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