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Capital White Paper

April 12, 2010, Alexandria, Va., – National Credit Union Administration (NCUA) Board
Member Gigi Hyland announced today the release of a White Paper on supplemental
capital. The White Paper, prepared by an internal working group at NCUA, is the
culmination of an initiative that Board Member Hyland launched in December 2008 to
accelerate consideration of supplemental capital approaches.
“In December 2008, I had discussions with state credit union supervisors and NASCUS,”
Board Member Hyland stated. “They made a number of compelling arguments that it is
time to seriously consider whether credit unions must be given access to some form of
supplemental capital to continue providing members the services they need. The White
Paper released today is an attempt to explore NCUA’s current authority to permit
federally insured credit unions to offer supplemental capital and to identify key public
policy considerations for any extension of NCUA’s authority to permit the issuance of
supplemental capital by federally insured credit unions. It also sought to set forth the
Working Group’s observations and conclusions on the risk management, regulatory
safety and soundness and consumer protection issues that should be addressed to
appropriately implement supplemental capital.”
The White Paper reviews NCUA’s current authority, discusses research related to
supplemental capital for credit unions, assesses the lessons learned from current forms
of supplemental capital in credit unions, offers three possible models for supplemental
capital and provides modeling and suggested statutory revisions. Based on its review
and analysis, the Working Group made the following observations and conclusions:
1. Affording credit unions the ability to raise supplemental capital that counts
towards PCA “net worth” requirements is an appropriate policy consideration;
2. PCA regulatory reform including a stronger and more meaningful risk-based
capital system, as advanced by the NCUA Board in 2005 and 2007, should
continue to be pursued as a priority. The reforms combined with supplemental
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Media Contact: NCUA Office of
Public & Congressional Affairs
Phone: (703) 518-6330
Email: pacamail@ncua.gov
capital could afford credit unions the opportunity to more effectively manage
capital levels;
3. Any statutory change that affords credit unions the ability to count supplemental
capital towards PCA “net worth” must be accompanied by robust regulatory
authority to assure reasonable safeguards and risk parameters are put in place.
“Chairman Matz’s December 12, 2009 letter to House Financial Services Committee
Chairman Barney Frank enunciating two narrow legislative remedies that would help
reverse the disincentive to accept new share deposits is a key starting point for any
discussion about supplemental capital,” noted Board Member Hyland. “I hope this White
Paper serves as a useful vehicle for continued dialogue and action on this important
The supplemental capital White Paper is available here


The White Paper is intended as a broad exploration of the issues related to
supplemental capital and does not represent the official position of the NCUA Board.
NCUA is the independent federal agency that regulates, charters and supervises
federal credit unions. With the backing of the full faith and credit of the U.S.
government, NCUA operates and manages the National Credit Union Share
Insurance Fund, insuring the deposits of over 90 million account holders in all
federal credit unions and the overwhelming majority of state-chartered credit

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