CUNA supports the authority of credit unions to build additional capital in a way that does not dilute the cooperative ownership and governance structure, it wrote to NCUA Tuesday. CUNA’s letter is in response to the agency’s advance notice of proposed rulemaking (ANPR) on alternative capital.
“We greatly appreciate the NCUA’s willingness to consider allowing credit unions to accept supplemental capital to count towards the risk-based net worth requirement,” the letter reads. “If structured properly, not only will this enhance the safety and soundness of credit unions, but it can be accomplished without altering the cooperative, mutual structure of credit unions.”
The ANPR includes secondary capital and supplemental capital. Secondary capital is permissible for low-income designated credit unions and can be counted toward both the new worth ratio and the risk-based net worth requirement under NCUA's prompt corrective action standards.
The board is contemplating authorizing supplemental capital instruments that would only count towards the risk-based net worth requirement.
In developing this rule, CUNA urges NCUA to create an environment for limited experimentation by credit unions in the creation of supplemental capital instruments, limited in an amount to not expose the share insurance fund to undue risk, but flexible in scope to allow the development of the most appropriate instruments that will be useful and cost effective for credit unions.
For supplemental capital for non-low-income credit unions, CUNA recommends the following approach:
CUNA also provided requested answers to questions raised by NCUA in the ANPR. Additional information can be found in the letter, and on CUNA’s Removing Barriers Blog.