Record Number of Comment Letters Shows Cooperative Concern With Banking Rule

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Credit union community voices misgivings about RBC rule, mobilizes for “repeatable process”.

In response to NCUA’s proposed regulation to impose risk-based capital (RBC) requirements, more than 2,200 comment letters were sent by credit union members, volunteers, leaders and organizations serving the movement. This is the highest response ever to a proposed regulation in NCUA’s rule-making history.

Chip Filson, Chairman of Callahan & Associates, sees three factors energizing this unprecedented response:

1.    The rule RBC is contrary to cooperative design, purpose and experience. “For over 100 years, the cooperative reserving formula has worked through every conceivable economic circumstance,” he said.

2.    The banking regulators have unanimously backed away from RBC as an effective means to measure capital adequacy. “They have adopted the simple leverage rule used by credit unions,” Filson said. He cited Tom Hoenig, Vice Chairman of the FDIC, who said, “risk-based capital is an experiment that has lasted too long.”

3.    Capital adequacy is a judgment that factors in dynamic, ever-changing economic and business circumstances. “A capital ratio is not a physics formula you compute to get the right answer; rather, it is a constantly monitored outcome that reflects prior experience, current plans and future expectations,” said Filson.“RBC should be tool, not a rule, and used like other models for assessing risk management.”

A read of comments recorded describe in minute detail the credit union community’s concerns with the fundamental flaws in the proposed RBC regulation. These include a one-size-fits-all approach, as well as the authority given to examiners to override the rule based on their subjective judgment.

Filson says NCUA’s effort to re-regulate every asset of a credit union’s balance sheet has fueled the debate and prompted new ways to provide comments. Callahan & Associates introduced an industry-wide website,, to educate, share comments and facilitate responses to the rule. Launched in mid-April, the site received more than 900 unique visitors, 89 percent of whom clicked the link to “submit a comment” to understand the process.

Along with Callahan, CU*Answers, a credit union service organization, also deployed a website to provide information and a user-friendly means to post comments. In just two weeks, CU*Answers facilitated more than 320 comments from its employees and affiliated credit unions through its AuditLink Response Tool.

Both firms say these efforts are just the beginning. “This is going to be a repeatable process,” said Randy Karnes, CU*Answers’ President/CEO. “Streamlining the comment process means more people will take part, more voices will be heard. In the cooperative movement, we are all consumer-owners of the future of credit unions. Offering a simple way to provide input means more than a minority will be heard.”

According to Jim Vilker, vice presidents of professional services at CU*Answers, the firm is refining its online response tool to be used for numerous topics important to credit unions. “The goal is to inspire grassroots, viral responses from members, credit union professionals, CUSOs, and other credit union-oriented businesses,” he said. Vilker sees the ongoing capability as a vital part of cooperative design because it facilitates community involvement.

Filson agrees. “The cooperative model’s fundamental strength is member-owner participation. This is just another example of that, ” he said.

To read a sampling of comments from the credit union community or to access the entire listing, visit

About Callahan & Associates
Callahan & Associates is dedicated to helping the credit union industry thrive. Our team of experts provides leading research, analytics, networking and consulting solutions. More than 4,000 credit unions and industry suppliers rely on us for the latest data, actionable insights and benchmarking tools to develop their unique competitive advantages and achieve their strategic goals. Our nearly 30 year history has enabled us to build an unparalleled knowledge transfer consortium which connects the industry’s best minds. To learn how you can join Callahan’s network, please visit

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Salvador Lopez
Callahan & Associates
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