‘Alternative capital’ to be considered by NCUA Board

Jan. 12, 2017 -- “Alternative capital” for credit unions will be the subject of an advanced notice of public rulemaking that the NCUA Board will consider at next week’s regular meeting in Alexandria, Va.

An ANPR on the issue of supplementary capital has been anticipated since at least last October, when the NCUA Board held a “board briefing” on the issue. At that briefing, staff outlined a number of challenges for the agency (and the credit union system) in formulating such a regulation. Those challenges included tax implications, fraud prevention, investor suitability, disclosures and others. Also at that briefing, NCUA Board Chairman Rick Metsger said the agency would move “as expeditiously as possible” on the issue, but also then added there are issues to be considered, specifically referring to tax implications.

NASCUS has a long record of consistently encouraging NCUA, Congress and others to embrace capital reform for credit unions as a tool for enhancing safety and soundness, with the general view that a capital structure limited exclusively to retained earnings significantly disadvantages credit unions in facing unexpected economic shocks, and penalizes well-run institutions that are simply attracting deposits too quickly.

NASCUS President and CEO Lucy Ito has pledged the state system to work closely with NCUA in addressing the challenges outlined at the October briefing. “Supplemental capital is an important tool in enhancing credit union safety and soundness, and the state system must be part of the discussion to ensure that both federal and state credit unions have the opportunity to use this tool, and that neither be at a disadvantage,” she said.

In other action, the board has scheduled a briefing on statutory inflation adjustments for civil money penalties it charges.


NCUA Board meeting agenda for Jan. 19