WASHINGTON—CUNA is supporting NCUA’s proposal to amend Part 704 of its regulations on corporate CUs, but it is asking the agency to address issues outside of the proposal, including the role of corporate credit unions in providing liquidity to natural-person credit unions.
In a comment letter signed by CUNA Assistant General Counsel Lance Noggle, CUNA urged NCUA to reconsider perpetual contributed capital (PCC) as part of Tier 1 capital, “since the deductions that will begin next year will adversely impact working capital available to corporates.”
CUNA explained that the proposed rule would replace the current definition of “adjusted” or “core” capital with “Tier 1” capital. “The revised definition would reduce the amount of a corporate credit union’s PCC that is counted as Tier 1 capital beginning in 2016 with increased deductions in 2020.”
Noggle also addressed how the proposed rule would in increase the secured borrowing maturity limits in section 704.9(b) from 30 to 120 days. “We agree with the direction of this change but urge the agency to consider whether the limit can be increased even further. Extended maturities would allow corporate credit unions to provide additional liquidity to natural person credit unions when needed. This would enable corporate credit unions to provide greater maturity through matched terms loans. Matching terms also reduces interest rate risk.”
Among other key concerns, CUNA addressed how Section 704.11(e) would add CUSO reporting rules similar to those in place for natural person credit unions, and that CUNA believes the requirements overstep NCUA’s legal authority and are not necessary for the safe and sound supervision of CUSOs.
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