WASHINGTON – A bipartisan group of House members introduced legislation this morning that would allow credit unions to raise alternative forms of capital, a long-sought goal of credit unions.
The Capital Access for Small Businesses and Jobs Act would allow credit unions to issue alternative forms of capital that do not alter the cooperative nature of the credit union; are uninsured and would be are offered by a credit union that is determined by the board to be sufficiently capitalized and well-managed.
Most importantly, the bill would allow credit unions to count the new capital as net worth under NCUA's minimum capital rules, known as prompt corrective action, or PCA.
“This legislation will go a long way to help well-managed credit unions administer their net worth levels more effectively,” said Fred Becker, president of NAFCU. “This is especially significant during challenging economic times such as those our nation has been facing during the last few years.”
The bill was introduced in the House Financial Services Committee by Reps. Peter King, R-N.Y. and Brad Sherman, D-Calif., and at least four other lawmakers have signed on as co-sponsors.
Credit unions have sought authority for more than a decade--especially over the past three years as loan losses cut heavily into capital levels--to supplement their regulatory capital, which is by statute restricted to retained earnings. Some states allow credit unions to issue alternative forms of capital, but federal statute prevents federally insured credit unions from counting those altermnative forms as net worth under NCUA's PCA rules.
