H.R. 2572 Would Authorize Equity Instruments

Representative Gary Miller (R - CA) introduced a bill (H.R. 2572) that would allow credit unions to issue equity capital instruments.

The bill would amend the definition of net worth to allow components of equity under generally acceptable accounting principles (GAAP) not included in retained earnings to count towards net worth.

Below is the specific language.

(2) NET WORTH.—The term ‘net worth’—
A) with respect to any insured credit union, means the retained earnings balance of the credit union, as determined under generally accepted accounting principles, together with—
(i) any amounts that were previously retained earnings of any other credit union with which the credit union has combined; and
(ii) components of equity under generally accepted accounting principles not included in retained earnings, as determined by the Board;

In an April 2010 report, NCUA's Supplemental Capital Working Group identified two instruments, voluntary patronage capital and mandatory membership capital, that could count as equity under GAAP.

In addition to these two instruments, the Board could include other comprehensive income as a part of net worth.