NCUA issues letter on subordinated debt rule effective Jan. 1

NCUA issued a Letter to Credit Unions (21-CU-13) reminding all federally insured credit unions the final final subordinated debt rule becomes effective Jan. 1, 2022. The final rule amends various parts of the NCUA’s regulations to permit low-income designated credit unions, complex credit unions, and new credit unions to issue subordinated debt for purposes of regulatory capital treatment.

Any issuances of secondary capital not completed by January 1, 2022, will be subject to the requirements of the final rule, with one potential exception discussed below. Any low-income designated credit union that does not complete its secondary capital issuance by the above mentioned date will be required to be approved under the final rule, if such low-income credit union seeks to issue subordinated debt, per the letter.

The NCUA board proposed an amendment to the subordinated debt rule at its September meeting that would allow low-income designated credit unions to issue secondary capital approved in 2021, irrespective of the date of issuance, provided such issuances are to the United States government or one of its subdivisions.

CUNA supported this proposal in its comments. According to NCUA, the board will consider a final version of this proposal before Jan. 1, 2022.

 

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