CUs Back Off Bid For SupplementaryCapital

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WASHINGTON - (02/25/05) -- In the few months a key governmentagency shed doubt on the need for secondary capital for creditunions, the credit union has backed off the suplementary capitalissue. Regulatory relief efforts soon to be introduced in Congressare unlikely to include secondary capital allowances and slowergrowth has cooled changed the equation, even the need, for somecredit unions to beef up their capital. In fact, the vast majorityof credit unions are considered to hold more than enough capital,at least under regulatory requirements, according to CUNA."Eighty-four-percent of credit unions have way more capital thanthey need. That leaves about 15-16%, about 1,500 credit unions withbetween 7% and 8%. And that's more than they need, though not somuch that they don't have to look over their shoulders at PCArules," Bill Hampel, chief economist for CUNA, told The CreditUnion Journal. Hampel's conclusion is similar to the one arrived atby the General Accountability Office last fall, which found thereis "no compelling need for secondary capital" among credit unions.In fact, NCUA said in a new report issued Wednesday on that only 62credit unions out of more than 9,300 were undercapitalized atmid-year 2004 under the current minimum capital (PCA) rules. Creditunions in several of the states, including Ohio, which iscontemplating credit union reform, are also backing off the questfor supplementary capital. Still, the credit union lobby, continuesto express concern over the PCA rules and plans to pursue reformsin Congress this year that would enact a risk-based capitalrequirement for credit unions.

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