ARLINGTON, Va. – The National Association of State Credit Union Supervisors (NASCUS) and CUNA Mutual Group have filed separate comment letters on NCUA’s subordinated debt proposal.
NCUA’s proposal would enlarge the universe of credit unions that are eligible to raise subordinated capital from outside investors. The proposed rule would permit low-income designated credit unions (LICUs), complex credit unions, and new credit unions to issue subordinated debt for purposes of regulatory capital treatment.
In its letter, NASCUS said it supports the agency’s efforts to include subordinated bebt into the calculation of a credit union’s regulatory capital and offering recommendations, saying it would foster continued modernization of the capital framework.
“For over 20 years, NASCUS has advocated for all credit unions – low-income designated, complex, and newly chartered – to have the ability to issue Subordinated Debt for regulatory capital treatment and we commend the NCUA for heeding our call and taking steps to develop a subordinated debt rule,” said NASCUS President and CEO Lucy Ito. “While the development of a Subordinated Debt rule is an arduous task, it will bring profound benefits to the credit union industry including, helping credit unions and their members, protecting the share insurance fund, and placing natural person credit unions in the United States on par with credit unions and other depository institutions worldwide.”
A ’Logical Starting Point’
NASCUS noted it has championed “a broader, more flexible Subordinated Capital rule,” with Ito stating a subordinated debt rule is a logical starting point for the NCUA rulemaking and offered recommendations to the proposed rule that would create greater flexibility and foster the innovation needed for the development of a robust subordinated debt marketplace.
“Since 1998, state regulators and NASCUS have heralded that permitting all credit unions to have access to Subordinated Debt is sound public policy and we stand ready to collaborate with NCUA to make credit union capital reform a reality,” NASCUS added.
The NASCUS comment letter can be found here.
CUNA Mutual Comment
In its comment letter, CUNA Mutual Group also expressed its support for the proposed expansion of the subordinated debt rule and further suggested several amendments.
In the company’s comment letter, Michael F. Anderson, senior vice president and chief legal officer, said if implemented thoughtfully, NCUA’s efforts will provide credit unions with an important tool, enabling their growth, increasing their ability to absorb losses during severe economic downturns, and allowing them to continue providing essential services to under-served communities – while preserving the unique cooperative nature and member focus of credit unions.
“CUNA Mutual Group believes all consumers should have access to a brighter financial future. NCUA’s proposed rule would not only help credit unions grow in general but would also positively impact low-income credit unions’ ability to serve members in underserved areas,” Anderson said.
Suggested Amendments
In its comment letter, CUNA Mutual Group also offered several suggested amendments to the proposed rule, including:
- More flexibility in the issuing process to allow credit unions to tailor their approach to raising capital to best maximize their resources and fit their unique circumstances
- Clear authority on the credit union industry’s ability to use cooperative strategies to help raise capital for different sizes of credit unions
- Amendments to specific language in the proposed rule to avoid misinterpretation and more closely adhere to common capital market practices.
‘Very Important’ Addition
In addition, Anderson said CUNA Mutual Group believes that expanding the universe of credit unions that are eligible to raise subordinated capital from outside investors is very important to the credit union industry as a whole. With the adoption of the proposed amendments, the NCUA’s rule will allow the emerging credit union subordinated capital market to grow and mature, CUNA Mutual said.