CUNA Expresses Support For 'Safe Harbor' Proposal

CUNA told NCUA it strongly supports the agency's proposal to create a "safe harbor" for net worth restoration plans for credit unions that are marginally below the "adequately capitalized" net worth ratio. Moreover, the trade group prepared an analysis of the plan showing how it could be put into effect if adopted by NCUA.

CUNA's input came in a comment letter to NCUA on its proposed revisions to Prompt Corrective Action rules.

NCUA is proposing the "safe harbor" in part to help credit unions that have been dragged below the adequately capitalized level by inflows of deposits from members exiting the stock market and mutual funds.

In its letter, CUNA also:

* Urged NCUA to drop the requirement for a regular reserve account at credit unions.

* Urged NCUA to increase the threshold for member business loans, consistent with NCUA's risk assessment for long-term mortgage loans, which is 25% (rather than based on the 12.25% cap on MBLs set by the Federal Credit Union Act).

* Urged the agency to consider the use of secondary capital for undercapitalized credit unions in some contexts as they strive to meet PCA requirements.