The Association of Corporate Credit Unions asked the NCUA to reconsider its position on corporate capital write downs during a special Nov. 5 meeting that was closed to the press.

According to a "Discussion Framework" document produced for the meeting, which was obtained by the Credit Union Times, the trade association recommended the NCUA clarify its 09-CU-10 Letter to Credit Unions to "reflect that a Corproate's Board of Directors has the discretion and authority to replenish capital if loss projections don't materialize and asset values recover."

The ACCU also asked the NCUA to allow corporates to deplete capital on an annual basis, rather than quarterly; allow them to operate with a retained earnings deficit "similar to other financial institutions;" extinguish capital only when actual realized losses exceed retained earnings; and, use the corporate stabilization fund as a buffer between current capital and newly contributed capital.

The ACCU reasoned the elimination of retained deficits is not required by GAAP or NCUA regulations, nor do those regulations "require capital account depletion to be a permanent event."

"As a matter of business law, extinguishment of a contractual liability can only be granted by the creditor (not the debtor) or in conjunction with a business liquidation," the ACCU wrote. "NCUA's actions ... arbitrarily restructures the contributed capital into an earned capital category if the estimated losses don't materialize."