I read the Editor's Column ("CUs Deserve a Complete Capital Restructuring") in the Jan. 26 issue and could not agree more.
Now more than ever, credit unions do need relief from the burdens of a legacy structure to build net worth. I applaud Chairman Matz on her efforts to provide credit unions with much-needed capital reform.
But she doesn't need to look much further than the existing Federal Credit Union Act. Section 216 of the act, which addresses prompt corrective action, already mandates that the NCUA board take into consideration the unique cooperative and not-for-profit status of credit unions when it promulgates prompt corrective action rules and regulations.
Section A provides that the purpose is to "resolve the problems of insured credit unions at the least possible long-term loss to the fund." A valid argument has been made that secondary capital, if allowed, would satisfy Section A and the short- and long-term losses to the fund could be mitigated.
I would argue that by statute, the NCUA is required to take into account the very nature of credit unions when they created the rules and regulations regarding prompt corrective action, and it could have already addressed secondary capital. It just has chosen not interpret the law to allow secondary capital.
One argument for why the NCUA didn't is that the law doesn't specifically allow for secondary capital for PCA purposes, but the law doesn't specifically say that secondary capital cannot be allowed for PCA purposes. It is all how you look at it and how you chose to interpret the intent of the law. What the law does say is that the board has to take into consideration the unique structure of credit unions in their design of capital requirement for PCA. Did the NCUA take the unique not-for-profit cooperative structure into consideration when it created the rules to enforce prompt corrective action? n
Kyle L. Markland
Affinity Plus FCU
St. Paul, Minn.