When it comes to capital, credit unions may have too much of a good thing.

After decades of puny capital-to-asset ratios, credit unions have been hell-bent on raising reserves since the early 1980s and could have billions more than they need. The industry's ratio in June was 10.61%, or $31.8 billion. Ten years earlier credit unions had a 6.84% ratio, or $7.3 billion.

William N. Cox, a columnist for the industry newspaper Credit Union News, maintains that 8% capital is sufficient for typical credit unions - those that stick to consumer lending and have a stable membership base.

If that's the case, credit unions have roughly $2.1 billion in capital that could be used more constructively or simply returned to members.

Other industry analysts are reluctant to set a hard-and-fast number for an adequate capital ratio, but most agree the if the industry keeps padding its cushion it could jeopardize future competitiveness.

"It think it's too much," said Tun Wai, chief economist for the National Association of Federal Credit Unions. "At some point you have to ask if you're taking away any services you could provide or are you taking away dividends you could give to members."

"It's a double-edged sword," said James Barth, a finance professor at Auburn (Ala.) University. "It means it's less likely that there will be failures, but it also means they're not leveraging that capital to make as many loans."

In the trenches, credit union executives are split between those who believe in maintaining capital commensurate with their risk and those who like an extra layer of protection, sometimes to help keep examiners off their backs.

James C. Blaine, chief executive of State Employees Credit Union, Raleigh, N.C., said in an interview that building up capital is merely a matter of prudence. The $3.9 billion-asset institution now has a 7.75% capital ratio and is trying to build it to 8%.

"Six is the statutory minimum" for the state, Mr. Blaine said. "Eight is reasonable. Above 10, you're taking away money from today's members."

Excess capital is a relatively new concern for the industry, said William F. Hampel, chief economist for the Credit Union National Association. Credit unions traditionally kept a minimum of capital and routinely returned much of their net income to members in the form of bonus dividends and loan interest refunds.

The industry, and CUNA, began stressing the need for reserves during the economic upheaval of the early 1980s, Mr. Hampel said. The industry's average then was about 6.5%.

But progress was slow until the early 1990s, when declining interest rates helped credit union earnings skyrocket and deposits tumble, he said.

Although it took 11 years for credit union capital to increase 150 basis points in 1991, since then it has jumped 250 basis points, Mr. Hampel said. "That growth wasn't planned," he said.

But some credit unions very consciously increased capital because of the regulators, Mr. Hampel and other observers said. During the 1980s the NCUA clamped down on institutions it considered undercapitalized, and other credit unions followed suit.

"The regulators have done a good job of pressuring credit unions into building capital," Mr. Cox said.

Also, the NCUA adopted a new rating system - the Camel code, which grades institutions according to their capital, assets, management, earnings, and liquidity - that rewarded credit unions for keeping high capital levels.

But now the NCUA has backed off from its capital demands, and Mr. Hampel and other observers expect credit unions to maintain capital and offer better prices and invest in new services, including technology.

"I doubt credit unions are going to want to wholesale reduce capital, but I think more credit unions are going to be content to let it stay around current levels," Mr. Hampel said.

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