“Except for those credit unions designated as low-income, Congress limited the definition of net worth in the Federal Credit Union Act to retained earnings as defined by generally accepted accounting principles. Therefore, unless Congress amends the statutory definition of net worth, other forms of capital, including supplemental capital, cannot legally be counted as net worth for federally insured, consumer credit unions, other than those with a low-income designation,” McKenna wrote.

“(The) NCUA did specifically address the issue of supplemental capital for low-income designated credit unions in the proposed rule on risk-based capital. (The) NCUA would allow low-income credit unions to count supplemental capital, or secondary capital, as it is referred to in the proposed rule, in the risk-based capital numerator for purposes of calculating their risk-based capital ratio,” McKenna added.

McKenna said a credit union's inability to raise capital outside of retained earnings limits its ability to serve members.

He added that the NCUA supports the Capital Access for Small Businesses and Jobs Act (H.R. 719), introduced by Rep. Peter King (R-N.Y.), which would give credit unions an additional tool to promote sufficient capital stability by amending the definition of “net worth” in the Federal Credit Union Act.