WASHINGTON -- Support for secondary capital for credit unions was expressed today in a joint letter to all three members of the NCUA Board from the leaders of CUNA and NAFCU.

In the letter, signed by NAFCU President Fred Becker and CUNA President Dan Mica, the two leaders noted “there are many issues facing the credit union system today, but none more important to those credit unions that need help than alternative capital.”

The credit union leaders asked the NCUA Board members for their support of the measure in an expression of unity by the credit union community as it prepares to take the legislative proposal forward.

“This key legislative proposal is an important step forward on this critical issue; and we look forward to working with the NCUA Board as we move toward expeditious enactment in this Congress,” said NAFCU’s Becker.

“We believe the time is exactly right to take this proposal to Capitol Hill, for credit unions now and into the future,”
said CUNA’s Mica.

The two associations have agreed that alternative capital for federally insured credit unions should come from members,
which could also include sponsor organizations and select employee groups. They also agreed that credit unions should be able to count in their net worth calculations assistance received from NCUA under section 208 of the Federal Credit Union Act.

Alternative capital would not be federally insured, and it would be subordinated to other claims against an insured credit union and the National Credit Union Share Insurance Fund.

The complete text of the joint letter from the credit union trade groups follows.

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October 15, 2009

The Honorable Debbie Matz
Chairman
National Credit Union Administration Board
1775 Duke Street
Alexandria, VA 22314-3428

Dear Chairman Matz:

On behalf of the Credit Union National Association and the National Association of Federal Credit Unions, and at your request, we are writing to inform you that our boards of directors have agreed to support an amendment to the Federal Credit Union Act regarding alternative capital. The statutory changes we support would authorize alternative capital from members, including from member sponsor and member select employee groups. It would also permit Section 208 assistance to be included as alternative capital. These changes would be implemented through regulations developed by the National Credit Union Administration. A copy of the legislative language is attached.

Our goal is to achieve alternative capital authority for federally insured credit unions this year. We know a number of steps must be taken if alternative capital is to be attained as soon as possible. This includes garnering the support from the NCUA, the U.S. Treasury Department, in addition to the U.S. Congress.

We urge the NCUA Board to develop a supportive position on alternative capital as quickly as possible. In that connection, we would welcome the opportunity, along with some of our senior staff members, to meet with you to address any questions you may have regarding our position or how we envision the changes we support could help credit unions.

There are many issues facing the credit union system today, but none more important to those credit unions that need help than alternative capital. We hope NCUA can play a leading role as we pursue this critically important goal. We also plan to work with the National Association of State Credit Union Supervisors and the National Federation of Community Development Credit Unions in this endeavor. In the future, at the appropriate time, we also want to renew efforts to improve Prompt Corrective Action.

Thank you for your timely attention to the issue of alternative capital. We hope to hear from you soon.

Sincerely,
Daniel A. Mica
CUNA
President & CEO

Fred R. Becker, Jr.
NAFCU
President & CEO

CUNA AND NAFCU DRAFT LEGISLATION ON ALTERNATIVE CAPITAL

(2) Net worth.—The term ‘net worth’—

(A) with respect to any insured credit union, means

i)The retained earnings balance of the credit union, as determined under generally accepted accounting principles;
and,

ii)Any amounts that were previously retained earnings of any other credit union with which the credit union has combined; and,

iii)As authorized by the Board, any other member capital accounts of the credit union, or any other credit union with which the credit union has combined, or any accounts established under 12 U.S.C. sec. 1788, provided that such accounts:

a.do not alter the cooperative nature of the credit union, including, but not limited to, members’ ownership and control of the credit union; and,

b.are subordinate to all other claims against the credit union, including the claims of creditors, shareholders, and the Fund; and,

c.are uninsured.

(B) with respect to a credit union that serves predominantly low-income members, as defined by the Board, includes secondary capital accounts that are—

(i)uninsured; and

(ii)subordinate to all other claims against the credit union, including the claims of creditors, shareholders, and the Fund; and

(54)