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NAFCU sent members a Regulatory Alert Wednesday to break down the NCUA’s amendment to modify its proposal on subordinated debt to replace the maximum maturity of subordinated debt notes with a requirement to demonstrate how these investments would be considered “debt.” The rule would also extend the regulatory capital treatment of Grandfathered Secondary Capital (GSC) to 30 years from the date of issuance.

Through the Regulatory Alert, NAFCU highlights:

• for investments made through the Treasury Department’s Emergency Capital Investment Program (ECIP), issued GSC would receive regulatory treatment for an extended period of 30 years;
• the proposal establishes a more flexible framework for determining the maximum maturity of a subordinated debt note, and incorporates technical changes to reduce administrative burdens associated with issuing subordinated debt; and 
• the proposal amends a provision related to an issuer’s obligation to obtain opinions from qualified counsel by clarifying the jurisdictional scope of this requirement. 

Of note, NAFCU previously joined Inclusiv on a letter to the NCUA on the agency’s proposal to amend the definition of GSC to better accommodate ECIP investments. Both groups stated they do not support a maximum maturity for ECIP investments that truncates the useful life of funding as regulatory capital, as it would “impair the impact of the funding in low- and moderate-income communities that need longer term capital infusion.” The groups also advocated for simplification of the NCUA’s 2020 subordinated debt rule to make complex administrative requirements less burdensome.

Comments in response to the proposal are due to NAFCU November 11 and can be submitted through the alert; comments are due to the NCUA December 5. Subscribe to receive Regulatory Alerts in your inbox.