Posted by Lisa Hochgraf
Way back when, in our early days of being credit union industry editors, my colleague Ron Jooss ran an article for Credit Union Management with the title, "How Much is Enough?" The story (with a very fat pink piggy bank for art, not Denise's pig, but a very great pig nonetheless) talked about whether credit unions with double-digit capital ratios were doing enough with members' money, and whether they should spend some of that money to do something active for members.
So this morning as I read the Jan. 28 issue of Credit Union Times, I was interested in this bit about regulators' recent visit to $1.1 billion Robins Federal Credit Union, Warner Robbins, Ga., in the story, "Robins Federal's Financials Gain Regulatory Applause."
"When they discovered the credit union boasts a 12.4 percent capital ratio, they were delighted. In fact, quipped President/CEO John Rhea, with statistics like that in the current economy, 'They give you a standing ovation.'"
I have to say I've been very grateful lately that credit unions overall have taken what some in the past might have called a "conversative" approach to their financial management. But this article made me wonder--are perspectives on how much capital is enough a matter of shifting sand depending on the times? Or are there more hard and fast rules worth following?
Says Rhea in the article, "I think what you're seeing is that what you always thought was too much capital may not be anymore. We've always felt comfortable that we kept [the capital ratio] in double digits. We didn't want it to get below 10. The 12 percent is a nice number, and that ebbs and flows, depending on the performance of the credit union."
