ABA Calls on Congress to Reject Delay for Credit Union Risk-Based Capital Rules

In a memo to House Financial Services committee members today, ABA urged lawmakers to reject a provision of the Foreign Investment Risk Review Modernization Act of 2018 that would delay the effective date of risk-based capital rules for credit unions for two years. The association noted that allowing a delay would place taxpayers at risk and increase the already unlevel playing field between taxpaying banks and credit unions.

Banks have long been subject to a robust regulatory capital regime, including the complex Basel III standards, ABA pointed out. Given the expansive growth the credit union industry has seen in recent years and the almost universal agreement about the need to modernize the National Credit Union Administration’s current risk-based capital rules to ensure financial stability, ABA highlighted the importance of implementing the new rules without delay.

“Having to hold less capital than banks provides credit unions with a lower overall cost of funds that artificially distorts market pricing, and can lead to the underpricing of risk,” ABA said. “It likewise artificially drives business away from competing industries, and compounds the competitive advantage conferred by the credit union’s tax exempt status.”