(July 17, 2011 – Hollywood, CA) The National Federation of Community Development Credit Unions (Federation) today announced a $2-million investment from the Ford Foundation for the purpose of making secondary-capital investments in community development credit unions (CDCUs).
“The Ford Foundation is our largest foundation investor, with a history of supporting CDCUs and the Federation going back more than 20 years,” said Federation President/CEO Clifford N. Rosenthal. “It was their support in 1996 that enabled us to pioneer and implement our secondary capital program, which was totally new in the credit union movement at that time. Over the years, the Federation’s Community Development Investment Program has made nearly $12 million in secondary capital investments in low-income credit unions from Vermont to Hawaii.”
Secondary capital is long-term, subordinated debt that acts as regulatory net worth, subject to certain conditions. It is currently available exclusively to low-income credit unions. “Secondary capital is crucial to the growth of credit unions,” Rosenthal explained, “because it enables them to meet mandatory net-worth standards. Credit unions cannot add deposits unless they remain in compliance with these standards, and every single additional dollar of secondary capital enables a credit union to add more than $12 in deposits while remaining compliant with their regulator. Without this capital, most low-income credit unions would find it difficult, if not impossible, to grow.”
The Federation and the CDCU movement achieved an enormous success in 2010 when the U.S. Department of the Treasury made $69.9 million in secondary-capital investments in 48 credit unions under its Community Development Capital Initiative (CDCI). “CDCI was an important vindication of the financial innovation that the Ford Foundation’s support made possible for our movement some 15 years ago,” Rosenthal said.
Rosenthal noted that over the last two years, credit unions and their regulators have also been calling for legislation to allow credit unions of all types to raise supplemental or secondary capital.
© 2011 National Federation of Community Development Credit Unions.