Chances Slim For Supplementary Capital

Credit Union Journal Daily Briefing  |  Tuesday, April 13, 2010

WASHINGTON – The possibility that Congress will act to give credit unions authority to raise supplemental capital for their net worth calculation is very remote and such authority still could be years off, observers agree.

“It’s a high mountain to climb,” said Brad Thaler, senior lobbyist for NAFCU, which is focusing the brunt of its efforts in this Congress on increasing the cap on member business loans. The credit union lobbyist conceded that the supplementary capital provision could be added to another bill in progress but the opportunities are dwindling.

Even though both NAFCU and CUNA have agreed to language for a supplementary capital bill and NCUA Chairman Debbie Matz has asked Congress for the authority, congressional leaders have yet to include the necessary provisions in a bill and timing is running out on this year’s legislative session.

An NCUA panel chaired by NCUA Board member Gigi Hyland yesterday issued a report endorsing the concept of supplementary capital to be counted as net worth under the agency’s minimum capital, or prompt corrective action, rules, and an outline of three different forms supplementary capital could take.

The NCUA group acknowledges some of the controversy surrounding the issue of supplementary capital including the potential dilution of members’ voting and the recent experience with the failure of two corporate credit unions, U.S. Central FCU and WesCorp FCU, which wiped out their supplementary paid-in-capital and membership capital shares.