Removing Barriers Blog

Board Meeting Recap: NCUA issues bank purchase, subordinated debt proposals
Posted January 23, 2020 by CUNA Advocacy

The NCUA board issued a proposed rule on credit union combination transactions and subordinated debt, among other items, at its board meeting. The agenda also included approval of the agency’s 2020 Annual Performance Plan and a briefing on the credit union loan interest rate ceiling.

2020 Annual Performance Plan
The Board approved the agency’s 2020 Annual Performance Plan, which sets out performance measures and targets in support of the goals in the NCUA’s Strategic Plan. The plan also describes the means, strategies and specific actions the agency has resourced and intends to undertake to achieve each strategic objective.


Proposed Rule – Credit Union Combination Transactions
The Board issued a proposed rule on credit union combination transactions, which include those where a credit union proposes to assume liabilities from a non-credit union, including a bank. 

The proposal would establish a new Subpart D of Part 708a to clarify and make transparent the procedures and requirements currently in place related to combination transactions. Further, the proposed rule clarifies the scope of NCUA’s regulations requiring the agency to grant approval before a credit union may purchase loans or assume an assignment of deposits, shares, or liabilities from a non-credit union.

NCUA will accept public comments on the proposed rule for 60 days following publication in the Federal Register.


Proposed Rule – Subordinated Debt
The Board issued a proposed rule to permit low-income designated credit unions (LICUs), complex credit unions (those with at least $500 million in assets), and new credit unions (those in operation for less than ten years) to issue subordinated debt for purposes of regulatory capital treatment. Specifically, this proposed rule would create a new subpart in the final RBC rule that would include requirements related to applying for authority to issue subordinated debt, credit union eligibility to issue subordinated debt, prepayments, disclosures, securities laws, and the terms of a subordinated debt note.

All secondary capital issued after the effective date of a final rule would be subject to the requirements for subordinated debt. This change would not impact a LICU’s ability to include such instruments in its net worth.

NCUA will accept public comments on the proposed rule for 120 days following publication in the Federal Register.


Credit Union Loan Interest Rate Ceiling
The Board agreed to maintain the current temporary 18% interest rate ceiling for loans made by federal credit unions from March 11, 2020, through September 10, 2021. The Board is authorized to raise the ceiling beyond 15% for up to 18 months after consulting with Congress, Treasury, and other federal financial agencies. 

Chairman Hood noted that the agency is interested in receiving comments on the possibility of moving from a fixed to a variable rate. In May 2019, CUNA expressly asked NCUA to consider such a change.