NCUA Issues Alternate Capital Proposal for CUs

The National Credit Union Administration today published an advanced notice of proposed rulemaking to expand the types of investment capital that federally insured credit unions could use to meet certain regulatory requirements. NCUA is considering whether to allow credit unions to use investment capital (that would be uninsured capital subordinate to all other claims) to satisfy the risk-based net worth ratio requirement.

Under current law, only low-income designated credit unions are allowed to use secondary capital to satisfy two regulatory requirements: the net worth ratio and the risk-based net-worth ratio. While any change to the net worth ratio would require an act of Congress, the NCUA asserted in the proposal that it has broad authority to adjust the risk-based net worth ratio requirement and therefore may choose to allow credit unions that are not low-income designated to use alternative capital to meet this requirement.

ABA expressed dismay at the NCUA proposal, noting that it amounts to a charter enhancement under the guise of regulatory relief, and that once again, the NCUA continues to act as a cheerleader for the industry it has been charged with supervising. ABA is closely reviewing the ANPR and encourages bankers to submit their concerns to the NCUA. Comments are due May 9.

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