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

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

The ACCU also asked the NCUA to allow corporates to depletecapital on an annual basis, rather than quarterly; allow them tooperate with a retained earnings deficit "similar to otherfinancial institutions;" extinguish capital only when actualrealized losses exceed retained earnings; and, use the corporatestabilization fund as a buffer between current capital and newlycontributed capital.

The ACCU reasoned the elimination of retained deficits is notrequired 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 contractualliability can only be granted by the creditor (not the debtor) orin conjunction with a business liquidation," the ACCU wrote."NCUA's actions ... arbitrarily restructures the contributedcapital into an earned capital category if the estimated lossesdon't materialize."