A dollar raised and a dollar recognized as capital need not solve the same problem. The NCUA's February 2017 consultation illustrated that difference by separating existing secondary capital from supplemental instruments still under consideration. The latter would count only toward the risk-based net-worth requirement, leaving the separate net-worth ratio outside their contemplated reach. [2017-01713][2015-26790]

Qualifying secondary capital had a broader counting role, but only for low-income-designated credit unions. It could count toward both measures while remaining uninsured, subordinated and subject to an approved capital plan. Recognition declined as maturity approached. These restrictions explain why the economic question was not simply whether institutions could attract funds, but what regulatory purpose those funds could serve and for how long. [2017-01713][2015-26790]

The 2015 final rule added an applicability boundary. Its risk-based capital provisions were scheduled for January 1, 2019 for federally insured natural-person institutions with more than $100 million in quarter-end total assets in the latest Call Report. The threshold belonged to those provisions, not every change to the prompt-corrective-action system. [2017-01713][2015-26790]

Incentives would depend on that combination of institutional eligibility and instrument treatment. Yet the February 8 advance notice did not open a new supplemental-capital market, and the prospective rule did not demonstrate financing gains. The two documents describe one policy chain. Evidence of actual issuance, pricing or expanded lending would be needed to move from the proposed mechanism to claims about competitive results. [2017-01713][2015-26790]

Source documents

  1. Alternative Capitalhttps://www.govinfo.gov/content/pkg/FR-2017-02-08/html/2017-01713.htm
  2. Risk-Based Capitalhttps://www.govinfo.gov/content/pkg/FR-2015-10-29/html/2015-26790.htm