Eligible low-income credit unions (LICUs) may accept 30-year subordinated debt investments from the Treasury’s Emergency Capital Investment Program (ECIP), as detailed in a letter to credit unions (21-CU-11) from NCUA. A LICU may treat this ECIP funding as secondary capital in accordance with the NCUA’s regulations, provided that any LICU receiving secondary capital treatment has an NCUA-approved secondary capital plan by Dec. 31, 2021. 

The final Subordinated Debt rule, passed by the NCUA Board in January 2021, includes a 20-year limitation on the regulatory capital treatment of “Grandfathered Secondary Capital,” which is defined as any secondary capital issued under a secondary capital plan that was approved by the NCUA before January 1, 2022.

Upcoming action by the NCUA will clarify that ECIP participating credit unions may count ECIP funding as regulatory capital for the entire time it is held.

Today’s announcement is part of a three-step process the agency is taking to ensure credit unions have full access to the Treasury Department program. The first step was a proposed rule 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 second step is today’s letter to credit unions allowing low-income credit unions to accept 30-year ECIP funding. The third step will be additional NCUA action to permit ECIP funding to count as regulatory capital for the entire time it is held. The NCUA aims to work on this action sometime in 2022.