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NAFCU seeks CU feedback on proposed amendment to NCUA’s subordinated debt rule
The NCUA during its September board meeting issued a proposed rule related to subordinated debt amending the definition of “grandfathered secondary capital” to include secondary capital issued to the U.S. Government or one of its subdivisions under an application approved before Jan. 1, 2022. In a new Regulatory Alert sent to members Monday, NAFCU seeks credit union feedback on the proposal.
The proposal aims to benefit low-income credit unions (LICUs) participating in the Treasury Department's Emergency Capital Investment Program (ECIP) or other government programs. NAFCU appreciates clarity on the treatment of approved secondary capital plans for LICUs with pending ECIP applications, but believes more can be done to accommodate the specific features of the ECIP program.
Of note, the Regulatory Alert explains that the proposal clarifies that the maximum maturity for Grandfathered Secondary Capital applies to Government investments in secondary capital.
The Regulatory Alert details how the proposed rule would impact credit unions and outlines questions for credit unions to consider when providing feedback on this topic, including:
- if a 20-year maximum maturity for subordinated debt impacts your credit union's ability to make the most out of secondary capital;
- if recognizing a 30-year ECIP investment as secondary capital would enhance lending activities; and
- whether or not the NCUA should make other changes to the subordinated debt rule.
Comments on the proposed rule are due to NAFCU October 15 and can be submitted through the alert; comments are due to the NCUA October 28. Subscribe to receive Regulatory Alerts.