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NCUA Board Approves Final Subordinated Debt Rule to Support ECIP Participation

March 2023
NCUA Board Approves Final Subordinated Debt Rule to Support ECIP Participation

Board Action Bulletin

ALEXANDRIA, Va. (March 16, 2023) – The National Credit Union Administration Board held its third open meeting of 2023 and approved a final rule on subordinated debt.

In a prepared statement, 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 that was 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 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 or other programs administered by the U.S. government.

In addition, the NCUA Board approved four minor modifications to other sections of the current subordinated debt rule to make it more user-friendly and flexible.

“This final rule ensures eligible credit unions participating in the ECIP or other government-sponsored initiatives providing needed capital can fully benefit from those initiatives,” Chairman Harper said in his prepared statement. “The 30-year, low-cost, patient capital provided through ECIP will be a game changer in under-resourced communities nationwide. 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.”

The final rule is effective 30 days after publication in the Federal Register.

Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at The NCUA also live streams, archives and posts videos of open Board meetings online.

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