National Credit Union Administration October 5, 2022 – Federal Register Recent Federal Regulation Documents

The NCUA Board (Board) is proposing to amend the Subordinated Debt rule (the Current Rule), which the Board finalized in December 2020 with an effective date of January 1, 2022. This proposal would make two changes related to the maturity of Subordinated Debt Notes (Notes) and Grandfathered Secondary Capital (GSC). Specifically, this proposal would replace the maximum maturity of Notes with a requirement that any credit union seeking to issue Notes with maturities longer than 20 years to demonstrate how such instruments would continue to be considered ``debt.'' This proposed rule would also extend the Regulatory Capital treatment of GSC to the later of 30 years from the date of issuance or January 1, 2052. This proposed extension would align the Regulatory Capital treatment of GSC with the maximum permissible maturity for any secondary capital issued to the United States Government or one of its subdivisions (U.S. Government), under an application approved before January 1, 2022. This proposed change would benefit eligible low-income credit unions (LICUs) that are either participating in the U.S. Department of the Treasury's (Treasury) Emergency Capital Investment Program (ECIP) or other programs administered by the U.S. Government. This change would also cohere the requirements in the Current Rule related to maturities and Regulatory Capital treatment of Notes and the Regulatory Capital treatment of GSC, while continuing to ensure that credit unions are operating within their statutory authority. The Board is making four other, minor modifications to the Current Rule to make it more user-friendly and flexible. Specifically, the Board is proposing to amend the definition of ``Qualified Counsel'' to clarify that such person(s) is not required to be licensed to practice law in every jurisdiction that may relate to an issuance. The Board is also proposing to amend two sections of the Current Rule to remove the ``statement of cash flow'' from the Pro Forma Financial Statements requirement and replace it with a requirement for ``cash flow projections.'' This change would better align the requirements of the Current Rule with the customary way credit unions develop Pro Forma Financial Statements and ``cash flow projections.'' Next, the Board is proposing to revise the section of the Current Rule on filing requirements and inspection of documents. This proposed changed would align this section of the Current Rule with current agency procedures. Finally, the Board is proposing to remove a parenthetical reference related to GSC that no longer counts as Regulatory Capital. This change would align the rule with recent changes made to the Call Report.