CUNA white paper: CU alternative capital a top priority

WASHINGTON (9/29/10)--The Credit Union National Association (CUNA) has developed a comprehensive white paper on capital reform for credit unions, a topic whose importance has only increased by the nation's recent years of economic upheaval and the current focus on Basel III proposed international capital standards.

"Reduced capital ratios at credit unions, strong headwinds against net income, and an interest by policymakers in increased capital at most types of financial institutions all point to the heightened need for alternate capital for credit unions," the detailed report notes in its introductory paragraphs.

It goes on, "Without access to additional forms of capital, many credit unions will be forced to curtail the growth of member service and burden members with higher loan rates and fees and lower dividend rates for years to come."

CUNA's Governmental Affairs Committee this week accepted the report and identified alternative capital as one of credit unions' top legislative issues in the coming Congress.

A credit union's only source of capital is retained earnings. It is CUNA's longstanding policy to support the authority of credit unions to build additional capital, either from members or nonmembers, in a way that does not dilute the cooperative ownership and governance structure of credit unions. This additional capital should be subordinated to credit unions' share insurance funds, so that credit unions have the financial base to offer member services and adjust to fluctuating economic conditions, according to CUNA. (CUNA News Now)

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