A proposed subordinated debt rule change intended to benefit eligible low-income credit unions (LICUs) that are participating in Treasury’s Emergency Capital Investment Program (ECIP) or other federal programs is out for comment until Dec. 5, according to a notice in Wednesday’s Federal Register.
The proposal, issued unanimously Sept. 22 by the National Credit Union Administration (NCUA) Board, would make a handful of changes to the credit union subordinated debt rule that took effect this Jan. 1. Two key changes would:
- Replace the 20-year maximum maturity of subordinated debt notes with a requirement that any credit union seeking to issue notes with maturities longer than 20 years demonstrate how the instruments would continue to be considered “debt.” (The January 2022 final rule sets a maximum maturity of 20 years for subordinated debt notes, but grant funds from Treasury’s ECIP can be held up to 30 years.)
- Extend the regulatory capital treatment of grandfathered secondary capital (GSC) to the later of 30 years from the date of issuance or Jan. 1, 2052.
The Treasury ECIP was created under the 2021 Consolidated Appropriations Act to help communities disproportionately affected by the COVID-19 pandemic. Qualified low-income credit unions (LICUs), including minority depository institutions (MDIs) and community development financial institutions (CDFIs), are eligible to participate in the ECIP. More than 60 credit unions are listed as participants.
Reg lookup: Subordinated Debt