ALEXANDRIA, Va.–The NCUA board has approved a rule designed to help credit unions that are using new ECIP funds for secondary capital.
Specifically, the new rule states that the expiration of regulatory capital treatment for funding received from the Treasury program is the latter of 20 years from the date of issuance or Jan. 1, 2042, so long as the agency approves those secondary capital plans by Dec. 31, 2021.
Had the rule not been changed, funds credit unions received from Treasury’s $9 billion Emergency Capital Investment Program (ECIP)—enacted as part of the federal response to the pandemic—would have been treated as subordinated debt rather than grandfathered secondary capital. The funds have been tapped by numerous low-income credit unions to bolster their capital.
The final rule passed by the board is substantially similar to the proposed rule. The board approved two narrow changes to address the transition to the new subordinated debt rule for LICUs participating in the ECIP or similar programs.
“The pandemic-induced recession hit communities of color and the poorest households the hardest,” said NCUA Chairman Todd Harper. “And, with the expiration of several pandemic-relief measures and rising prices for essentials like food, energy, transportation, and housing, many of these households will soon experience financial stress…In creating ECIP, Congress created a lifeline to support these underserved communities and help them recover from the pandemic. And, on Tuesday, the Treasury Department announced that 85 credit unions will receive billions of dollars in ECIP funding. The amount of these allocations ranged from less than $1 million to more than $200 million.”
Harper called the funding from ECIP a “game-changer” for participating MDI and CDFI credit unions and their communities, saying participating credit unions will leverage ECIP funds to lend to start-up small businesses, back eligible community development projects, and offer car and home loans.
Can’t ‘Bear this Burden Alone’
“However, CDFIs and MDIs cannot — and should not — bear this burden alone,” said Harper. “In the months ahead, I encourage all credit unions to support safe, fair, and affordable lending to their members. With a cooperative structure and statutory mission of meeting the credit and savings needs of members, especially those of modest means, all credit unions have a moral obligation to step in and step up to support the needs of their members, local businesses, and communities.”
Both Kyle Hauptman and Rodney Hood of the NCUA board urged credit unions to take advantage of the new funding.”