Monday, January 23, 2017

NCUA Seeks Comment on Alternative Capital

The National Credit Union Administration (NCUA) Board issued for comment an advance notice for proposed rulemaking (ANPR) on alternative capitl for credit unions.

The NCUA Board is considering changes to the existing secondary capital regulation and whether to authorize federally insured credit unions to issue supplemental capital instruments that would only count toward a credit union’s risk-based net worth requirement.

The ANPR identifies two categories of alternative capital: secondary capital and supplemental capital.

The Federal Credit Union Act currently permits low-income credit unions to issue secondary capital. By law, secondary capital counts toward both the net worth ratio and the risk-based net worth requirement of NCUA’s prompt corrective action standards.

The Board is considering whether non-low income credit unions can issue supplemental capital to meet their risk-based capital requirement. Also, can low-income credit unions issue supplemental capital.

The ANPR seeks comment on a wide range of issues regarding alternative capital, including:
  • Associated regulatory changes that would be necessary;
  • Potential tax implications related to issuing alternative capital, particularly for state-chartered credit unions;
  • Potential director and management liability issues from issuing alternative capital;
  • Investor protection issues and whether the sale of secondary capital, like supplemental capital, should be restricted to knowledgeable institutional investors;
  • The impact of alternative capital on the mutual ownership structure of credit unions;
  • Limiting the amount of supplemental capital issued by credit unions;
  • Loss absorbing capacity of supplemental capital;
  • The treatment of reciprocal holdings of alternative capital; and
  • The application of securities law to both supplemental and secondary capital.
The comment period will be for 90 days after the ANPR is published in the Federal Register.

Over the coming months, I will comment on various aspects of the ANPR.

Read the ANPR.

No comments:

Post a Comment


The content is provided for educational purposes only, with the understanding that neither the authors, contributors, nor the publishers of this site are engaged in rendering legal, accounting or other expert or professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

Comments appearing in response to articles appearing on this site do not necessarily reflect the views of the ABA. ABA makes no representations regarding the truth or accuracy of commentary or opinions that may be posted in response to the articles that appear on this website.

The inclusion herein of any link to a website, either in the text of an article or in a comment, does not denote any approval, sponsorship, or endorsement by the ABA, and ABA is not responsible for the content or opinions expressed on those linked websites or related commentary. This content is not licensed to third parties sites and is not affiliated with any third party site. Any reference to the author or this content on any third party site on the Internet is not authorized by the ABA.

It is the policy of the American Bankers Association to comply fully with all antitrust laws. Certain discussions should be considered off-limits, including those that contain competitively sensitive data such as price and cost information, or statements that could be construed as reflecting an attempt or desire to control or influence a particular market or markets. Future pricing or other prospective competitive information should never be shared.