WASHINGTON-In an Oct. 12 letter, CUNA President and CEO Dan Mica wrote the Government Accountability Office in response to its August study of alternative capital for credit unions. GAO’s position on the issue is made clear from the title of the study: “Credit Unions, Available Information Indicates No Compelling Need for Secondary Capital.” The study did state that any risk-based system of capital must employ risk-based capital and leverage requirements together, which CUNA and NCUA support, according to the letter. However, CUNA stated that the study is flawed in a number of ways. For one, it fails to acknowledge that the credit union community is seeking Prompt Corrective Action changes to enhance safety and soundness. The report notes that most credit unions’ net worth ratios are far above PCA requirements, but fails to acknowledge that a number of well-managed, well-capitalized credit unions operate close to PCA levels so that a growth surge could result in PCA trouble. Additionally, GAO never analyzed the current PCA system and reiterated statements from the bankers, without independent analysis, as to why credit unions’ PCA net worth requirements are two points higher than banks.

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