Harper: Don’t Change CU Capital Standards

Clashing with NCUA Chairman Rodney Hood, board member Todd Harper is asking Congress not to reduce credit union capital standards in response to the coronavirus crisis.

“Reductions in capital standards could ultimately lead to greater losses for the Share Insurance Fund, which all surviving federally insured credit unions would need to pay,” Harper wrote to leaders of the House and Senate committees with NCUA oversight powers.

Last week, NCUA Chairman Rodney Hood said in his own letter to Senate Banking Chairman Mike Crapo (R-Id.) that the level at which credit unions are considered well capitalized should be reduced from a net-worth ratio of 7% to 6%. He asked that the level for adequately capitalized credit unions be reduced from 6% to 5%.

Harper said a decrease in capital standards would provide short-term regulatory relief for credit unions but, “they could also lead to a false sense of security and prevent the agency from taking timelier actions to prevent losses.”

The two board members agreed that Congress should allow all federal credit unions to expand their fields of membership to include underserved areas.

Hood and Harper agreed on several broad policy changes, but differed on how they should be executed. Harper called for Congress to exempt all business loans made between the start of the pandemic and the end of the year from the Member Business Loan cap. Hood called for the Member Business Loan cap to be increased to 20% during the pandemic.

Harper also asked Congress to make permanent the recent changes to the agency’s Central Liquidity Facility. In the alternative, he said that the changes should be extended by one year, to Dec. 31, 2021.

Responding to reports that debt collectors are garnishing some Economic Impact Payments to cover outstanding debts, Harper said Congress should make it clear that those payments are exempt from being seized.

He also asked Congress to increase funding for the agency’s Community Development Revolving Loan Fund by at least $10 million for loans made this year. And he renewed the NCUA’s long-standing call for Congress to grant the agency power to supervise third-party vendors.

NCUA Chairman Rodney Hood’s position.

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