The proposed rule regarding subordinated debt for credit unions has been published in the Federal Register, opening up the 120-day comment period.
The NCUA board of directors unanimously approved a proposed rule expanding eligibility to issue subordinated debt at its Jan. 23 meeting. The proposed rule would create a new subpart in the NCUA’s final risk-based capital rule that would address the requirements for and regulatory capital treatment of subordinated debt.
Under the proposal, low-income-designated credit unions, complex credit unions and newly chartered federal credit unions would be permitted to issue subordinated debt. According to the agency, this proposed rule will:
- add a new section to NCUA’s regulations addressing limits on loans to other credit unions;
- clarify application requirements to issue subordinated debt;
- expand requirements for note disclosures and offering documents;
- update the borrowing rule to clarify that federal credit unions can borrow from any source; and
- add new safe harbors for repudiation and interest payments.
The comment period ends on July 8, 2020. The proposed rule can be viewed on the Federal Register’s website.