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.