The National Credit Union Administration (NCUA) Board approved a final rule amending its Subordinated Debt rule that was finalized in 2020. Chairman Todd M. Harper said, “I support this rule because it facilitates the access of eligible credit unions to the U.S. Department of the Treasury’s Emergency Capital Investment Program. Congress created ECIP to support the communities of color and low-income households hit hardest by the COVID-19 pandemic’s financial and economic disruptions. With rising interest rates, lingering inflation, and continuing economic uncertainty, under-resourced families and communities face many challenges. ECIP funding is a much-needed boost to these communities, allowing them to address short-term needs and achieve long-term financial stability.” 

The final rule makes two changes to the current subordinated debt rule. First, the final rule replaces the maximum permissible maturity of subordinated debt notes with a requirement that any credit union seeking to issue subordinated debt notes with maturities longer than 20 years demonstrate how such instruments would continue to be considered “debt.” Second, the rule extends the regulatory capital treatment of grandfathered secondary capital to the later of 30 years from the date of issuance or January 1, 2052. This extension will align the treatment of grandfathered secondary capital with the maximum permissible maturity for any secondary capital issued by low-income credit unions under the U.S. Department of the Treasury’s Emergency Capital Investment Program (ECIP) or other programs administered by the U.S. government. 

Additionally, the NCUA Board made four minor modifications to other sections of the current rule to make it more user-friendly and flexible. 

The final rule is effective 30 days after publication in the Federal Register. To view the final rule on subordinated debt, please visit this link.