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NCUA alt. capital plan gets joint CUNA-NAFCU support
WASHINGTON (10/14/10)--Joining together on an issue of “utmost significance” to credit unions, the Credit Union National Association (CUNA) and National Association of Federal Credit Unions (NAFCU) jointly backed the National Credit Union Administration’s (NCUA’s) proposal on alternative sources of capital for credit unions. In a joint letter, CUNA and NAFCU thanked NCUA Chairman Debbie Matz for her leadership on the important issue and asked for further meetings with agency staff on pursuing supplemental capital legislation. Last December, the NCUA contacted House Financial Services Committee Chairman Barney Frank (D-Mass.) to propose the following:
* The law should be changed to allow qualifying credit unions, as determined by the NCUA board, to issue alternative forms of capital to supplement their retained earnings. To ensure the proper authority, alternative forms of capital would be subject to necessary regulations addressing safety and soundness criteria, investor protections, and any impact on the cooperative credit union governance model; and * Using the model of low-income designated credit unions, which are authorized to offer uninsured secondary capital accounts to non-members, the Federal Credit Union Act should be modified to permit qualifying credit unions to offer uninsured alternative capital instruments subject to regulatory restrictions and to expand its definition of net worth to include those instruments. These changes would allow well-managed credit unions to better manage net worth levels under varying economic conditions.
The CUNA-NAFCU letter notes that the executive committees of CUNA and NAFCU recently met to discuss a number of issues of relevance to the credit union industry. “We were very pleased to note that your proposal, while adding a risk-based capital regime, was in keeping with the set of principles, joint statement, and draft legislative language that we developed (at NCUA’s request),” said the letter signed by CUNA President/CEO Bill Cheney and NAFCU President Fred Becker. It added, “Recognizing that alternative capital is an issue of ever-increasing importance, we endorse your proposal and ask for your leadership and assistance in moving capital reform expeditiously forward through the legislative process in the first session of the 112th Congress.”

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