ALEXANDRIA, Va.–The NCUA board will discuss a proposed rule that would allow some federally insured credit unions (FICUs) to count subordinated debt as capital for risk-based net worth purposes when it meets Jan. 23.
As CUToday.info has reported, subordinated debt rules have long been discussed by various board members, including NCUA Chairman Rodney Hood and Board Member J. Mark McWatters. Hood indicated in 2019 that a rule would be forthcoming, including in remarks before the Senate Banking Committee.
At its most recent meeting McWatters said such a rule is “complex” and that he anticipated NCUA would expect significant “feedback” around subordinated debt.
Both credit union trade groups have also issued various statements and positions related to subordinated debt, as well.
According to the board agenda posted by the agency, it will also be discussing:
- A proposed rule on CU “combination transactions,” or rules related to a federally insured CU converting to a mutual savings bank and the merger of an FICU into a bank. During 2019 one credit union announced plans to be acquired by a bank.
- A review of the federal credit union (FCU) loan interest rate ceiling (which it will also set)
- NCUA’s 2020 performance plan
- An inflation adjustment for the agency’s civil money penalties
NASCUS Response
In response to the announcement by NCUA related to subordinated debt, NASCUS President and CEO Lucy Ito said, “We are pleased that NCUA is moving forward on this important issue. NASCUS has long been a proponent of subordinated debt as a tool for well-managed credit unions to meet capital requirements and to add another line of defense to protect the National Credit Union Share Insurance Fund. Given the complexity, and importance of this issue, we urge the board to consider an extended comment period of 120 days. An extended period would give NCUA appropriate time to consult with state regulators and all stakeholders adequate time to review and consider the possible impacts of what promises to be complex and historically notable rule-making that may have ramifications for other rules including Prompt Corrective Action, Risk-Based Capital, and investments authority—just to name a few. Such a complex and critical rule deserves due deliberation.”