Jan 01 2004

Managing Credit Union Capital: Subordinated Debt, Uninsured Deposits, and Other Secondary Sources

Dealing with capital constraints is a problem that affects many credit unions. This report summarizes discussion at a colloquium convened to examine issues of managing credit union capital: subordinated debt, uninsured deposits, other secondary sources, and adjustment of some prompt corrective action (PCA) requirements that have had unintended consequences.

The meeting begins with a look at capital in its broadest context, scrutinizing how other cooperatives raise capital, and how that affects ownership and governance. The discussion then focuses on how legislation might help address credit union concerns over capital; a report on how members might respond to offers of uninsured shares paying a higher rate than insured shares; a look at how subordinated debt might be counted as capital under existing law; and finally an outline of a specific product designed to help meet capital needs.

In short, the presentations move from the broadest issues on capital for cooperatives in general to a focus on credit union capital issues overall, and then to specific approaches to legislative and market remedies for improved management of capital.