WASHINGTON—NAFCU has told NCUA it supports an agency proposal to allow federal credit unions (FCUs) to receive public unit and nonmember shares up to 50% of paid-in and unimpaired capital and surplus less any public unit and nonmember shares.
"The current 20% limit on public unit and nonmember shares – first established 31 years ago – does not reflect significant, intervening changes within the credit union industry," wrote NAFCU's Andrew Morris, senior counsel for research and policy. "The credit union system today is well capitalized, healthy, and operates under a host of modern safety and soundness regulations."
Under current regulation, all FCUs eligible to receive public unit and nonmembers shares are limited to 20% of the credit union's total shares or $3 million, whichever is greater. NAFCU said it supports the higher limit as it better enables FCUs – particularly those that are low-income designated – to grow and safely expand access to financial services within their communities.
Alternative Proposed
While the proposed rule would eliminate the waiver option in exchange for a higher general limit and modify the method by which the limit is measured, Morris recommended that NCUA retain the alternative dollar limit and consider increasing it to at least $5 million to ensure that smaller credit unions that rely on a large volume of nonmember shares obtain relief.
Morris noted that written plans – required if public unit and nonmember shares taken with borrowings exceeds 70% of paid-in and unimpaired capital and surplus – would demonstrate prudent risk management, but should not "frustrate" the relief provided by the proposed rule.
"In general, NAFCU believes that written plans should not operate as arbitrary barriers to prevent certain credit unions – whether because of asset size or other characteristics – from benefiting from the changes contemplated in the proposal," added Morris.