July 27, 2015


  • I agree with Chris 100%, the cost of supplemental capital will be expensive for CU's as compared to banks AND the more we start to look like a bank, the more likely Congress will want to treat us like a bank and start taxing us. We should be careful what we ask for! Second, look how well RBC worked for the banks in 2007, 2008 and beyond; I can't figure out why NCUA thinks it will prevent closures for CU's that are mismanaged.
  • You are correct in what you say about the covenants and therefore practical use of supplemental capital, but you don't explain why that makes RBC a bad idea. RBC is not being issued, to enable the issuance of supplemental capital. They're mutually exclusive considerations. Each has stand alone considerations.
  • You are right, of course, that supplemental capital and RBC are separate issues, but they are not unrelated. As an aggressive PCA rule, RBC2 threatens to force credit unions to increase their capital ratios very quickly. Without access to supplemental capital, that is possible only by rapidly shrinking the balance sheet. Doing that is invariably expensive and punitive to member-owner-borrowers. NCUA seems to have figured this out and has promised expanded access to supplemental capital as part of some future RBC3. As for the problems with RBC generally, I wrote on them extensively in March and April and thought it would be a little self-indulgent to repeat myself too much. Here is a link to my first blog post; links to others can be found within: http://www.creditunions.com/blogs/commentary/rbc2-once-more-with-feeling Chris Howard
    Chris Howard