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NCUA Board Member Rodney E. Hood Statement on Amendments to the Subordinated Debt Rule

September 2022
NCUA Board Member Rodney E. Hood Statement on Amendments to the Subordinated Debt Rule

As Prepared for Delivery on September 22, 2022

Congress provided federal credit unions with the authority to borrow from any source. Federal credit unions borrowing in the form of subordinated debt is squarely within the statutory authority provided under law. The sub debt rulemaking the NCUA recently undertook was so complex, we really anticipated the possibility that some tweaks may be needed in the future. And that is where we find ourselves today.

One of the tweaks to the sub debt regulation is needed because of the Consolidated Appropriations Act, which, among other things, created the Emergency Capital Investment Program. Under the ECIP, Congress appropriated funds and directed Treasury to make investments in “eligible institutions” to support their efforts to “provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially in low-income and underserved communities.” The definition of “eligible institutions” includes federally insured credit unions that are minority depository institutions or community development financial institutions.

I am pleased that ECIP provides our minority depositories and CDFIs with the resources to really continue providing access to affordable financial services for the most vulnerable of our communities. With that being said, you have all heard me mention how financial inclusion is indeed a civil rights issue of our time. I believe ECIP will bring greater capital and opportunity for credit unions to serve marginalized communities. I also applaud this program because it ties in, I say, quite directly with our ACCESS initiative.

Under the terms developed by the Treasury Department, investments in eligible credit unions are in the form of subordinated debt. Relevant to this proposed rule, Treasury offered either 15- or 30-year maturity options for these investments. The current NCUA sub debt rule does not allow for maturities beyond 20 years. So the rule before us today gives flexibility to credit unions seeking sub debt beyond 20-year maturities based on the credit union demonstrating why it should be longer than 20 years when applying for the subordinated debt. The rule before us also makes several other minor changes that are needed.

I will be supporting today’s proposed rule and have no further comments or questions.

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