Updated November 2013
A credit union's net worth ratio is
currently determined solely on the basis of retained earnings as a percentage
of total assets. Because retained earnings often cannot keep pace with asset
growth, otherwise healthy growth - such as growth resulting from taking
deposits - can dilute a credit union's regulatory capital ratio and trigger
non-discretionary supervisory actions under prompt corrective action (PCA)
rules. Allowing eligible credit unions access to supplemental capital, in addition
to retained earning sources, will help ensure healthy credit unions can achieve
manageable asset growth and continue to serve their member-owners efficiently
as the country recovers from the financial crisis.
During a joint trades meeting at
NAFCU's annual Congressional Caucus in 2010, interested parties crafted
principles for legislation that would open the Federal Credit Union Act and
allow credit unions that met certain eligibility requirements access to
supplemental capital. NAFCU has pushed the NCUA to embrace this concept.
In February 2013, Congress Reps.
Peter King (R-NY) and Brad Sherman (D-CA) reintroduced, for the 113th
Congress, NAFCU-backed legislation (H.R. 719) that would allow federal credit
unions to receive payments on uninsured, non-share capital accounts, provided
- Do not alter the cooperative nature of the credit
- Are uninsured
- Are subordinate to all other claims against the credit
union, including the claims of creditors, shareholders, and the National
Credit Union Share Insurance Fund
- Are available to be applied to cover operating losses
of the credit union in excess of its retained earnings and, to the extent
supplied, will not be replenished
- Are subject to maturity limits as determined by the
- Are offered by a credit union that has been determined
sufficiently well capitalized by the NCUA Board
Credit unions did not engage in the
risky lending practices that led to the financial crisis and have not cost
taxpayers a single dime. The Capital Access for Small Businesses and Jobs
Act (H.R.719) will help to ensure that credit unions can continue to serve
their nearly 95 million members nationwide.
NAFCU will continue to advocate for
thoughtful dialogue on this important issue to our nation's credit unions and
educate lawmakers on the importance of passing this critical legislation.