14 Minute NCUA Board Meeting Posted by Association of Vermont Credit Unions on 10:05 AM

Yesterday's first meeting of the NCUA Board for 2017 may have been its shortest meeting ever at less than 14 minutes long.

There were only two items on the agenda -  an Advanced Notice of Proposed Rulemaking (ANPR) on alternative capital and a briefing on the recent inflation adjustment for civil money penalties.  Most of the time was spent on alternative capital

For purposes of the ANPR, alternative capital includes two categories of capital – secondary and supplemental.   Secondary capital is the only form of alternative capital authorized under the Federal Credit Union Act and it is only permissible for credit unions with a low-income designation.

Secondary capital is included in the statutory definition of net worth and counts towards the net worth ratio and the risk-based net worth requirement.  The NCUA Board is considering changes to the existing secondary capital regulation and whether federally insured credit unions should be authorized to issue supplemental capital instruments that would only count toward a credit union's risk-based net worth requirement.   In addition to providing background on secondary and supplemental capital, the ANPR has broad range of questions that touch on the following:

• Associated regulatory changes that would be necessary; 
• Potential tax implications related to issuing alternative capital, particularly for state-chartered credit unions;  
• Potential director and management liability issues from issuing alternative capital; 
• Investor protection issues and whether the sale of secondary capital, like supplemental capital, should be restricted to knowledgeable institutional investors; 
• The impact of alternative capital on the mutual ownership structure of credit unions; and 
• The application of securities law to both supplemental and secondary capital.

The ANPR seeks comments from all credit unions, not only those interested in issuing alternative forms of capital.  The comment period will be open for 90 days once the ANPR is published in the Federal Register.  CUNA's Removing Barriers Blog will monitor the latest information on the comment period.