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Home » Secondary capital proposal would provide flexibility to LICUs
Policy & Issues

Secondary capital proposal would provide flexibility to LICUs

October 27, 2021
NCUALogo

CUNA supports NCUA’s proposed “grandfather” provision in its secondary capital proposal, it wrote to the agency Wednesday. The proposal would benefit eligible low-income credit unions (LICUs) participating in the Treasury’s Emergency Capital Investment Program (ECIP).

Specifically, the proposal would amend its subordinated debt rule’s definition of “Grandfathered Secondary Capital” to include certain secondary capital applied for and approved before Jan. 1, 2022, the rule’s scheduled effective date.

“We support the proposed provision to grandfather secondary capital applied for and approved by December 31, 2021, regardless of when the funds are actually received by the LICU. We appreciate the flexibility this will provide LICUs that may not actually have their secondary capital funded until after the end of the year, which could be due to a variety of factors, many of which are completely out of the control of the credit union,” the letter reads.

“Further, we agree with the NCUA’s rationale for narrowly tailoring this proposal, such as that the issuances targeted by the proposal were applied for and approved under the requirements of the current secondary capital rule,” it adds.

CUNA strongly disagrees with provisions that would not permit LICUs to issue secondary capital with terms longer than 20 years.

However, NCUA addressed the issue in an Oct. 20 Letter to Credit Unions, clarifying that LICUs may accept 30-year ECIP funding.

“Despite the concerns noted above, we are encouraged by the agency’s October 20 Letter to Credit Unions clarifying that LICUs may accept 30-year ECIP funding,” it reads. “We believe such an interpretation is appropriate and we appreciate the NCUA listening to concerns raised by the industry ahead of the proposal’s comment deadline.”

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