The NCUA Board approved its final rule on subordinated debt at its Thursday meeting. Board members also reiterated the safety and soundness of the credit union system in the wake of the Silicon Valley Bank collapse.

The final rule makes changes to the current subordinated debt rule related to the maturity of Subordinated Debt Notes and Grandfathered Secondary Capital (GSC). CUNA wrote in support of the rule when proposed.

“We thank the NCUA board for making a necessary change to enable low-income credit unions participating in Treasury’s Emergency Capital Investment Program to receive the program’s maximum benefit,” said Alexander Monterrubio, CUNA’s deputy chief advocacy officer for regulatory affairs.

Specifically, the final rule:

• Replaces the maximum permissible maturity of Subordinated Debt Notes with a requirement that any credit union seeking to issue Subordinated Debt Notes with maturities longer than 20 years demonstrate how such instruments would continue to be considered “debt.”
• Extends the Regulatory Capital treatment of GSC to the later of 30 years from the date of issuance or January 1, 2052.
• Makes four minor modifications to other sections of the current rule to make it more user-friendly and flexible.

The final rule will become effective 30 days after its publication in the Federal Register.