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CDCUs should be eligible for CDFI bond program
WASHINGTON (8/17/11)--The Credit Union National Association (CUNA) has recommended that credit unions that are designated Community Development Financial Institutions (CDFIs) be eligible for guarantees on notes that could be used as secondary capital. Specifically, CUNA said in a comment letter, CDCUs that are CDFIs should be eligible for the U.S. Treasury Deparment's CDFI Fund's developing Bond Guarantee Program. Under the CDFI Fund’s bond program, notes or bonds of up to 30 years duration issued by CDFIs would have full guarantees from the U.S. Treasury. The bond program, which is still being developed, would “support CDFI lending and investment by providing a source of long-term, patient capital to CDFIs,” the CDFI Fund said. The bond guarantee program was enacted by the Small Business Jobs Act of 2010. CUNA added that credit unions should be allowed to count any proceeds from these bonds as supplemental capital. CUNA also suggested that some types of CDCU subordinated notes should be eligible to be considered as supplemental capital for low-income credit unions, consistent with the National Credit Union Administration’s net worth regulations. Allowing credit unions to count bond proceed as supplemental capital would help them “leverage their net worth to add deposits and generate loans for a range of credit needs in low-income communities, including but not limited to microenterprise, providing working capital for small businesses, education, and other essential needs of their members,” CUNA added. The CDFI Fund should also consider revising its definitions of "low-Income," "underserved." and "rural area" to better conform to those of the National Credit Union Administration, CUNA said. CDCUs are among the financial institutions that may apply for membership in CDFI Fund programs. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. A total of 960 financial institutions are certified CDFIs. For the full CUNA comment letter, use the resource link.


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