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NAFCU reiterates support for subordinated debt rule changes
NAFCU Senior Counsel for Research and Policy Andrew Morris wrote to the NCUA to express support for proposed changes to the agency’s subordinated debt rule. The proposed amendments grant two previous NAFCU requests: to extend the treatment of Emergency Capital Investment Program (ECIP) funds as regulatory capital to reflect the maximum permissible maturity of the note, and to eliminate the 20-year maximum maturity limit in favor of a more flexible test.
In the letter, Morris offered support for the “NCUA’s decision to eliminate the maximum maturity requirement in the subordinated debt rule and replace it with a more reasonable standard which considers whether an issued note is debt.” Additionally, NAFCU “appreciates the board’s decision to adjust the regulatory capital treatment of [grandfathered secondary capital] to fully accommodate the maximum permissible maturity of notes issued under [the Treasury’s ECIP].”
Morris also noted NAFCU’s support of changes and clarifications to alleviate administrative burden for credit unions under the subordinated debt rule, in addition to reiterating a previous request, which calls on the NCUA to consider a simpler application process for smaller issuances of subordinated debt made to experienced investors.
NAFCU will continue to advocate for an efficient and effective regulatory capital framework that supports a robust market for credit union subordinated debt.