Saying credit unions should not be discouraged from accepting deposits for fear of their negative impact on capital, NCUA Chairman Debbie Matz urged Congress to give credit unions more options in accepting outside capital.In a Dec. 7 letter to House Financial Services Committee Chairman Barney Frank (D-Mass.), she urged Congress to allow certain credit unions to exclude from total assets those that have virtually no risk of loss, such as Treasury securities. Those credit unions would have to attain a minimum net worth as determined by the NCUA and show that share growth is the cause of their declining net worth ratio."In effect, the reward for their success in attracting new shares is the risk of a demotion to a lower net worth category if accepting those shares drives down the credit union's net worth ratio," Matz wrote.She said the reputational risk was having a "chilling effect" on some credit union service.Matz also urged lawmakers to allow credit unions, as certified by the NCUA Board, to issue alternative forms of capital.Matz wrote that such alternative forms would "allow well-managed credit unions to better manage net worth levels under varying economic conditions."Although as chairman Matz speaks for the NCUA Board, the letter was not the result of a board action. Several sources at the agency said she informed other board members before she sent the letter but did not seek their input.The board is scheduled to discuss the issue of supplemental capital at its January meeting. NCUA Board Member Gigi Hyland is developing a white paper on the subject that will contain a range of policy options.Lawmakers, who have been working on regulatory restructuring legislation, hadn't issued any reaction to the letter at press time.CUNA President/CEO Dan Mica and NAFCU President/CEO Fred Becker praised Matz's proposal."Chairman Matz has precisely and quickly defined the negative impact current capital rules are having on consumers at a time when increased savings is vital. She has also taken a leadership role on alternative capital. CUNA commends her for her timely letter to federal lawmakers as they consider broad financial institution regulatory reforms," Mica said in a statement.Becker described the letter as a "step in the right direction. We look forward to working with the agency and Congress to enact much-needed capital reforms for credit unions."The issue of supplemental capital has been a top priority for credit unions for many years, but the trades have had difficulty reaching a consensus.CUNA and NAFCU issued a joint letter earlier this year in which they stated that "our goal is to achieve alternative capital authority for federally insured credit unions this year."They are in agreement on proposed language, which allows secondary capital for mainstream credit unions but restricts it to accounts that are funded by members and are subordinate to all other claims against the credit union, including the claims of creditors, shareholders and the share insurance fund. The capital infusion cannot alter the cooperative nature of the credit union, including, members' ownership and control of the credit union and are uninsured. CUNA still believes credit unions should be allowed to seek capital from beyond their membership, while NAFCU favors restricting the capital to members of the credit union.NASCUS has already come up with suggested language for the changing the definition of net worth in the Federal Credit Union Act. Currently, the law defines it as a credit union's "retained earnings balance capital," and NASCUS wants it to just read "capital."–[email protected]