April 10, 2014

McKenna says CUs need supplemental capital

April 10, 2014 – NCUA's Michael McKenna told House Financial Services Committee leaders Wednesday that the agency supports H.R. 719, legislation introduced by Reps. Peter King, N.Y., and Brad Sherman, D-Calif., to allow NCUA to authorize supplemental capital authority for healthy, well-managed credit unions.

McKenna, NCUA's general counsel, testified on behalf of the agency during Tuesday's committee hearing on the economic impact of federal financial institution regulators' activities. He was questioned by Sherman on whether NCUA has considered expanding credit unions' access to supplemental capital as it works on its risk-based capital proposal.

McKenna said the agency was looking at it. He sought to clarify that Wednesday, noting in a letter to committee Chairman Jeb Hensarling, R-Texas, and Ranking Member Maxine Waters, D-Calif., that the agency has "very limited" statutory authority for supplemental capital and that legislative action is needed.

"A consumer credit union's inability to raise capital outside of retained earnings limits its ability to serve its members," he wrote. "NCUA has therefore previously encouraged Congress to consider authorizing healthy, well-managed consumer credit unions, as determined by the NCUA Board, to issue supplemental capital that will count as net worth."

NAFCU has long urged greater supplemental capital authority and has included this wish in its five-point plan for credit union regulatory relief. H.R. 719, which would allow credit unions access to certain forms of supplemental capital, would advance this element of the plan.