Authorizing credit unions to issue capital shares is fully consistent with congressional intent, credit union history, credit unions’ tax status and credit unions’ mutual structure, the World Council of Credit Unions wrote to NCUA Tuesday. The World Council submitted its letter in response to NCUA’s advance notice of proposed rulemaking (ANPR) on alternative capital.
The World Council believes NCUA has broad authority to allow all federal credit unions to issue perpetual capital. Its letter cites section 107(6) of the Federal Credit Union Act, which allows federal credit unions to issue “shares” “representing equity,” which could be similar to corporate credit union Perpetual Contributed Capital.
The World Council also states that any supplemental capital rule should include the current expected credit losses (CECL) standard, which was authorized by the Basel committee earlier this year.
The CECL standard allows agencies like NCUA to authorize credit unions to add-back the additional reserves required by CECL to the numerator of their capital ratio.
Finally, the World Council also notes that credit unions traditionally issued at-risk equity shares prior to the establishment of the National Credit Union Share Insurance Fund or other share insurance systems.
CUNA commented on the ANPR as well, supporting the ability of credit unions to raise alternative capital, and providing suggestions on how such a system should be structured.