New Bill Would Allow Supplemental Capital to Count Toward Credit Union Net Worth

Feb. 10, 2012 - H.R. 3993, the Capital Access for Small Businesses and Jobs Act, introduced Feb. 9 would allow credit unions to access supplemental capital, a reform long supported by NASCUS.

The bill would make a change to the definition of net worth in the Federal Credit Union Act to allow non-share capital accounts to count toward a natural person's credit union's net worth. The current definition of net worth is limited to retained earnings for natural person credit unions. From a regulatory standpoint, NASCUS has supported supplemental capital for many years. A supplemental capital program can provide increased systemic stability, additional balance sheet management tools and give credit unions the necessary capital flexibility to respond to economic conditions.

The bill states that supplemental capital could include non-share capital accounts as authorized by the National Credit Union Administration (NCUA) that meet the following criteria:

  • Do not alter the cooperative nature of the credit union;
  • Are uninsured;
  • Are subordinate to all other claims against the credit union, including the claims of creditors, shareholders, and the Fund;
  • Are available to be applied to cover operating losses of the credit union in excess of its retained earnings and, to the extent so applied, will not be replenished;
  • Are subject to maturity limits as determined by the NCUA Board; and
  • Are offered by a credit union that is determined by the Board to be sufficiently capitalized and well-managed.

"For NASCUS and state regulators, access to supplemental capital for credit unions has always been a regulatory issue  and a matter of safety and soundness," said NASCUS President and CEO Mary Martha Fortney. "NASCUS applauds the introduction of this bill and enthusiastically supports the ability of state and federal regulators to be provided with this regulatory parity enjoyed by other federal regulators."