Regulator to consider proposal allowing some credit unions to issue subordinated debt to raise capital

A proposed rule to allow some federally insured credit unions (FICUs) to count subordinated debt as capital for risk-based net worth purposes will be considered by the board of the federal credit union regulator at its open meeting next week, the agency said this week in posting the board agenda.

The proposal is one of several issues on the agenda for the three-member National Credit Union Administration (NCUA) Board for its meeting Jan. 23.

The agency has been working on the subordinated debt proposal for some time. In September, NCUA Board Chairman Rodney Hood indicated that the proposal would be taken up by the end of last year. One likely reason that didn’t happen is because of the relatively complicated nature of the proposal. In December, Hood told the Senate Banking Committee that “this has proven to be a very complex issue,” and he indicated that the agency wanted to get the proposal right “before giving it to stakeholders for comment.”

NCUA Board Member J. Mark McWatters, during the board’s December meeting (and anticipating the proposal’s release), called it “a good rule, a complex rule” and said the agency would need “a lot of feedback on it.”

Also at next week’s meeting, the board will:

  • Consider a proposed rule on credit union combination transactions (under part 708a, subpart D, of NCUA regulations, which governs the conversion of an FICU into a mutual savings bank and the merger of an FICU into a bank).
  • Review and set the federal credit union (FCU) loan interest rate ceiling;
  • Discuss the agency’s 2020 performance plan; and
  • Hear a briefing on an inflation adjustment for the agency’s civil money penalties (which will increase by a multiplier of 1.01764 from current levels; NCUA administers 16 CMPs under its regulations).

NCUA Board agenda, January 2020