Responding to a request from NCUA Board Member Michael Fryzel for legislative language addressing credit union's need for alternative sources of capital, CUNA and NAFCU have agreed on a secondary capital package.
The proposed language would restrict secondary capital for mainstream credit unions to accounts that are funded by members, are subordinate to all other claims against the credit union, including the claims of creditors, shareholders, and the share insurance fund; do not alter the cooperative nature of the credit union, including, but not limited to, members' ownership and control of the credit union and are uninsured.
"While currently well-capitalized overall, certain segments of our industry have, as you know, requested our well-coordinated assistance toward achieving expeditious capital reform through a risk-based capital regime and/or through alternative capital," NAFCU CEO Fred Becker wrote in a Sept. 24 letter to CUNA CEO Dan Mica. "With that in mind, the NAFCU Board has requested that we come to an agreement on draft alternative capital legislation as expeditiously as possible."
CUNA responded by supporting NAFCU's language while reserving the right to later press for credit unions to have access to capital from other sources as well.
"As reflected in NAFCU's legislative proposal, based on principles of mutuality, the NAFCU Board supports alternative capital for credit unions from their members only," CUNA General Counsel wrote in a memo to NAFCU. "Although our Board continues to support broader access to capital, as evidenced by the Board's discussion in Estes Park, it has also recognized that the need of a number of credit unions for alternative capital is real and immediate. In that context, CUNA is prepared to join with NAFCU in pushing for member-only alternative capital at this time."
