In a bill the Credit Union National Association (CUNA) says will enhance the safety and soundness of the credit union system, Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.) have proposed to permit the National Credit Union Administration (NCUA) to allow credit unions to accept additional forms of capital, provided it does not alter the cooperative ownership structure of credit unions.
Current law restricts credit unions to building their capital levels through retained earnings. Under the newly introduced bill, supplemental capital would have to be uninsured and subordinate to other claims against a credit union.
The bill (H.R. 3993) also authorizes the NCUA to set maturity limits on this capital and restrict the ability to raise supplemental capital to credit unions that are sufficiently capitalized and well-managed.
In a letter to colleagues seeking support for the bill, King said it will provide the NCUA with “the same authority and flexibility to adjust capital requirements in response to changes in economic conditions as Congress has provided to federal banking regulators.” They said it also will:
- Rectify a flaw in a 1998 law that is discouraging manageable asset growth by financially healthy credit unions;
- Ensure credit unions can continue to accept new deposit shares–even during tough economic times when demand for loans and other income-generating services are low; and
- Allow credits unions to help keep private sector credit flowing at affordable rates even in recessionary times.
The NCUA has backed an idea to permit a combination of supplemental and risk-related capital for credit unions. [read more]
[related: Supplemental Capital Measure Was Years In Coming]
[related: Supplemental Capital Bill Introduced in House]