NCUA issues letter on subordinated debt rule as of January 1 | 2021-11-08
The NCUA issued a letter to credit unions (21-CU-13) Reminding all federally insured credit unions of the last subordinated debt rule comes into effect on January 1, 2022. Final rule amends various parts of the NCUA bylaws to allow low-income designated credit unions, complex credit unions and new credit unions to issue subordinated debt for the purposes of the regulatory treatment of capital.
Any secondary equity issuance not completed by January 1, 2022 will be subject to the requirements of the Final Rule, with one potential exception discussed below. Any designated low income credit union that does not complete its secondary capital issuance by the above date will need to be approved under the final rule, if that low income credit union seeks to issue subordinated debt, according to the letter.
The NCUA Board of Directors proposed an amendment to the subordinated debt rule at its September meeting that would allow designated low-income credit unions to issue approved secondary capital in 2021, regardless of the date. issue, provided that such issues are intended for the United States government or any of its subdivisions.
CUNA supported this proposal in its comments. According to the NCUA, the board will consider a final version of this proposal before January 1, 2022.
âGiven the current 45-day review period for secondary capital plans, any low-income credit union that is still considering submitting a secondary capital plan should do so as soon as possible. Additionally, if a designated low-income credit union is considering submitting a secondary investment plan this year, it should consider using the requirements of Section 702.408 of the Subordinate Debt Final Rule when drafting. its plan and submission of an application, âreads the letter from the NCUA. “This can help avoid having to resubmit documentation as long as the application meets the requirements of the final rule.”