Low-income-designated credit unions that are eligible to receive funding from Treasury’s Emergency Capital Investment Program (ECIP) may accept 30-year subordinated debt investments from the program, according to the National Credit Union Administration (NCUA).
The NCUA on Wednesday issued a Letter to Credit Unions providing this and other details of the agency’s action related to this Treasury program created to help financially support small businesses and consumers in low-income and underserved communities affected by the COVID-19 pandemic. Among the institutions eligible to receive ECIP funding are federally insured credit unions that are minority depository institutions (MDIs) or community development financial institutions (CDFIs) that are in sound financial condition.
Besides being able to take ECIP investments with maturities up to 30-years, eligible low-income credit unions (LICUs) also may treat the funding as secondary capital as provided in the NCUA rules and regulations, the agency said, as long as the institutions have NCUA-approved secondary capital plans by Dec. 31, 2021. (More details on this are provided in the letter, No. 21-CU-11.)
The NCUA approved a final subordinated debt rule this January that includes a 20-year limitation on the regulatory capital treatment of “grandfathered secondary capital,” which is defined as any secondary capital issued under a secondary capital plan that was approved by the NCUA before Jan. 1, 2022. The NCUA said upcoming action by the agency “will clarify that ECIP participating credit unions may count ECIP funding as regulatory capital for the entire time it is held.”