NCUA is proposing a Subordinated Debt rule that allows “Complex Credit Unions” to issue debt in addition to moving Low Income Credit Union’s Secondary Capital into it. Subordinated Debt is a tool credit unions can use to fund projects like branch expansion or investing in new products and services.
This rule change is a big step towards completing the transition to the Risk Based Capital regime. Because credit unions are more limited in their ability to raise capital than banks, credit unions that need capital should consider Subordinated Debt as an option. More specifically, with the recent changes that include more members into the Low-Income Credit Union (LICU) calculation, more credit unions may be able to apply for LICU status and thereby have greater options for funding projects in line with long-term strategic planning.
LSCU has created a summary and outline of the rule you can view here. LSCU’s compliance team is planning to have a call with an advisor from Olden Lane to discuss the rule.
While we hope NCUA will postpone the July 8 deadline for comments, at present we have not heard that they plan on doing so. Therefore, please send any input you have by July 2 to LSCU Director of Regulatory Advocacy Mike Lee.
If you’d like to participate in that call, please let Mike know.