NCUA urged to modernize capital rules, ensure parity with banks after Basel III shift

Federal banking regulators unveiled a Basel III endgame framework Thursday that would lower capital requirements for large banks by an estimated 2.4%, marking a significant change from prior proposals on this topic. Doubling down on America’s Credit Unions previous requests, President/CEO Scott Simpson responded to the announcement by urging the NCUA to take a “similar, tailored approach by recalibrating the capital treatment of mortgage servicing assets,” for credit unions.  

“We have also called on the agency to evaluate broader capital relief options, including adjustments to elements of the risk-based capital framework, to ensure requirements better reflect actual risk and economic conditions,” said Simpson. “The Federal Credit Union Act requires a risk-based capital framework that is comparable to banking regulators, and today’s proposal reinforces the need for that framework to evolve alongside broader regulatory changes without imposing unnecessarily restrictive requirements on credit unions. 

“Credit unions are a critical source of mortgage credit, particularly for low- and moderate-income borrowers. When capital rules are not calibrated to actual risk, they can limit the ability of credit unions to support homeownership and invest in their communities,” he added. “We urge the NCUA to act to modernize its capital framework so credit unions can continue meeting the needs of their members while maintaining safety and soundness.”