CUNA Comment Letter

CUNA Supports NCUA's Proposal Governing Corporate Credit Unions

December 19, 2001

Ms. Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314

Dear Ms. Baker:

RE: 12 C.F.R. Part 703 [Section 703.100(c)] and Part 704, Proposed Rule

On behalf of the Credit Union National Association, I would like to comment on NCUA’s Proposed Rulemaking on revisions to Section 703.100(c), and Part 704. CUNA represents more than 90% of our nation’s over 10,300 state and federal credit unions.

CUNA strongly commends the thoughtful and comprehensive comment letter filed by the Association of Corporate Credit Unions (ACCU) and supports the views expressed by ACCU in its letter. CUNA would like to reinforce several points made by ACCU, as they are significant to natural person credit unions as well as to corporate credit unions.

Regulatory Flexibility for Corporates

Regulatory flexibility is now a hallmark of the current NCUA administration under Chairman Dollar. We believe this approach to supervision, which focuses on safety and soundness while seeking to provide incentives and flexibility for good management is an excellent model that should be applied to the corporates as well. We urge the agency to work with the corporates and consider how a Reg-Flex paradigm could be applied to the corporates.

Section 703.100(c)

The Board proposes to increase the limit on a natural person credit union’s aggregate purchase of paid-in capital (PIC) and membership capital shares (MCS) in one corporate to 2% of the credit union’s assets measured at the time of purchase. The Board also proposes to limit a credit union’s aggregate purchase of PIC and MCS in all corporates to 4%. CUNA agrees with the proposed increases in the percentage of assets that a natural person credit union would be able to invest in a corporate and all corporates. This change will facilitate the ability of credit unions to purchase capital instruments of corporates, which as NCUA has pointed out, has had a positive impact on capital redistribution within the credit union system.

CUNA requests that NCUA revise the phrase “at the time of purchase-- in this section to state, “at the time of investment or adjustment.-- Like ACCU, we support this change because a number of corporates offer adjusted balance MCS accounts, which are adjusted over regular intervals. As such, the measurement of a credit union’s purchase of MCS or PIC should be tied to each adjustment or investment, instead of at the initial MCS or PIC purchase date.

Thank you for the opportunity to share our views on the proposed regulatory changes for corporate credit unions. Please feel free to contact me at 202-508-6736 if you have any questions about our comments.

Sincerely,

Mary Mitchell Dunn
Associate General Counsel and
Senior Vice President