NASCUS: With Trades On Board, Alternative Capital Closer To Reality

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SAN ANTONIO-Secondary, or supplementary, capital for credit unions has been a long-time goal of the National Association of State Credit Union Supervisors, but its likelihood has also seemingly been a long way off. But now the group feels it's closer than ever to becoming reality.

"We still have to work with Congress, Treasury and the NCUA," said NASCUS President Mary Martha Fortney. "But CUNA and NAFCU are on board."

Indeed, during NASCUS' annual meeting here CUNA President Bill Cheney said secondary capital will be his trade group's top priority in Congress in 2011 (see related story).

NASCUS Chairman Tom Candon, who is Vermont's state regulator, noted House Banking Committee Chairman Barney Frank has indicated an interest in the issue, and asked where NCUA stood on it. NCUA has supplied a letter to Frank indicating its support. Separately, NCUA board member Gigi Hyland recently oversaw a working group's white paper on the topic, as well.

"We keep trying to educate on this issue," said Fortney. "It's not for every credit union and it's not a magic pill. And even if we got supplemental capital today it would be another year and a half before it was available to be put in place."

The fact that retained earnings at credit unions have declined at the same time assessments to help replenish the NCUSIF are taking place has added to the need for secondary capital, said Candon. "It's one way to bring capital back up at a time when some credit unions have had to turn away deposits," Candon added.

Fortney noted the overall effort is certainly "further ahead than where we were five years ago," adding that models for secondary capital as it is available to CUs in other countries are available for review. And low-income CUs in the U.S. already have the ability to accept secondary capital. "Why can't all credit unions have the same opportunity," asked Fortney. "That's the question no one seems to be able to answer."

Other issues discussed with Credit Union Journal by NASCUS leadership:

* Candon noted the important role corporates have played, especially for smaller CUs. He said regulators must urge CUs to ensure their strategic plans are prepared for any vacuum of services that may be created as some corporates are wound down and as all corporate see their activities limited by new regulations.

* NASCUS continues to raise concerns with the Federal Trade Commission over a potential new rule related to disclosures in mortgage advertising that would apply to state-chartered CUs only. In fact, state-charters are the only depository institutions affected by the rule at all. "We are asking that state charters be exempted," said Fortney, noting discussions with the FTC have been going on for more than a year.

Fortney said FTC has listened to NASCUS' concerns, which center on the additional level of compliance that would be required of CUs and the fact other lenders would be advertise the same products and terms but would not have to make the same disclosures. The comment period on FTC's proposal runs through Nov. 15.

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