Supplemental Capital Bill Introduced in U.S. House (Misc News: February 9, 2012)
CUNA is hailing a bill introduced in the U.S. House that would allow credit unions to accept additional forms of capital, provided it does not alter the cooperative ownership structure of credit unions.
The bill, H.R. 3933, was introduced by Reps. Peter King, R-N.Y., and Brad Sherman, D-Calif, according to CUNA News Now.
MCUL & Affiliates CEO David Adams said preservation of the tax exemption, raising the member business lending cap and reducing the regulatory burden are higher credit union priorities, but supplemental capital legislation would also benefit credit unions.
“The Michigan Credit Union League will work with CUNA and the credit union community to obtain this authority while also pursuing other, higher priority issues,” Adams said. “The fact that some members of Congress support this request is encouraging as we attempt to gain support for the rest of our legislative agenda.”
The NCUA would be authorized to set maturity limits on this capital and restrict the ability to raise supplemental capital to credit unions that are sufficiently capitalized and well-managed.
In a letter to colleagues seeking support for the bill, King said it will provide the NCUA with "the same authority and flexibility to adjust capital requirements in response to changes in economic conditions as Congress has provided to federal banking regulators."
It would also:
- Rectify a flaw in a 1998 law that discourages manageable asset growth by financially healthy credit unions;
- Ensure credit unions can continue to accept new deposit shares – even during tough economic times when demand for loans and other income-generating services are low; and
- Allow credits unions to help keep private sector credit flowing at affordable rates even in recessionary times.
NCUA Chair Debbie Matz, in letters to the top members of the Senate Banking Committee and the House Financial Services Committee last year, urged statutory changes that would correct the disincentive she said is impacting even strong, well-capitalized credit unions.
To the detriment of consumers, current credit union prompt corrective action (PCA) rules discourage some credit unions from marketing their desirable products and services out of concern that attracting increased share deposits could deflate net worth positions, she said.
In a letter to the sponsors supporting the legislation, CUNA President/CEO Bill Cheney wrote that the bill would help credit unions protect taxpayers from losses to the National Credit Union Share Insurance Fund without jeopardizing the 'one member, one vote' principle that is the bedrock of the credit union ownership structure.
"Capital is also the first line of defense in protecting taxpayers from deposit insurance losses. It is in everyone's best interest to have financial institutions that are well capitalized and able to weather whatever difficulties may occur," CUNA President/CEO Bill Cheney wrote.
Cheney added in a note sent to the leagues that three congressmen have signed on as co-sponsors: Rep. Ron Paul, R-Texas; Rep. Larry Kissell, D-N.C., and Bob Filner, D-Calif.