Supplemental Capital: A Tool for Safety and Soundness

by. Mary Martha Fortney

Regulators have a very specific mission: to provide oversight in the best interest of American consumers. So why are America’s state credit union supervisors – those who work to ensure the stability of state credit unions across the country – voicing our support for HR 719, the Capital Access for Small Businesses and Jobs Act? Because it would provide the credit union system with more safety and soundness by allowing them access to new sources of capital.

This is crucial, because more than 95 million Americans currently use credit unions for their financial services needs. By making credit unions more secure, HR 719 would provide added protection for the consumers who are their members, as well. This is the ultimate goal for us as regulators.

Right now, credit union access to capital is limited to the retained earnings from their net income; in other words, their savings. Supplemental capital, quite simply, would act as a buffer to share insurance for a credit union in the rare occasion in which it is needed. It is already used as a resource by corporate credit unions and low-income credit unions in the U.S. It is even available to credit unions outside of the U.S.

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