Lee Butke, president/CEO of the $4.2 billion Corporate One Federal Credit Union, said the question of raising paid-in capital is a serious one that deserves serious debate. The verdict in his Columbus, Ohio board room? Too risky, Butke said.
"Unlike in past PIC issuances, we'd be unable to express clarity about the risk involved," he said. "Obviously there's the potential for additional U.S. Central write downs, which thankfully is fairly modest for us, but there's also the risk of loss on any bonds or investments one holds, and if you hold any non-agency mortgage backed securities at all, there's risk."
Butke also said he's not willing to generate capital until the NCUA has had a chance to determine new corporate regulations.
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"There's an assumption things won't change. I ask, when anticipating a 5% capital requirement, 5% of what? If corporates are limited to a term book of business, for example, then the asset base won't be where it is today," he said.
Finally, corporates must make forward statements regarding how they will generate future earnings when they raise capital, he said, and new NCUA regulations could potentially limit those assumptions.
Butke did say he does see a day when he will ask members for additional capital, but said he won't do it until he can provide "a crystal clear vision of the future".
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