March 17, 2023

NCUA Board approves final rule on subordinated debt

NCUAThe NCUA Board met yesterday and finalized the subordinated debt rule, granting two previous NAFCU requests related to the Emergency Capital Investment Program (ECIP) and maximum maturity limits.

The NAFCU-supported rule included provisions to extend the treatment of ECIP funds as regulatory capital to reflect the maximum permissible maturity of the note. The rule also eliminates the 20-year maximum maturity limit in favor of a more flexible test.

Additionally, NCUA Chairman Todd Harper addressed the recent failure of Silicon Valley Bank and Signature Bank by stating that the credit union system remains well capitalized and continues to have a wide range of liquidity sources including the backstop, discount window and funding facility, and the Central Liquidity Facility. Harper also reiterated “no one has ever lost a single penny of insured share deposits at the credit union system.”

Board Member Rodney Hood expressed similar sentiments, saying the current bank failures are not a repeat of 2008. Instead, Hood called it a “confidence crisis” and reassured that credit union members can be confident their money is safe, as over 90 percent of credit union accounts are insured. Vice Chairman Kyle Hauptman noted that credit unions should use this opportunity to tout the credit union difference.

NAFCU President and CEO Dan Berger sent a similar message to member credit unions this week, saying “these two failures were based solely on the institutions’ mistakes and not reflective of a systemic economic failure.”

NAFCU remains engaged with lawmakers and regulators on credit union priorities.