[House Report 114-869]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-869
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RISK-BASED CAPITAL STUDY ACT OF 2015
_______
December 12, 2016.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 2769]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 2769) to require the National Credit Union
Administration to conduct a study of the appropriate capital
requirements for credit unions, and for other purposes, having
considered the same, report favorably thereon without amendment
and recommend that the bill do pass.
PURPOSE AND SUMMARY
H.R. 2769 requires the National Credit Union Administration
(NCUA) to conduct a study of the appropriate capital
requirements for Federal and State credit unions, as defined
under section 101 of the Federal Credit Union Act (FCUA). Any
credit union may voluntarily provide information for the study
if requested by the NCUA, but may not be required to provide
such information.
H.R. 2769 also requires the NCUA to issue a report to
Congress containing all findings made in carrying out its study
and any legislative recommendations to improve the capital
system for credit unions. The report must be issued to Congress
within 270 days of enactment. Until 120 days after it issues
its report to Congress, the NCUA may not issue or implement any
final risk-based capital rule or regulation.
BACKGROUND AND NEED FOR LEGISLATION
On January 23, 2014, the NCUA issued a proposed rule to
amend its risk-based capital requirements for credit unions.
Known as the ``Risk-Based Net Worth Rule,'' the proposal
generated significant controversy and garnered over 2,000
comment letters, including over 300 from members of Congress.
In response, the NCUA withdrew its original proposal and issued
a revised risk-based capital rule on January 15, 2015. Concerns
were not ameliorated with the issuance of the 2015 revision, as
shown by the 2,147 comment letters received by the NCUA after
re-issuance. Yet, on October 15, 2015, the NCUA Board voted 2-1
to approve a final risk-based capital rule, which will take
effect January 1, 2019.
Many are concerned the risk-based capital is unnecessary,
because as former NCUA Chairman Matz noted in a December 2011
letter to the Governmental Accountability Office, ``consumer
credit unions performed very well during the worst financial
crisis since the Great Depression and NCUA was highly
successful overall in mitigating failures and losses for
consumer credit unions.'' While the NCUA has an important role
in ensuring credit unions remain sound enough to withstand a
range of economic conditions, there is an absence of adequate
research, dialogue, and due diligence in its rulemaking
efforts.
Additionally, there are concerns that the final rule
exceeds NCUA's statutory authority, as current law does not
expressly permit the NCUA to establish a two-tiered risk-based
capital system. As a result, several legal opinions were
commissioned to determine whether the NCUA has legal authority
to do so. Paul Hastings, LLP found that the Federal Credit
Union Act is ambiguous and susceptible to differing
interpretations, including that of the NCUA. Venable, LLP
concluded that the Federal Credit Union Act (FCUA) does not
permit NCUA to establish a higher risk based capital component
for ``well-capitalized'' credit unions than what is required
for ``adequately capitalized'' credit unions, and therefore the
rule would violate the FCUA.
In addition, NCUA Board Member Mark McWatters, an attorney
and former law professor, voted against the final risk-based
capital rule, arguing that the Hastings legal opinion was not a
strong enough basis which to justify the NCUA's legal authority
to implement a two-tier risk-based net worth system. In his
October 15, 2015, dissent, Board Member McWatters stated:
Since I am of the view that the NCUA Board does not
possess the legal authority under the FCUA to adopt a
two-tier RBNW standard, and based upon other major
concerns with the rule I have addressed in this
statement, I will not support the RBNW regulations as
currently drafted. Further, I would find it problematic
to support a single-tier RBNW standard unless the rule
permits the inclusion--or at least acknowledges a good
faith undertaking to investigate the viability--of
properly structured supplemental capital in the
calculation of the RBNW ratio to the fullest extent
permitted by applicable law.
In a letter of support for H.R. 2769 dated June 15, 2015,
the National Association of Federal Credit Unions wrote:
This important legislation will require the National
Credit Union Administration (NCUA) to take a more
deliberate approach before it issues an unnecessary and
costly Risk-Based Capital final rule. It should be
noted that the legislation will not prevent NCUA from
instituting new capital requirements, but will require
NCUA to thoroughly examine the myriad of significant
concerns raised by the credit union industry . . .
HEARINGS
The Committee held no hearings on H.R. 2769 in the 114th
Congress. However, while the Committee did not hold a specific
legislative hearing on this measure, it held a hearing entitled
``National Credit Union Administration Operations and Budget''
on July 23, 2015, at which matters relating to this measure
were discussed.
COMMITTEE CONSIDERATION
The Committee on Financial Services met in open session on
September 30, 2015, and considered the bill. An amendment
offered by Mr. Heck was ruled by the Chair to be not germane.
The Committee ordered H.R. 2769 to be reported favorably to the
House without amendment by a recorded vote of 50 yeas to 9 nays
(recorded vote no. FC-60), a quorum being present.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion to table the appeal of the Chair's ruling that Mr.
Heck's amendment was not germane was agreed to by a recorded
vote of 28 yeas to 23 nays (recorded vote no. FC-58), a quorum
being present. The second and final recorded vote was on a
motion by Chairman Hensarling to report the bill favorably to
the House without amendment. The motion was agreed to by a
recorded vote of 50 yeas to 9 nays (Record vote no. FC-60), a
quorum being present.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 2769
will increase agency accountability by providing for review of
the appropriate capital requirements for credit unions.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATES
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 15, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2769, the Risk-
Based Capital Study Act of 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Martin von
Gnechten.
Sincerely,
Keith Hall.
Enclosure.
H.R. 2769--Risk-Based Capital Study Act of 2015
H.R. 2769 would direct the National Credit Union
Administration (NCUA) to conduct a study of the appropriate
capital requirements for federal and state credit unions and to
report its findings to the Congress within 270 days of the
legislation's enactment. The bill would delay the
implementation of any proposed or final rule related to risk-
based capital for credit unions until 120 days after the report
has been issued. In January 2015, the NCUA issued a proposed
risk-based capital rule. That proposed rule will take effect on
January 1, 2019.
CBO estimates that enacting the legislation would affect
direct spending; therefore, pay-as-you-go procedures apply.
However we estimate that the net effects would be negligible
because any increase in operating costs for NCUA to prepare the
report required by the bill would be offset by additional fees
collected from federal credit unions. CBO also expects that the
report required by H.R. 2769 would not delay the implementation
of the proposed rule on risk based capital or affect the
financial risks facing federal credit unions, because the
proposed rule will not take effect until 2019 under current
law, after the report would be issued. Enacting the bill would
not affect revenues.
Enacting the bill would not increase net direct spending or
on-budget deficits by more than $5 billion in any of the four
10-year periods beginning in 2026.
H.R. 2769 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Martin von
Gnechten. The estimate was approved by H. Samuel Papenfuss,
Deputy Assistant Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates reform
Act.
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
EARMARK IDENTIFICATION
H.R. 2769 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015),
the Committee states that no provision of H.R. 2769 establishes
or reauthorizes a program of the Federal Government known to be
duplicative of another Federal program, a program that was
included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
DISCLOSURE OF DIRECTED RULEMAKING
Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015),
the Committee states that H.R. 2769 contains no directed
rulemaking.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
This Section cites H.R. 2769 as the ``Risk-Based Capital
Study Act of 2015''.
Section 2. NCUA study
This section requires the NCUA to conduct a study that
includes an analysis of the NCUA's legal authority to prescribe
separate risk-based capital thresholds to both ``adequately
capitalized'' and ``well capitalized'' credit unions; a
discussion of the differences between credit unions and other
types of depository institutions and how they differ in their
risk-weights for their capital requirements; a discussion of
the rationale behind the risk-weights assigned in the NCUA's
proposed rule; an analysis of the impact the proposed rule
would have on excess capital above the minimum level for a
credit union to be ``well-capitalized.'' This section also
allows for any credit union to voluntarily provide information
requested by the NCUA. Lastly, this section prescribes the NCUA
to issue a report to Congress regarding the findings of their
study.
Section 3. Delay of rulemaking
This section prohibits the NCUA from issuing or
implementing any final risk-based capital rule or regulation
until 120 days after it issues its report to Congress.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 2769 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report contemplated by Clause 3(e)(1)(B) of rule
XIII of the House of Representatives.
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