WASHINGTON (7/19/13)--At a briefing Thursday for Capitol Hill staffers on issues surrounding the need for credit unions to have access to supplemental forms of capital, Credit Union National Association President/CEO Bill Cheney said every credit union "can benefit from the option of supplemental capital."
Twenty percent of credit unions saw their capital decline 2% during the economic
Rep. Peter King (R-N.Y.), standing at the podium, told a roomful of Hill staffers that current, restrictive rules for credit union capital are a "quirk" in the law that should be remedied. To King's left are Credit Union National Association President/CEO Bill Cheney, National Association of State Credit Union Supervisors President/CEO Mary Martha Fortnoy and Credit Union Association of New York President/CEO Bill Mellin. (CUNA Photo)
downturn, Cheney noted, adding that new sources of capital would be a tool that would help credit unions better serve their members.
Under current law, a credit union's net worth ratio is determined solely on the basis of retained earnings as a percentage of total assets.
Also at the briefing, Rep. Peter King (R-N.Y.) called the current statute that limits credit union capital to retained earnings a "quirk" in the law.
"As the economy is trying to rebound, the last thing we need is quirks in the law to hurt on of our mainstays" in the financial services arena, he said.
King has introduced legislation that would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings. CUNA supports the "Capital Access for Small Business and Jobs Act" (H.R. 719).
"We are going to push this bill. It is not going to be easy. The banks are opposed. We are going to tie it to a larger regulatory relief bill," King told the gathering.
Rep. Brad Sherman (D-Calif.), King's chief co-sponsor, told the Hill staffers that, "With supplemental capital, credit unions will be strong and be in a position to do more small business loans."
He also backed greater authority for credit unions to make member business loans (MBLs) as proposed in pending legislation that would lift the MBL cap to 27.5% of assets, up from the current 12.25% limit. He said the pending legislation also would help create new jobs--all without costing the government any money.
Credit Union Association of New York President/CEO Bill Mellin, also participating in the briefing, noted supplemental capital does not change the credit union structure: "It doesn't change who owns and runs the credit union. We remain cooperative and member-owned; one member, one vote. We are very different from banks."
And Linda Armyn, of Bethpage FCU in Long Island, N.Y., shared a cautionary tale. Armyn said that credit unions in her state had to slow branch growth because new deposits lowered capital ratio.
"There is a negative effect on the community when credit unions have to slow growth," she noted.