The NCUA should regulate corporate credit unions use of capital more closely to avoid a recurrence of the problems that have plagued that system, the American Bankers Association told the agency today.
ABA Senior Economist Keith Leggett urged the agency to move in an "expeditious fashion" to: ensure that its definition of capital for corporates is the same as that of other regulators of federally-insured institutions; minimum standards of permanent capital for corporates; and subject corporate credit unions to a risk-based capital standard.
To ensure the soundness of the credit union system, corporates should be subject to a minimum core capital leverage ratio and risk-based capital requirement that is comparable to banks, he added.
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He also recommended that the agency should ask Congress to mandate that credit unions deduct their equity investments in corporate credit unions when calculating their net worth.
The ABA opposes expanding the corporates' loan participation authority because it would increase the amount of credit risk they assume and increase liability exposure of the NCUSIF to corporates, Leggett added.
Leggett was responding to the NCUA's request for comments on the structure of the structure of the corporate credit union system. The NCUA requested the comments, which are due by Monday, when it issued its program to stabilize the corporates in January.
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