79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–647 

COMMON SENSE CREDIT UNION CAPITAL RELIEF ACT OF 

2017 

APRIL 24, 2018.—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 

together with 

MINORITY VIEWS 

[To accompany H.R. 4464] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 4464) to repeal the rule issued by the National Credit 

Union Administration titled ‘‘Risk-Based Capital’’, having considered the same, report favorably thereon without amendment and 

recommend that the bill do pass. 

PURPOSE AND SUMMARY

Introduced by Representative Bill Posey on November 28, 2017, 

H.R. 4464, the ‘‘Common Sense Credit Union Relief Act of 2017,’’ 

repeals the October 15, 2015, National Credit Union Administration (NCUA) Final Risk-Based Capital Rule (80 FR 66626). 

BACKGROUND AND NEED FOR LEGISLATION

The National Credit Union Administration (NCUA) is the independent federal agency created by the U.S. Congress to regulate, 

charter, and supervise federal credit unions. The NCUA operates 

and manages the National Credit Union Share Insurance Fund 

(NCUSIF), which insures the deposits of the account holders in all 

federal credit unions and the majority of state-chartered credit 

unions. 

2 

1See: Share Insurance Fund Overview, available at: https://www.ncua.gov/services/pages/ 

share-insurance.aspx. 2https://www.gao.gov/assets/590/587409.pdf. 

Beginning in 1934 with the passage of the Federal Credit Union 

Act (FCUA), the NCUA, through its predecessors, engages in the 

supervision and regulation of federal credit unions. The NCUA is 

responsible for the regulation and supervision of 5,696 federally insured credit unions with approximately 109 million members and 

more than $1 trillion in assets across all states and U.S. territories. 

In 1970, this supervision of federal credit unions evolved to include 

the addition of the NCUSIF, which provides to credit union accounts the backing of the full faith and credit of the U.S. Government. Administered by the NCUA, provides members with at least 

$250,000 of insurance at a federally insured credit union and the 

NCUA’s overview of the NCUSIF states that ‘‘Credit union members have never lost a penny of insured savings at a federally insured credit union.’’ 1

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 more than 300 from members of Congress. In response, the 

NCUA withdrew its original proposal and on January 15, 2015, the 

NCUA issued a revised risk-based capital rule. The 2015 revised 

proposal did not extinguish the concerns of interested commentators, 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 commentators are concerned that risk-based capital for 

federal credit unions is unnecessary, because, as former NCUA 

Chairman Matz noted in a December 2011 letter to the Government 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.’’ 2 While the NCUA must ensure that credit unions remain sound to withstand a range of economic conditions, there is a notable absence of comprehensive research, dialogue, and due diligence as part of its rulemaking efforts. 

Additionally, there are concerns that the 2015 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. The law firm of 

Paul Hastings, LLP, found that the (FCUA is both ambiguous and 

susceptible to differing interpretations, including that of the 

NCUA. Another law firm, Venable, LLP, concluded that the FCUA 

does not permit the 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 2015, then NCUA Board Member, and now-Chairman, Mark 

McWatters, an attorney and former law professor, voted against 

the final risk-based capital rule. Board Member McWatters argued 

3 

3https://www.ncua.gov/newsroom/Pages/speeches/2015/october/McWatters-Statement-FinalRisk-Based-Net-Worth-Rule.aspx. 4https://www.ncua.gov/newsroom/Pages/speech-2017-feb-remarks-of-chairman-mcwattersgac.aspx. 5https://financialservices.house.gov/uploadedfiles/hhrg-115-ba15-wstate-bducharme20171207.pdf. 

that the Paul Hastings legal opinion was not a strong enough basis 

on which to justify the NCUA’s legal authority to implement a twotier risk-based net worth system. In his October 15, 2015, dissent, 

now-Chairman 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.3

Furthermore, now-Chairman McWatters has indicated his intent 

to revisit the risk-based capital rule as part of a ‘‘thoughtful loosening’’ of regulations, because: 

just as regulatory relief designed for the entire credit 

union community may not help an individual credit union, 

overall performance does not mean every institution is 

doing well. That is why I support and wish to enhance the 

NCUA’s regulatory and supervisory approach to focus on 

the problem areas and allow well-managed credit unions to 

get about the business of serving their members with minimal interference.4

The rule was both unnecessary and poorly conceived from its inception. Even though the NCUA took unprecedented actions to rewrite the rule for a second time, the revised rule garnered even 

more comments than the initial version. As stated in testimony before the Financial Services Committee on December 7, 2017, by 

Brian Ducharme, President and CEO of MIT Federal Credit Union: 

[e]nacting H.R. 4464 would stop the outdated NCUA riskbased capital rule from being implemented and, instead, 

allow the agency to craft a new RBC rule that considers 

recent developments and better reflects the needs of the 

credit union system.5

As such, by repealing the NCUA’s final rule, H.R. 4464 will provide much needed regulatory relief for credit unions that have only 

become more stable and resilient since the NCUA originally proposed this rule some four years ago. 

HEARINGS

The Committee on Financial Services held a hearing examining 

matters relating to H.R. 4464 on April 26, 2017 and April 28, 2017. 

4 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on December 13, 2017, and ordered H.R. 4464 to be reported favorably 

to the House as amended by a recorded vote of 33 yeas to 25 nays 

(Record vote no. FC–132), 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 recorded vote was 

requested on a motion by Chairman Hensarling to report the bill 

favorably to the House. The motion was agreed to by a recorded 

vote of 33 yeas to 25 nays (Record vote no. FC–132), a quorum 

being present. An amendment offered by Ms. Waters, no. 1, was 

not agreed to by a recorded vote of 25 ayes and 33 nays (Record 

vote no. FC–131). 

5 


Insert offset folio 5 here HR647.001
6 


Insert offset folio 6 here HR647.002
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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. 4464 will repeal 

the National Credit Union Administration’s Risk-Based Capital 

final rule (published at 80 Fed. Reg. 66626 (October 29, 2015). 

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. 

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, February 26, 2018. 

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. 4464, the Common Sense 

Credit Union Capital Relief Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Sarah Puro. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 4464—Common Sense Credit Union Capital Relief Act of 2017 

Summary: H.R. 4464 would prevent a rule issued by the National 

Credit Union Administration (NCUA) from going into effect. That 

rule would make changes to NCUA’s capital requirements for credit unions. Such changes can affect the probability that a credit 

union fails and must be resolved by the Share Insurance Fund 

(SIF). As a result, CBO estimates that enacting the bill would increase net direct spending by $50 million over the 2018–2027 period. 

8 

1See National Credit Union Administration, Risk-Based Capital Final Rule Impact Summary 

(October 2015), https://go.usa.gov/xnHtm (PDF, 128 KB). 

Because enacting H.R. 4464 would affect direct spending, pay-asyou-go procedures apply. Enacting the bill would not affect revenues. 

CBO estimates that enacting H.R. 4464 would not increase net direct spending or on-budget deficits by more than $2.5 billion in 

any of the four consecutive 10-year periods beginning in 2028. 

H.R. 4464 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). 

Additional fees levied by the NCUA on credit unions would increase the cost of an existing private-sector mandate as defined in 

UMRA. However, CBO estimates that those costs would fall below 

the annual threshold established in UMRA for private-sector mandates ($156 million in 2017, adjusted annually for inflation). 

Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 4464 is shown in the following table. The costs 

of this legislation fall within budget function 370 (advancement of 

commerce). 

By fiscal year, in millions of dollars— 

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018– 

2022 

2018– 

2027 

INCREASES IN DIRECT SPENDING 

Increased Costs to the NCUA to Resolve 

Failed Credit Unions.

Estimated Budget Authority ............. 0 14 10 10 6 2 2 2 2 2 40 50 

Estimated Outlays ............................ 0 14 10 10 6 2 2 2 2 2 40 50 

Basis of estimate: Enacting H.R. 4464 would reduce the amount 

of capital that certain credit unions would be required to hold and 

would change how credit unions account for the risk profile of their 

assets to federal regulators. Enacting the bill would permit credit 

unions to hold less capital than they will be required to hold under 

the rule, which becomes effective in January 2019. Reducing the 

amount of capital credit unions hold increases the probability that 

a credit union could fail and also increases the federal cost of resolving credit union failures. Failed credit unions are resolved 

through the SIF, which is administered by the NCUA. That spending is recorded in the budget as direct spending. 

Under the rule, Credit Unions will be required to have a ratio 

of risk-weighted assets to capital of 10 percent. Under H.R. 4464, 

that ratio would be 7 percent, the ratio in place before the rule was 

finalized. The rule sets the level of capital credit unions must hold 

and also requires credit unions to account for the risk profile of 

their assets in a way that is commensurate with the way that 

banks must account for their risk profile. Under the bill, credit 

unions would return to using a measure of risk called the net 

worth ratio that was primarily intended to capture interest rate 

risk. 

CBO’s baseline projection for the SIF’s gross cost is $1.2 billion 

over the 2018–2027 period. Using information from the NCUA, 

CBO estimates that enacting the bill would increase those gross 

SIF costs by about one-third (or about $400 million) over the 2018– 

2027 period.1 CBO expects those costs would increase because 

9 

failed credit unions would have less capital, and as a result, costs 

to the SIF to resolve them would increase. However, the NCUA has 

the authority to collect premiums and fees from insured institutions to offset its costs; those premiums and fees are recorded as 

offsets to direct spending. Because of the time it would take for the 

NCUA to set its assessments to recoup those costs, CBO expects 

that there would be a one-year delay in collecting premiums and 

fees from credit unions. As a result of that lag, CBO estimates that 

enacting the bill would lead to a net increase in direct spending of 

$50 million over the 2018–2027 period. 

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in outlays that are subject to those pay-as-you-go procedures are shown in the following table. 

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 4464, THE COMMON SENSE CREDIT UNION 

CAPITAL RELIEF ACT OF 2017, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON DECEMBER 13, 2017 

By fiscal year, in millions of dollars— 

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018– 

2022 

2018– 

2027 

NET INCREASE IN THE DEFICIT 

Statutory Pay-As-You-Go Impact ............... 0 14 10 10 6 2 2 2 2 2 40 50 

Increase in long-term direct spending and deficits: CBO estimates that enacting H.R. 4464 would not increase net direct spending or on-budget deficits by more than $2.5 billion in any of the 

four consecutive 10-year periods beginning in 2028. 

Mandates: H.R. 4464 contains no intergovernmental mandates as 

defined in UMRA. 

Additional fees assessed by the NCUA to offset the costs associated with implementing the bill would increase the cost of an existing mandate on federally chartered credit unions required to pay 

those fees. CBO estimates that the additional cost of the mandate 

would total $19 million in 2020 and would remain below the annual threshold established in UMRA for private-sector mandates 

($156 million in 2017, adjusted annually for inflation) in subsequent years. 

Estimate prepared by: Federal costs: Sarah Puro; Mandates: Rachel Austin. 

Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

10 

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

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee states that the bill requires no directed rulemakings. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 4464 as the ‘‘Common Sense Credit Union 

Capital Relief Act of 2017.’’ 

Section 2. Repeal 

This section repeals the National Credit Union Administration’s 

‘‘Risk-Based Capital’’ final rule (published at 80 Fed. Reg. 66626 

(October 29, 2015). 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

H.R. 4464 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 Rules of 

the House of Representatives. 

(11) 

1https:// www.federalregister.gov/documents/2015/10/29/2015-26790/risk-based-capital and 

https://www.ncua.gov/About/Pages/board-actions/bulletins/2015/october/BAB20151015.aspx. 2 H.R. 2769 (114th Congress), the Risk-Based Capital Study Act of 2015, https:// 

www.congress.gov/bill/114thcongress/house-bill/2769. The bill was not enacted into law, so 

NCUA was not required to conduct the study or report. 3https://www.ncua.gov/regulation-supervision/Documents/RBC/final-risk-based-capital-rule-report.pdf. 

MINORITY VIEWS

H.R. 4464 would repeal the final rule on risk-based capital that 

was promulgated by the National Credit Union Administration 

(NCUA) in October 2015 and takes effect on January 1, 2019.1

That rule was the culmination of a multi-year rulemaking process that involved considerable study and input from stakeholders. 

NCUA’s Board explained that the rule satisfies several legal requirements that it is required to fulfill. According to NCUA, nearly 

75 percent of all credit unions are exempt from the rule, and only 

one percent of credit unions are likely to have to make adjustments 

to come into compliance with the rule. While the bill would repeal 

the final rule, it would not make any changes to the underlying 

statutes that the rule addresses, meaning the statutory rulemaking 

requirement remains. 

NCUA’s risk-based capital rule has been closely scrutinized by 

the Committee in terms of how the agency proposed and then finalized the rule. For example, on October 6, 2015, Members of our 

Committee wrote a bipartisan letter to former NCUA Chairman 

Debbie Matz, urging the agency to voluntarily undertake the study 

and report proposed by a bipartisan bill introduced in the 114th 

Congress,2 before finalizing the risk-based capital rule. Chairman 

Matz replied on October 8, 2015, that NCUA had already closely 

studied each of the factors mentioned in the study under the proposed bill, but she still committed to issuing a report to the Committee. In November 2015, NCUA submitted to the Committee a 

220-page report entitled, ‘‘Report to the House Financial Services 

Committee on the Final Risk-Based Capital Rule,’’ that was also 

published on NCUA’s website.3 In this report, NCUA laid out the 

statutory authority for the rulemaking along with the extensive 

analysis and engagement with stakeholders in crafting and finalizing the proposal. NCUA emphasized that, ‘‘The Federal Credit 

Union Act requires the NCUA Board to prescribe, by regulation, a 

system of prompt corrective action that is: ‘consistent with’ section 

216 of the Federal Credit Union Act; and ‘comparable’ to the system of prompt connective action prescribed in the Federal Deposit 

Insurance Act. . . . Because of the statutory requirement for 

NCUA’s prompt corrective action system to be comparable—and 

the fact that credit unions are exposed to credit risk like all depository financial institutions—NCUA’s general approach was to defer 

12 

4Federally insured credit unions have substantially increased membership, assets, net income, 

and loans since 2011. Credit union membership has expanded by 16.5 million since 2010, an 

increase of 18 percent, which now stands at more than 108 million members nationwide. See 

https://www.ncua.gov/newsroom/Pages/publications/annual-reports.aspx. 5https://www.ncua.gov/About/Pages/board-actions/bulletins/2015/october/BAB20151015.aspx. 

For more information about the rule, also see https://www.ncua.gov/regulation-supervision 

/Pages/policy-compliance/resource-centers/risk-based-capital.aspx, https://www.ncua.gov/newsroom/Pages/speeches/2015/october/Matz-Statement-on-the-Risk-Based-Capital-Final-Rule.aspx, 

https://www.ncua.gov/Legal/Documents/RBC/RBC-Impact-Analysis.pdf, https://www.ncua.gov/ 

Legal/Documents/RBC/RBC-Final-Rule-FAQs.pdf, and https://www.ncua.gov/About/Documents/ 

Agenda%20Items/AG20151015Item4a.pdf. 6https://financialservices.house.gov/uploadedfiles/hhrg-115-ba15-wstate-mstanley20171207.pdf. 

to the capital treatment used by the other banking agencies and 

the Basel Committee on Banking Supervision.’’ 

NCUA’s rule updates regulations on prompt corrective action requiring credit unions that take certain risks must hold capital commensurate with those risks. The rule only applies to federally-insured credit unions with assets over $100 million. At the time the 

rule was adopted, it was estimated that 76 percent of credit unions 

would be exempt. Furthermore, among the 24 percent of credit 

unions covered by the rule, only 1 percent would experience any 

change in their capital category, based on balance sheets of covered 

credit unions at the time. Nearly 99 percent of the 1,489 covered 

credit unions, would continue to be categorized as ‘‘well capitalized.’’ 4 The rule is set to go into effect on January 1, 2019, which 

coincides with the full phase-in of risk-based capital rules at federal banking agencies.5

When the final rule was adopted, then Chairman Matz explained 

the rule is tailored to address the high-risk outlier credit unions 

that pose significant potential risk of losses to NCUA’s Share Insurance Fund (NCUSIF). In the event of losses to NCUSIF, all federally insured credit unions would have to pay to recapitalize the 

fund. As Dr. Marcus Stanley explained in testimony before the 

Committee, ‘‘This is not just a theoretical danger. During the financial crisis dozens of credit unions failed, and the Federal government was forced to place large ‘wholesale’ credit unions into public 

conservatorship due to large unexpected losses on subprime mortgage securities.’’ Dr. Stanley went on to recommend that ‘‘Congress 

work with the NCUA to investigate means of assisting credit 

unions that are less extreme than simply repealing new risk based 

capital rules.’’ 6

We oppose H.R. 4464 because it would repeal a risk-based capital 

rule that fulfills a statutory mandate that federally-insured credit 

unions be held to comparable capital standards as federally- insured banks. Furthermore, this tailored rulemaking was adopted 

after a thoughtful and deliberative rulemaking process. Rather 

than a wholesale repeal of the rule, a less drastic policy approach 

would be to identify any specific problems with the final rule, seek 

more information, and determine whether any regulatory or legislative changes may be necessary to address them. Furthermore, 

while credit unions are required to have comparable capital rules 

that banks have, we believe credit unions should also have a comparable amount of time banks had to adjust to new capital rules. 

To that end, Committee Democrats offered a substitute amendment to replace H.R. 4464’s repeal of the risk-based capital rule 

with a two-year extension, giving the few credit unions that will 

13 

have to adjust their balance sheet until 2021 to come into compliance with the rule. The extension would also give NCUA, Congress, 

and stakeholders additional time to more closely scrutinize various 

components of the risk-based capital rule, and make administrative 

or legislative changes as necessary. Unfortunately, Republicans rejected this sensible alternative and continue to insist on completely 

repealing the rule even though the law requires NCUA to have 

comparable capital rules as banks have. 

For these reasons, we oppose H.R. 4464. 

MAXINE WATERS. 

NYDIA M. VELA ́ ZQUEZ. 

CAROLYN B. MALONEY. 

JOYCE BEATTY. 

KEITH ELLISON. 

Æ