WASHINGTON–Allowing credit unions to issue alternative capital “would be inconsistent with the purpose of their charter, undermine the foundation of their tax exemption and introduce potentially significant safety and soundness concerns to their balance sheets,” according to the American Bankers Association.
The ABA also urged NCUA to instead facilitate more conversions to bank charters.
The ABA offered its opinion in a comment letter to NCUA in response to its advanced notice of proposed rulemaking (ANPR) to extend the types of investment capital that federally insured credit unions could use to meet certain regulatory requirements. The comment period is open as the agency considers whether to allow credit unions to use investment capital (that would be uninsured capital subordinate to other claims) to satisfy the risk-based net worth ratio requirement.
In its comment letter, the ABA said that should NCUA move forward with the proposal, it would be overstepping its legal authority. Instead, the bankers group said that rather than advancing the current proposal, NCUA should increase its efforts to facilitate conversions of credit unions to federal mutual savings bank charters for those wishing to expand their operations or increase their access to capital.