Supplemental Capital

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 all 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 continues to recover from the financial crisis.

NAFCU's Position on Supplemental Capital

During its October 2016 Board Meeting, the NCUA Board was briefed on supplemental capital solutions. On February 8, 2017, NCUA released an Advanced Notice of Proposed Rulemaking (ANPR) to solicit comments from stakeholders on alternative forms of capital, which include both secondary capital and supplemental capital. On May 8, 2017, NAFCU submitted comments on to NCUA, offering general support for the proposal so long as it does not conflict with the mutual, cooperative structure of credit unions.

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.

Credit unions did not engage in the risky lending practices that led to the financial crisis and have not cost taxpayers a single dime. Given the negative impact the NCUA's recently approved risk-based capital proposal could have on credit unions, it has never been more important for Congress to consider allowing credit unions access to supplemental capital.

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 critical legislation.

Recent Activity on Capitol Hill

On February 28, 2017, Congress Reps. Peter King (R-NY) and Brad Sherman (D-CA) reintroduced, for the 115th Congress, NAFCU-backed legislation (H.R. 1244) that would allow federal credit unions to receive payments on uninsured, non-share capital accounts, provided the accounts:

  • Do not alter the cooperative nature of the credit union.
  • 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 NCUA Board.
  • Are offered by a credit union that has been determined sufficiently well capitalized by the NCUA Board.

     Recent Media Outreach

    NAFCU has stayed at the forefront of this issue and continued to champion credit unions in major media nationwide.

    Supplemental Capital Bill Reintroduced (Credit Union Times, February 17, 2015) 

    Supplemental Capital Introduced in Congress (Credit Union Journal, February 13, 2015)

    NAFCU Applauds Reps. King, Sherman Introduction of Supplemental Capital Bill (February 13, 2015) 

    NCUA's Congressional Testimony Heats Up Supplemental Capital Debate(Credit Union Journal, April 10, 2014)

    Recent Policy Letters

    Read recent letters from NAFCU to members of Congress on key supplemental capital issues that affect credit unions and their members.

    3-7-17 NAFCU Letter in Support of H.R. 1244, the "Capital Access for Small Businesses and Jobs Act"

    3-11-2014 NAFCU letter on The Importance of HFSC Supplemental Capital for All Credit Unions

    Dear Colleague Letter-Supplemental Capital

    View all NAFCU policy letters

    Updated November 2017