NCUA Board Approves Final Subordinated Debt Rule
Board members approve the rule 2-0. Chairman Todd Harper leaves the meeting to go to the hospital.
UPDATE: During the opening minutes of Thursday’s NCUA board meeting, where members began discussions about the subordinated debt final rule, Chairman Todd Harper left the meeting and sought a medical evaluation at an area hospital after he felt unwell.
NCUA spokesperson Joseph Adamoli issued an update concerning Chairman Harper’s condition: “After experiencing sudden pain in his stomach and chest, Chairman Harper sought a medical evaluation. The Chairman was sent home after all tests were found normal. He looks forward to resuming his schedule tomorrow.”
Since Harper was absent, Vice Chairman Kyle Hauptman and Board Member Rodney Hood voted to approve the final subordinated debt rule (2-0), which makes two changes to the current rule finalized in 2020.
“Specifically, this 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.’
“The rule also extends the regulatory capital treatment of grandfathered secondary capital to the later of 30 years from the date of issuance or Jan. 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 or other programs administered by the U.S. government,” according to the NCUA.
In a prepared statement included in the record in his absence, Chairman 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.”
During testimony with NCUA staff, Vice Chairman Hauptman brought up Chairman Harper’s statement concerning how the rule will impact MDIs and CDFIs. Harper’s statement, which was included in the record since he was absent, said, “And, with this rule change, credit unions that are either MDIs or CDFIs will be well-positioned to advance economic equity and fulfill their statutory mission of meeting the credit and savings needs of their members, especially those of modest means.”
In response to this point, Inclusiv President/CEO Cathie Mahon sent CU Times the following statement: “Inclusiv appreciates the NCUA board members’ focus on small and MDI credit unions’ ability to access subordinated debt (formerly secondary capital) to help them grow and better serve their low-income communities. We look forward to working with the NCUA staff and board to remove barriers to access to this critical resource.”
CUNA Deputy Chief Advocacy Officer for Regulatory Affairs Alexander Monterrubio said, “We thank the NCUA board for making a necessary change to enable low-income credit unions participating in Treasury’s Emergency Capital Investment Program to receive the program’s maximum benefit.”
The final rule will become effective 30 days after publication in the Federal Register.