BankNews.com

Company Name

ICBA Pressures NCUA to Withdraw Alternative Capital Proposal

May 17 —  In a comment letter, the Independent Community Bankers of America called on the National Credit Union Administration to withdraw its proposal to allow tax-subsidized credit unions to issue alternative capital. In the letter, ICBA said the captive regulator’s plan would put the financial system and taxpayers at increased risk solely to further expand the activities of credit unions beyond the limits justified by their tax exemption.

“This proposal is another example of NCUA pushing the envelope and acting as a cheerleader for the industry it regulates,” ICBA First Vice President of Accounting and Capital Policy James Kendrick wrote. “The NCUA’s proposed rule on alternative capital would undermine credit unions’ mutual ownership structure, allow outside investors to leverage the credit union tax subsidy, and fuel runaway growth of an industry that has already expanded beyond its original purpose.”

In the comment letter, ICBA said:

— The NCUA lacks the regulatory authority to allow credit unions to issue debt that acts as risk-based capital.

— The proposal would lead to increased borrowing and leverage on credit union balance sheets, posing excessive risks to the financial system.

— Allowing credit unions to issue new forms of capital instruments is inconsistent with their cooperative structure and justifies an end to their tax exemption.

— The plan would put taxpayers at risk by primarily benefiting and inciting risky behavior at a handful of large credit unions.

— Supplemental capital instruments would not provide full loss-absorbing capacity if they mature during an economic downturn.

“The NCUA should focus on the intended mission of credit unions: serving people of modest means through a mutual ownership structure,” Kendrick wrote. “The time is ripe for Congress to reexamine the tax-exempt status of credit unions.”

Print Friendly
Share This PageShare on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn
Software: Kryptronic eCommerce, Copyright 1999-2017 Kryptronic, Inc. Exec Time: 0.057846 Seconds Memory Usage: 3.783073 Megabytes
Kryptronic Internet Software Solutions