LICUs may accept 30-year sub-debt ECIP

(Oct. 22, 2021) Eligible low-income credit unions (LICUs) may accept 30-year subordinated debt investments from a Treasury program meant to encourage the institutions to augment efforts to support small businesses and consumers, NCUA announced Thursday.

In a letter to credit unions (LTCU 21-CU-11) Thursday, the agency said the LICUs may accept the subordinated debt investments from the Treasury Department’s Emergency Capital Investment Program (ECIP). In addition, the agency said, the credit union may treat the investment as secondary capital in accordance with NCUA regulations. That is, provided that the LICU has an agency-approved secondary capital plan by year’s end.

According to NCUA Board Chairman Harper, the policy will allow ECIP-participating credit unions to fulfill that statutory mission and advance economic equity and justice. “Going forward, the NCUA will pursue additional action to permit ECIP funding to count as regulatory capital for the entire time it is held,” he said.

The agency’s subordinated debt rule, adopted in January, includes a 20-year limitation on the regulatory capital treatment of “Grandfathered Secondary Capital,” NCUA said. That is defined as any secondary capital issued under a secondary capital plan that was approved by the NCUA before Jan. 1, 2022. The agency indicated it plans, in the future, to clarify that ECIP participating credit unions may count ECIP funding as regulatory capital for the entire time it is held.

NCUA said the latest LTCU is the second step in a three-step process for ensuring credit unions can use ECIP. The first step was a proposed rule issued earlier this year to allow eligible credit unions to accept ECIP funding in 2022 without having to fill out a new subordinated debt application after the effective date of the new rule. The third step, according to the agency, will be more NCUA action – “sometime in 2022” — to permit ECIP funding to count as regulatory capital for the entire time it is held.

LINK:

NCUA LTCU 21-CU-11: Emergency Capital Investment Program Participation