WASHINGTON (1/7/15)--While the Credit Union National Association says it generally supports the National Credit Union Administration's corporate credit unions proposed rule, CUNA has urged the NCUA board to consider additional corporate credit union issues this year.
The NCUA's proposal would revise several definitions used in the agency's corporate credit union regulations, with the goal to "streamline and clarify certain provisions and to enhance readability."
Most notably, the proposal replaces the current definition of "adjusted" or "core" capital with "Tier 1" capital. This would reduce the amount of a corporate credit union's perpetual contributed capital (PCC) counted as Tier 1 capital beginning in 2016, with increased deductions in 2020.
"CUNA urges NCUA to reconsider PCC as part of Tier 1 capital since the deductions that will begin next year will adversely impact working capital available to corporates," the letter reads. "The deduction of PCC from Tier 1 calculations could create uncertainty regarding the financial stability of a corporate credit union simply due to the deduction of PCC creating the appearance of lower capital. We are also concerned that the deduction would cause confusion for credit union auditors when they evaluate any potential impairment of PCC."
CUNA believes the NCUA should eliminate the deductions of PCC from Tier 1 capital, allowing PCC to be counted for all regulatory capital requirements as allowed by current regulations.
"NCUA has not provided sufficient rationale as why the change starring in 2016 is necessary, and it could harm natural-person credit unions if their corporate credit union finds it necessary to reduce services," the letter reads.
According to the letter, CUNA also: