below, Alldredge has created a balance sheet with assets composed of 29% investments, 35%Continue Reading

RBC Rule Would Double Credit Union Capital Requirements

RBC Rule Would Double Credit Union Capital Requirements

The below comparison of existing risk-based capital requirements for banks with the proposed RBC levels for credit unions by Douglas Alldredge, CPA and chief financial officer of First Credit Union ($402.5M, Chandler, AZ), shows credit unions would have to reserve twice the level of capital, 199%, for common asset classes where risk weights are differentContinue Reading

Professional Reviews Of Risk-Based Capital’s Role In Banking

Professional Reviews Of Risk-Based Capital’s Role In Banking

Following the Great Recession and financial crisis, there have been many commentaries and studies about why the risk-based capital requirements did not prevent severe losses. The following are conclusions from several of these. Bloomberg Businessweek “Bloomberg Businessweek” posed the following question to Mark Carney, the head of Canada’s central bank during the crisis and current governorContinue Reading

The Potential Harm Of A Risk-Based Capital Rule

The Potential Harm Of A Risk-Based Capital Rule

We do not have to speculate about the downside of what a regulatory-designed and imposed capital system would do to credit unions. Just look at the corporate network on which NCUA imposed risk-based capital standards following its September 2010 seizure and liquidation of five corporates. The chart below shows the risk-based capital ratios of theContinue Reading

One Action Credit Unions Should All Agree The System Needed

One Action Credit Unions Should All Agree The System Needed

In its last session, Congress introduced the Financial Institution Examination and Fairness Reform Act (HR 3641). This bipartisan legislation would have established an independent appeal process, outside of the existing ombudsman appeals structure, for regulated depository institutions that disagreed with examination or supervisory directives. Such an appeals process would be useful if NCUA makes finalContinue Reading