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NAFCU, in a letter to the NCUA Thursday, offered its support of a proposed rule to amend regulations that govern corporate credit unions and the scope of their work.

The rule would permit corporate credit unions to include all perpetual contributed capital (PCC) as Tier 1 capital if a corporate credit union reaches a new "retained earnings ratio" of 250 basis points. The rule also modifies the definition of retained earnings to include "GAAP equity acquired in a merger" as a component of retained earnings. The NCUA last revised the corporates' regulatory framework in 2010 in response to the fallout from the financial crisis, which included the failure of five large corporate credit unions with investments in faulty mortgage securities.

In the letter, NAFCU Regulatory Affairs Counsel Ann Kossachev acknowledged that the NCUA is right in its "recognition that the current rule must be modified so as to not disadvantage corporate credit unions" as they have generated sufficient retained earnings over the past seven years.

Kossachev highlights three potential positive outcomes if the rule is affirmed:

• greater available liquidity to inject into the credit union system;
• increased transparency and understanding of the value of the PCC; and
• heightened stability and faith in the safety and soundness of the industry overall.

NAFCU supports the NCUA's efforts to "enhance the operations of corporate credit unions" while promoting "increased certainty and stability" in the system.