ALEXANDRIA, Va. — U.S. Central can convert membership capital accounts to a new paid-in capital instrument, the NCUA decided today.
Membership capital accounts, which are not insured, are available to cover losses that exceed retained earnings and paid-in-capital. The instrument, PIC2, is considered Tier 1 capital by debt ratings agencies and will enhance U.S. Central's credit ratings, the agency said.
"Converting callable MCA funds to PIC2, Tier1 capital is an important facet of broader efforts to maintain robust debt ratings for US Central," NCUA Chairman Michael Fryzel said in a statement. "This represents the latest in a series of prudent steps to preserve credit union system-wide stability and financial health during these times of market dislocation."
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According to NCUA, PIC2 has a total subscription of $450 million and the allocation is proportionate to shares on deposit with U.S. Central, though there is a cap of 15% for any one corporate credit union. Dividends are paid at the discretion of U.S. Central's board, and may be only paid from current net income (after expenses are recorded and dividends are paid) if U.S. Central would remain adequately capitalized. PIC2 subscriptions don't require additional funding by member corporate credit unions unless current MCA falls short of required PIC2.
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