May 08, 2017

NAFCU welcomes capital ANPR, urges pilot program

NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt on Monday welcomed the NCUA's advanced notice of proposed rulemaking on alternative forms of capital and recommended that a framework be developed through a pilot program, similar to the one used for the derivatives rule.

"A regulatory capital framework that authorizes supplemental capital would grant credit unions an additional option to guard against risk, achieve growth, and ensure that our industry remains a bedrock of stability for the 106 million Americans who currently look to credit unions as a vital source of affordable financial services," Hunt wrote to the NCUA.

Hunt, in a letter, said NAFCU's approach to alternative capital emphasizes the following general principles:

· that the not-for-profit, mutual, member-owned structure of credit unions be preserved;
· that their capital structure not be fundamentally changed and that the safety and soundness of the credit union community be preserved;
· that a degree of permanence be established such that a sudden outflow of capital will not occur;
· that credit unions be allowed feasible means to augment supplemental capital; and
· that credit unions be provided a solution with market viability.

The ANPR focuses on supplemental capital, which federally-insured credit unions could use to meet NCUA's risk-based net worth requirement; and secondary capital, which is already authorized for low-income-designated credit unions.

Hunt noted NAFCU's support for supplemental capital as an option for improving capital buffers, encouraging growth and meeting regulatory capital requirements, provided that credit unions' not-for-profit, cooperative structure is preserved. She also noted the association's support for modest changes to the approval and review of secondary capital issuers and she recommended the NCUA offer low-income designated credit unions broader call options to relieve certain market inefficiencies.

Hunt said NAFCU looks forward to working with the agency on developing a framework for regulatory capital.

NAFCU also continues to push for legislation that would create a fair capital system providing, among other things, access to alternative capital for all credit unions, regardless of charter type.