At its September meeting on Thursday via live audio webcast, the NCUA board of directors unanimously approved a proposed rule that amends the agency’s subordinated debt rule.
The proposed rule would amend the definition of “grandfathered secondary capital” in the NCUA’s approved subordinated debt rules to include any secondary capital issued to the U.S. government or one of its subdivisions, under an application approved by the NCUA before Jan. 1, 2022, regardless of the date of issuance, according to the agency.
This proposed change to the agency’s subordinated debt rules would benefit eligible low-income credit unions that are participating in the U.S. Treasury’s Emergency Capital Investment Program or in other programs administered by the federal government that can be used to fund secondary capital, if they do not receive the funds by Dec. 31, 2021, according to the NCUA. Additionally, under this proposed rule, the regulatory treatment of this secondary capital would expire 20 years after issuance or on Jan. 1, 2042, whichever is later.
Comments on the proposed must be received 30 days after publication in the Federal Register.
Final rules added to future agendas
The board also approved a request to add three final rules to future NCUA board agendas for the last quarter of 2021. Kyle Hauptman, vice chairman, and Rodney Hood, board member, both Republicans, requested the addition of three final rules under Part 791 of the NCUA’s Rules and Regulations:
- Credit Union Service Organizations, Part 712, to be placed on the agenda for the Oct. 21 board meeting;
- Field of Membership Shared Facility Requirements, Part 701, Appendix B, to be placed on the agenda for the Nov. 18 meeting; and
- Mortgage Servicing Rights, Parts 703 and 721, to be placed on the agenda for the Dec. 16 meeting.
Chairman Todd Harper, a Democrat, stated that it “should come as no surprise to anyone that my policy positions on these three rules have not changed since they were first proposed,” saying that he would not support the action and believes that crafting good rules should not be rushed.
“I want to be clear that, to me, this item is not a contentious one,” Harper explained. “There are times in many negotiations where the parties find themselves at an impasse. When that occurs, there are often processes that exist to move beyond the impasse while protecting everyone’s positions and rights.”
Share Insurance Fund update
While the credit union system remained on a “solid footing” the second quarter of 2021, Harper said that “we should expect delinquencies and charge-offs to rise in the months ahead, and all credit unions should pay careful attention to their capital, asset quality, earnings and liquidity.”
He said that to protect the National Credit Union Share Insurance Fund — and, ultimately, taxpayers — against losses, the NCUA needs to stay on top of these emerging risks and problems in the credit union system.
The Share Insurance Fund reported a net income of $46.3 million and $19.8 billion in assets for the second quarter of 2021, according to the NCUA. The fund also reported $60 million in total income for the second quarter of 2021. The equity ratio, as of June 30, is 1.23%, which is below the board-approved normal operating level of 1.38%.
Other approved items
Two other items were also approved at the Thursday meeting:
- a request to reprogram $2.4 million in surplus funds for agency needs as part of the mid-session budget; and
- a request by the Oregon Department of Consumer and Business Services for an exemption from the NCUA’s member business regulations.