Search
 
Commentary

Capital Issues Leave Even Well-Managed Credit Unions Completely Defenseless

Restrictive capital requirements combined with the inability to raise secondary capital has left even well-managed CUs completely defenseless to the first-lien the system has on their capital.

Restrictive capital requirements combined with the inability to raise secondary capital has left even well-managed CUs completely defenseless to the first-lien the system has on their capital. (Restrictions include asset-risk weighting and the minimum requirement that is 40% higher than banks). The NCUA has the statutory authority via the deposit insurance fund to use every credit union’s entire net worth to pay for problems in the system. While the trade association proposal to allow for secondary capital is an attempt at a solution, the practical reality is that in current form, the risks outweigh any remote benefit. Meanwhile, risk to current capital is looming.

Central to the competitive disadvantage of CUs compared to banks is the fact that banks don’t have a corporate credit union bail out, the cost of which appears significant considering that the $21 billion in unrealized losses represents approximately 300% of the NCUSIF.

Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.

Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including Law.com and GlobeSt.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Peter Westerman

Recommended Stories

Why Your CU Needs a Chief Data Officer

Why Your CU Needs a Chief Data Officer

Henry C. Meier, Esq. |

There are too many data-related questions to answer and legal issues hanging around to not have a data chief at the helm.

Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Already have an account? Sign In Now
Join Credit Union Times

Copyright © 2024 ALM Global, LLC. All Rights Reserved.