PRESS RELEASE
1001 Connecticut Avenue, NW Suite 1001 ▪ 800.446.7453 / 202.223.3920 ▪www.coops4change.org
FOR IMMEDIATE RELEASE
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Contacts:
Jennifer Rosenbaum, Callahan & Associates, 202.223.3920 or
Margaret Blankers, MJB Public Relations Group, 866.714.7041
On The Same Page: Nation’s Top Financial Regulators Approve Simple Leverage
Rule For Capital Adequacy For Banking Industry
Three bank regulators approve new leverage-capital rule and critique shortcomings of
Risk Based Capital approach NCUA proposes for cooperatives
WASHINGTON, D.C. (April 10, 2014) – A freshly minted rule from the Federal Reserve,
Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation calls for
the use of a simple leverage ratio to determine capital adequacy for the banking system. This
unanimous action by the three banking regulators reinforces concerns of many within the credit
union movement that a risk-based capital model, as proposed by NCUA, is inadequate and
potentially counter-productive.
On Tuesday, the three bank regulators passed the new regulation to increase banks’ leverage
ratio requirements to limit systemic and institutional risks. Co-Ops for Change Founder Chip
Filson, who previously served as NCUA’s Director of the Office of Examination & Insurance
and currently Chairman of Callahan & Associates, has released an analysis of the new banking
rule and the implications for credit unions. “Bank Regulators Approve Cooperative Model
Leverage Ratios to Improve Capital Adequacy Standards for Banking” is available for download
here.
“In light of the banking regulators unanimous conclusion that risk-based capital is not the best
method to measure capital sufficiency, we must ask why NCUA would impose this faulty system
on credit unions,” said Filson.
In an article on April 8, 2014The New York Times summarizes the new regulation requiring
banks with more than $700 billion in assets – “too big to fail” institutions – to raise their capital
ratio to 5 percent(“Banks Ordered to Add Capital to Limit Risks”). Those with federally insured
subsidiaries, in which activities often carry the greatest risk, would have to raise capital to 6
percent of overall assets. The three regulatory agencies estimate this move will strengthen the
industry’s safety and soundness, adding capital of $68 billion at the nation’s largest banks.
According to Filson, bank regulators’ assessments are supported by the overall performance of
credit unions during the Great Recession. Unlike the NCUA’s proposed risk-based regulation,
which is based on complex, subjective criteria to determine perceived risk levels, the leverage
ratio is simple to calculate and understand, and comparable across organizations. It supports the
capability of credit unions to continue lending in times of uncertainty – key to their “people
helping people” mission.
(More)
Co-Ops for Change
Top Financial Regulators Agree that NCUA-favored Risk-Based Capital is Not Best Option
April 9, 2014/Page Two
Sheila Bair, former Chair of the FDIC and currently with the Pew Charitable Trusts, said of the
leverage ratio ruling: “It’s real, it’s tangible, it makes a difference, and improves the banks’ loss
absorbing capacity. Many of the other rules are about controlling behavior, but there is only so
much behavior you can control.”
The New York Times’ reported that this rule will do more to rein in Wall Street than most other
parts of the sweeping Dodd-Frank overhaul of the banking industry that has occurred since the
financial crisis.
“This decision by all the banking agencies endorses the 100 year credit union model’s approach
to capital adequacy. It is a strong indictment of NCUA’s reasons for imposing a sweeping new
rule that has not worked for all other financial regulators,” Filson said.
To learn more about Co-Ops for Change and view its series of articles addressing the RBC issue,
visit www.Coops4Change.org.
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About Co-Ops for Change
Co-Ops for Change is a grassroots movement to increase awareness both within the credit union community and
among elected policymakers that our regulatory leadership should understand and support the seven cooperative
principles. The regulatory process should consider credit unions’ cooperative character, as well as the shared
economic value they create for people and communities. Credit union members, volunteers, professionals and
industry supporters can learn more about the campaign at www.Coops4Change.org.