Tuesday, March 10, 2015

Matz: Count Subordinated Debt as Supplemental Capital for Risk-Based Capital Ratio

In a speech to the Credit Union National Association's Government Affairs Conference, the National Credit Union Administration Chairman Debbie Matz stated that in 2015 the agency will allow complex credit unions to count subordinated debt as supplemental capital for the risk-based capital ratio.

She noted that this will require three changes. "First, we would need to provide consumer protections. Second, we would need to change the order of Share Insurance Fund payout priorities to recognize that supplemental capital accounts are not insured. And third, we would need to set prudent standards for credit unions to offer subordinated debt to supplement their risk-based capital."

Furthermore, she stated that the agency is exploring "ways to increase access to secondary capital for low-income credit unions this year. This could include regulatory relief to make secondary capital more attractive to potential investors in low-income credit unions, whether federally or state-chartered."

I will be interested in seeing NCUA's legal analysis on how credit unions, other than low-income credit unions, have the legal basis to count subordinated debt as supplemental capital.

Read the speech.

1 comment:

  1. Do they have the legal authority?
    Past that, is this idea prudent?



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