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Subordinated Debt Final Rule Effective January 1, 2022

21-CU-13 / November 2021
Subordinated Debt Final Rule Effective January 1, 2022
Federally Insured Credit Unions
Capital Planning
Federally Insured Credit Unions
Subordinated Debt Final Rule Effective January 1, 2022

Dear Boards of Directors and Chief Executive Officers:

This Letter to Credit Unions serves as a reminder to all federally insured credit unions that the final subordinated debt rule (You will be leaving and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) becomes effective on January 1, 2022.1 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.

With one potential exception discussed below, any issuances of secondary capital not completed by January 1, 2022, will be subject to the requirements of the final rule. 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.

At its September meeting, the NCUA Board proposed an amendment to the subordinated debt rule 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. The comment period on this proposal closed on October 28, 2021. The NCUA Board will consider a final version of this proposal before January 1, 2022.

Given the current 45-day review period for secondary capital plans, any low-income credit union still planning to submit a secondary capital plan should do so as soon as possible. Further, if a low-income designated credit union plans to submit a secondary capital plan this year, it should consider using the application requirements in section 702.408 of the final subordinated debt rule when drafting its plan and submitting an application. This can help avoid having to resubmit documentation as long as the application meets the requirements of the final rule.2

Please contact your Regional Office if you have any questions.



Todd M. Harper


1 86 FR 11060 (Feb. 23, 2021).

2 The new application requirements in §702.408 of the final rule are largely clarifications of the requirements in the current secondary capital rule.

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