WASHINGTON (2/27/12)--The Pennsylvania Credit Union Association (PCUA) has reached out to federal legislators, urging them to cosponsor the Capital Access for Small Business and Jobs Act (H.R. 3993), which would allow credit unions to obtain supplemental capital.
The PCUA board of directors and Governmental Affairs Committee signed a resolution supporting H.R. 3993 earlier this month (See News Now, Feb. 17), and last week circulated that resolution, with an attached letter, to Pennsylvania's U.S. House and Senate delegation.
Current law restricts credit unions to building their capital levels through retained earnings. Under the bill, supplemental capital would have to be uninsured and subordinate to other claims against a credit union. The bill also authorizes the National Credit Union Administration to set maturity limits on this capital and restrict the ability to raise supplemental capital to credit unions that are sufficiently capitalized and well-managed.
PCUA Chairman Michael Kaczenski in a release said that while "supplemental capital might not be for every credit union… the value of the credit union charter and the overall viability of the credit union movement would be improved if [credit unions gained] access to alternative sources of capital."
H.R. 3993 was introduced in early February by Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.), and currently has 8 additional cosponsors.
The Credit Union National Association (CUNA) in a recent letter to King and Sherman said the "visionary" legislation "would provide credit unions with appropriate ability to raise capital from sources other than retained earning without putting in jeopardy the 'one member, one vote' principle that is the bedrock of the credit union ownership structure.
"As credit unions emerge from the financial crisis, this legislation would improve the safety and soundness of credit unions by allowing them to develop a supplement cushion to reduce risk to the National Credit Union Share Insurance Fund (NCUSIF)," the letter added.
CUNA Chief Economist Bill Hampel in the most recent edition of CUNA's Credit Union NewsWatch said H.R. 3993 has been "carefully drafted to avoid raising issues that could jeopardize the federal credit union tax status." Hampel said the supplemental capital bill, if enacted, would help credit unions whose capital ratios have been reduced by the recent financial crisis and recession to much more rapidly rebuild their capital ratios. Credit unions would also benefit from the greater protection afforded the NCUSIF by greater capital ratios at those credit unions that choose to use supplemental capital, he added.
For more from the most recent edition of Credit Union NewsWatch, use the resource link.