The road to supplemental capital for credit unions is clearly littered with regulatory obstacles.
But during a briefing Thursday, during which NCUA staff presented a high-level snapshot of the steps the agency must take to authorize credit union use of supplemental capital, the NCUA board demonstrated a clear interest in deepening its investigation of a potential proposal.
Both NCUA Board Chair Rick Metsger and Board member J. Mark McWatters expressed a desire to issue an Advance Notice of Proposed Rulemaking (ANPR) in January to begin the process of eliciting stakeholder input.
“We’ll move as expeditiously as possible,” Metsger said. “But I think (we) have an understanding of the complexities. There are a lot of very serious issues that would have to be decided on this.”
CUNA long has supported providing credit unions access to supplemental capital, particularly as a measure to aid credit unions as they contend with the NCUA’s risk-based capital rule.
Credit unions--the only financial institutions barred from access to this source of income--would be able to leverage the extra capital to offset risk-based capital requirements, thereby easing the burden on their operations and allowing them to better serve members.
“It’s important to note that the rule NCUA is considering would only permit supplemental capital for purposes of meeting risk-based capital requirements once they take effect in 2019,” said Bill Hampel, CUNA chief policy officer. “That’s a step in the right direction. Allowing supplemental capital to be counted in the basic pure leverage ratio would require an act of Congress.”
NCUA staff outlined several issues the board must consider before authorizing supplemental capital, including that:
Despite the potential roadblocks, Metsger and McWatters were clear in their desire to investigate this issue further.
“We can pretend we know what the marketspace is for secondary capital for a credit union, but I don’t think we do,” McWatters said, adding, “People have asked me about (supplemental capital) for two years. So here it is, we need your input and we need your counsel.”