The trades are in agreement on proposed language, which allows secondary capital for mainstream credit unions but restricts it 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. The capital infusion cannot alter the cooperative nature of the credit union, including, members' ownership and control of the credit union and are uninsured.
The draft language, which NAFCU President Fred Becker sent to CUNA President/CEO Dan Mica on Sept. 24 and senior officials of the trade groups discussed on Sept. 25, does not include a provision for allowing outside capital, which CUNA has supported. But Mica told Credit Union Times that he hopes the group's position on that part of the issue might resurface later on.
"We are within a hair's breath of an agreement and didn't want to let that disagreement stall the process," Mica said.
In summarizing NAFCU's language, Becker wrote Mica that "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."
CUNA General Counsel Eric Richard wrote in his group's response that while its 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."
CUNA also suggested some additional changes including:
Allowing government assistance to be counted as capital;
Recognizing capital invested by one credit union in another should count as net worth;
Allowing organizations that sponsor a credit union-or whose employees constitute a select employee group within a credit union-to provide capital and make it easier to modify the field of membership if necessary to achieve this; and
Allowing credit unions facing financial difficulty more leeway to raise non-member capital.
NAFCU said in a statement it is "very pleased with CUNA's prompt and thoughtful response" and its board will review CUNA's suggestions carefully and hopes it can "quickly come to agreement on a jointly sponsored proposal that the industry and NCUA can take to Congress."
NCUA Board Member Gigi Hyland has been the agency's point person in its discussion with CUNA, NAFCU and NASCUS on the issue of additional capital.
NASCUS has already come up with suggested language for the changing the definition of net worth in the Federal Credit Union Act. Currently, the law defines it as a credit union's "retained earnings balance capital," and NASCUS wants it to just say "capital."
NASCUS President/CEO Mary Martha Fortney said in a statement that her group "has long supported supplemental capital for credit unions. We are pleased that the trade groups are giving serious consideration to the issue and trying to reach consensus."