Focus on Secondary Capital Issue Expected to Increase in 2012

The Federal Reserve’s year-end announcement proposing higher capital standards for the nation’s largest financial institutions sets the stage for an increased focus on the campaign to allow credit unions to accept secondary capital.

Tuesday’s announcement proposes U.S. banks with assets greater than $50 billion achieve a 9.5 percent ratio by 2019. While no immediate impact on credit unions is apparent, lobbyists for Northwest credit unions continue educating lawmakers about the benefits of allowing credit unions to accept supplemental capital.

“It could take a decade or more to raise our average capital level by two percentage points,” said John Annaloro, CEO of the Northwest Credit Union Association (NWCUA). “A top priority for us is lobbying Congress to modify the definition of credit union net worth to include supplemental capital.”

“What transpired with Bank Transfer Day demonstrated the reasons credit unions should be able to accept secondary capital,” said the Jennifer Wagner, director of legislative advocacy for the NWCUA. “So much deposit activity could negatively impact some credit unions’ ratios if assets grow too quickly.”

Wagner noted the Northwest delegation has been introduced to and educated about the issue in many conversations and thinks legislation could be introduced in 2012.

Credit unions are required to maintain a net worth of 7 percent to be well capitalized. Prior to the membership influx credit unions experienced during the peak of the Bank Transfer Day movement, Northwest credit unions’ average net worth ratio stood at 8.87 percent in Oregon and 9.47 percent in Washington.

As of Sept. 30, six credit unions in the region had ratios between 7 percent and 7.29 percent. Twelve credit unions’ ratios were below 7 percent.

The National Credit Union Administration (NCUA) has urged Congress to address credit union capitalization issues. In a recent online town hall with more than 2,400 attending, NCUA Chairman Debbie Matz also went on record in support.

“It makes no sense to have credit unions turn away deposits from consumers who have trust in the institution,” said Matz. “


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Posted in NCUA, NWCUA.