Voices across CU system join in support of capital proposal

May 10, 2017 -- Credit unions small and large, trade groups and even former regulators all joined NASCUS in supporting NCUA’s alternative capital proposal, based on a review of letters the groups and individuals filed about the proposal.

Spokane Media Credit Union, an $11 million credit union in Spokane, Wash. (with 1,200 memberships), asserted that access to supplemental capital is a valuable resource for all well-managed credit unions to assist in meeting member needs. “Current capital requirements can restrict the ability of credit unions of all sizes to serve their members,” wrote credit union President and CEO Debie Keesee. “Our credit union personally experienced the board conversation of potentially having to limit member deposits during the recent recession and the flight to safety with our assets increasing over 25% in a two year-period.”

BECU of Tukwila, Wash. – a $17 billion credit union with more than 1 million memberships – echoed those comments. “Supplemental capital will not be the solution to all capital problems, but having the option to count supplemental capital as part of the risk-based net worth requirements is important for credit unions and their members,” wrote BECU General Counsel Mike Ryan. “The market will follow the rule and the rule will likely need to be modified over time.”

The Cooperative Credit Union Association (a trade group representing credit unions in the states of Delaware, Massachusetts, New Hampshire and Rhode Island) noted that the “overwhelming majority” of its members across the four states support alternative capital authority for all credit unions. “The need for capital modernization continues as credit unions experience the challenges not only of external factors such as economic cycles, but also those such as social media and Bank Transfer Day, with no alternatives for growth opportunities beyond their ability to generate retained earnings,” wrote association President and CEO Paul Gentile. “The need for increased earnings through managed risk is stronger than ever and a critical component of capital modernization.”

Hanscom Federal Credit Union (at Hanscom Air Force Base, Mass.), a $1.2 billion credit union with 74,000 memberships, wrote that it presently has no plans to issue supplemental capital even if doing so becomes permissible under the final rule. But President and CEO David Sprague added that having the option to do so in the future is vital to safeguarding the credit union’s safety and soundness. “Unforeseen circumstances that may potentially be beyond our control could strain our capital position to a point where having the ability to quickly raise supplemental capital would be a valuable option,” Sprague wrote. “Our only current option to raise capital by increasing our retained earnings balance may not be sufficient in a severely stressed situation.”

And retired, former Washington state credit union regulator Parker Cann filed a letter reiterating his long support for supplemental capital. “Since 1998, when the Credit Union Membership Access Act was enacted, I have been a strong proponent for allowing credit unions to issue supplemental capital that counts for regulatory capital purposes,” Cann wrote. “I recognize that there are serious issues that must be tackled in a rulemaking on supplemental capital. However, these issues are not insurmountable. Existing state and federal bank regulation on similar issues can be looked to as a conceptual starting point. With the input of credit unions and state credit union regulators, I am confident that the NCUA can fashion a balanced rule that would benefit credit unions and their members, and protect the NCUSIF, supplemental capital investors, and other interested stakeholders.”