California CUs Forge Ahead On SecondaryCapital

SACRAMENTO, Calif. - (10/20/04) -- The California CU League, which hasbeen one of the leading advocates of secondary capital for creditunions, has submitted a proposal to state regulators which wouldallow California to become the 10th state to allow state charteredcredit unions to issue forms of secondary capital. The proposalsubmitted to the state's Department of Financial Institutionswould: require prior DFI approval of such issuances; limitpurchasers to accredited investors under Securities and ExchangeCommission rules; make all secondary instruments subordinated toother creditors and non-redeemable until maturity; have no votingrights. Even if the DFI approves the proposal, however, statechartered credit unions could not count it as net worth underNCUA's net capital, or prompt corrective action rules for allcredit unions. Nine other states currently allow state charteredcredit unions to issue secondary capital, but NCUA does not countany of it under PCA.