NCUA: Give Us Secondary Capital Authority

ALEXANDRIA, Va. — For its part, the NCUA said it would continue to pursue the changes to its administration of PCA that it has already recommended but appeared open to a change in the law regarding the CU capital definition.

“Secondary capital is a legislative issue,” said John McKechnie, director of public and congressional affairs for the agency. “In the event Congress determines that secondary capital should be authorized for credit unions, it would also be necessary for Congress to provide authority for the NCUA to promulgate regulations to ensure that credit unions exercise the authority in a safe and sound manner and provide proper investor protections.”

Among the agency’s concerns that McKechnie listed included controls to mitigate systemic risk issues would be needed if credit unions can invest in secondary capital instruments of other credit unions. Also, provisions for regulatory accounting treatment would be needed to prevent the artificial inflation of systemwide net worth.