ALEXANDRIA, Va.—Eligible low-income credit unions (LICU) may accept 30-year subordinated debt investments from the U.S. Department of the Treasury’s Emergency Capital Investment Program (ECIP), according to a new Letter to Credit Unions from NCUA.
In addition, the agency said a LICU may treat the ECIP funding as secondary capital in accordance with the regulations, provided any LICU receiving secondary capital treatment has an NCUA-approved secondary capital plan by Dec. 31, 2021.
“Credit unions have a statutory mission to meet the credit and savings needs of their members, including—and especially—those of modest means,” said NCUA Chairman Todd M. Harper in the letter. “The changes announced today will allow ECIP participating credit unions to fulfill that statutory mission and advance economic equity and justice. Going forward, the NCUA will pursue additional action to permit ECIP funding to count as regulatory capital for the entire time it is held. I look forward to working with my fellow board members on this important work.”
20-Year Limitation
As CUToday.info has reported, the final Subordinated Debt rule, which the NCUA board passed in January, includes a 20-year limitation on the regulatory capital treatment of “Grandfathered Secondary Capital,” which is defined as any secondary capital issued under a secondary capital plan that was approved by the NCUA before Jan. 1, 2022.
In the letter the agency said it will take future action to clarify that ECIP participating credit unions may count ECIP funding as regulatory capital for the entire time it is held.
Three-Step Process
NCUA said the newest announcement is part of a three-step process it has put in place to ensure credit unions have full access to the Treasury Department program.
The first step, NCUA said, was its proposed rule to allow eligible CUs to accept ECIP funding in 2022 without having to fill out a new subordinated debt application after the effective date of the new rule.
The second step is the new Letter to Credit Unions allowing low-income credit unions to accept 30-year ECIP funding.
The third step will be additional NCUA action to permit ECIP funding to count as regulatory capital for the entire time it is held, which it said it plans to complete sometime in 2022.