March 28, 2023

To our clients and friends:

Recently, the NCUA finalized an amendment to its current rules on subordinated debt.  The amendment makes two material changes to the current rule.  First, there is no longer a maximum maturity for subordinated notes, provided certain requirements are satisfied.  In addition, the regulatory capital treatment of grandfathered secondary capital was extended from 20 years to the later of 30 years from the date of issuance or January 1, 2052.  Please see our Alert for more details.

Credit unions should strongly consider getting NCUA preapproval to issue subordinated debt for liquidity and capital planning purposes even if they have no immediate plans to issue subordinated debt.  The current rules provide eligible credit unions with a two-year window to issue subordinated debt without any further approvals from the NCUA.  Further information about subordinated debt can be found here:  White Paper – NCUA Subordinated Debt Final Rule.

 

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