Progress Convincing Regulators, Congress to Support Supplemental Capital

The Credit Union Coalition for Supplemental Capital is seeing progress in efforts to convince Congress of the need for supplemental capital, according to Parker Cann, senior vice president and general counsel at BECU. Cann notes “much more awareness in Congress now than when we started a couple of years ago.”

BECU is an active participant in the coalition, a group consisting of several credit union trade associations and approximately 35 credit unions of diverse asset size from around the country. The group is among a growing chorus asking Congress to modify the definition of credit union net worth to include supplemental capital.

The Coalition found early support from west-coast trade associations representing credit unions in Washington, Oregon and California, and the issue remains a 2012 priority for the Northwest Credit Union Association (NWCUA).

“U.S. credit unions represent the only sector with statutory limitations on acquiring extra safety and soundness funds,” said NWCUA CEO John Annaloro.  “If worldwide capital standards change in 2012, a congressional ‘housekeeping’ update to the Federal Credit Union Act could become a fast track necessary to allow for additional alternatives in net worth accumulation.”

“If we can expand the opportunities for credit unions to raise capital, it’s a good thing,” said Cann, a former Washington State credit union regulator. “The strengthening of credit unions’ net worth is the first buffer for the insurance fund and could be a good tool for credit unions if managed properly.”

An announcement from the Federal Reserve last week proposing that U.S. banks with assets greater than $50 billion achieve a 9.5 percent ratio by 2019 did not immediately impact credit unions, but it could result in increased focus on the push for supplemental capital. Some credit unions’ ratios are challenged in the wake of the recession and the influx of deposits following Bank Transfer Day.

Although not all credit unions would necessarily choose to raise supplemental capital following new legislation, Cann believes they should have the option.

He noted helpful support from the Credit Union National Association (CUNA) and the National Association of Federal Credit Unions (NAFCU). The National Credit Union Administration (NCUA) has also gone on record in support, specifically asking Congress to authorize supplemental capital.

State regulators began advocating for supplemental capital options more than 10 years ago through their professional association, The National Association of State Credit Union Supervisors (NASCUS).

“Really, we want a broad bill in Congress that gives the NCUA the authority to decide by rule what limitations on supplemental capital are appropriate,” Cann said, adding that such rules would still come with significant regulatory oversight.

According to NWCUA President Troy Stang, the Association continues to play an active role in advancing the discussion in support of supplemental capital, noting that the NWCUA has “facilitated many of the congressional hill meetings and also joined Parker and others in meetings with NCUA and Treasury on this topic.”

In May, 2011, the NWCUA coordinated a special “Hike the Hill” visit to Washington aimed specifically at the supplemental capital issue. Meetings were held with Congressional representatives as well as with the NCUA and Treasury. Oregon credit union leaders also participated in an NWCUA-organized conference call with Congressional representatives during which they shared the impact supplemental capital could have on credit unions of all sizes.

“With a little more time, we hope to get a bill introduced and see if we can’t persuade Congress to enact it,” Cann said.


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Posted in Events, Federal, NCUA, NWCUA.