WASHINGTON (4/26/13)--The U.S. Congress should consider the capital concerns of credit unions as it discusses Basel III exemptions for small banks, Credit Union National Association President/CEO Bill Cheney urged in a Thursday letter to members of the U.S. House.
Basel III standards would require U.S. banks to hold common equity of 4.5% by 2015. In addition, banks would be required to hold a 2.5% conservation buffer, which would be gradually introduced by 2019, and increase Tier 1 levels from 4% to 6% by 2015.
Recent House legislation (H.R. 1693) would exempt community banks from the application of Basel III capital standards.
"To be clear: we would have very significant concerns if Congress were to exempt the small banks from the Basel III capital requirements and not at the same time address reforms to credit union capital requirements," the CUNA CEO said.
The CUNA letter encouraged legislators that support H.R. 1693 to also back the Capital Access for Small Businesses and Jobs Act (H.R. 719). The bill was introduce Feb. 14 by Reps. Pete King (R-N.Y.) and Brad Sherman (D-Calif.) and would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts at a credit union. The bill is substantially similar to last year's H.R. 3993, which had 45 co-sponsors.
Strong capital requirements are in the best interests of consumers and financial institutions, and reforms to financial institution capital standards should be done through a process that includes consideration of capital reform for credit unions as well as for community banks, Cheney noted.