Removing Barriers Blog

Supplemental Capital and Public Funds Bills Pending in Washington
Posted January 22, 2017 by CUNA Advocacy

At the behest of the Northwest Credit Union Association, Washington lawmakers are considering H 1318, which would permit state-chartered credit unions to accept supplemental capital immediately upon a change at the Federal level. Supplemental capital, which is also known as alternative capital, represents the portion of a credit union’s assets which is uncommitted and therefore available to cover losses.  The Federal Credit Union Act requires all federally insured credit unions, including state-chartered credit unions, to rely on retained earnings to build net worth. Credit unions designated as low income can accept supplemental capital, however. If the Federal Credit Union Act is amended and H 1318 is enacted, Washington’s federally insured credit unions would be permitted to access alternative capital which would enhance their safety and soundness by providing them with a cushion to absorb operating losses and asset write-downs during economic downturns. Supplemental capital would also enhance the ability of Washington credit unions to serve their members by taking deposits, making loans, opening new branch locations and expanding service offerings for members.

Another league-supported Washington bill, H 1209, would create conditions for the state’s credit unions to accept public deposits that exceed the maximum deposit insured by the national credit union share insurance fund. Public deposits are public funds deposited in a financial institution by the treasurer of a state or local government, or any agency thereof. State and local governments deposit billions of dollars in financial institutions, primarily in banks. However, Washington is one of the 25 states that permits credit unions to accept public deposits and permits government entities to deposit public funds in credit unions.