WASHINGTON – At the Association of Corporate CU's recent quarterly meeting with NCUA, the ACCU voiced its concern over the minimum 2% reserves and undivided earnings ratio in the corporate reg proposal. "I guess the main concern corporates have expressed, without really crunching all the numbers, has been the minimum RUDE ratio of 2%. We're worried that it's too restrictive on a corporate's ability to grow," said Gigi Hyland, executive director of ACCU. Hyland stressed that not all of ACCU's member corporates have thoroughly evaluated the proposal. Hyland and WesCorp President/CEO Dick Johnson, FirstCorp President/CEO Pete Pritts, Northwest Corporate CU President/CEO Kathy Garner, and TriCorp President/CEO Steve Roy met with NCUA officials on Oct. 18. Going into 704, the ACCU said capital issues were its biggest concern. "What we'd like to see is a better balancing of supplemental value of PIC and MCAs with retained earnings. What we as a network must do is roll up our sleeves and put up some alternatives on how we can accomplish that," said Hyland. It's not clear how PIC is going to be counted with capital based on the proposal. Hyland and corporate CEOs have consistently pointed out that corporates take on less risky investments than commercial banks and money center banks and that should be reflected in their capital requirements. Most corporates are heavy in triple AAA securities and government securities. Even the Federal Home Loan Banks, which some say are the most comparable institution with corporates, have more lax capital requirements than corporates. With this being the first major overhaul of Part 704 in some time, corporates are trying to get all their points across to NCUA. Corporates will get their chance at a focus group being held by NCUA on Oct. 24. In a brief roundtable discussion Credit Union Times did with the CEOs that attended the ACCU meeting, keeping natural person CUs on the right investment track in this low-rate environment seemed to be their focus. "I think there's still sticker shock with 2.5% rates out there now. I have been sitting in on some meetings with credit unions. They're talking about maybe having to go out farther on the yield curve, but I haven't seen that," said Kathy Garner, president/CEO of Northwest Corporate. "People are very, very cautious right now, and not willing to commit. We are actively and aggressively supplying information about our products," said Pete Pritts, president/CEO of FirstCorp. Pritts said at the corporate's recent economic forum an economist told attendees that rates will be flat for a long time, but economic opinions vary from economist to economist, so some CUs don't know what to think. Advice like that is key however, as it may affect CU's investment moves. Johnson hopes credit unions will learn a lesson from what happened this year. "Credit unions are notoriously slow to react to rate changes. If people had paid attention earlier this year, they'd be in a better position," said Johnson. He was referring to credit unions going out farther on the yield curve earlier this year prior to the numerous rate cuts, which has seen fed funds drop by 400 basis points. WesCorp was putting out information earlier this year urging CUs to take advantage by going farther out on the yield curve. Johnson is adamant about the need for natural-person CUs to take a fresh look at corporates. "We have a great story to tell in the corporate system. Our problem is when we say we have a good investment, paying 5 to 20 basis points higher than brokers, many of them are used to being with their brokers. They (brokers) take them to play golf and take them to lunch all the time," said Johnson. Hyland said another issue the ACCU is keeping tabs on is check truncation legislation. Credit unions have had success with truncation, and the Fed recently asked for ACCU's input on the issue. One key will be for the Fed to find out when and how often an original check is needed in cases of fraud. [email protected]