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Proposed Rules
Federal Register Vol. 86, No. 185
Tuesday, September 28, 2021

This section of the FEDERAL REGISTER
contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules.

NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Parts 702 and 741
NCUA 20210127
RIN 3133AF38

Subordinated Debt National Credit Union Administration NCUA.
ACTION: Proposed rule.
AGENCY:

The NCUA Board Board is proposing to amend the Subordinated Debt rule, which the Board finalized in December 2020 with an effective date of January 1, 2022. The Board proposes to amend the definition of Grandfathered Secondary Capital to include any secondary capital issued to the United States Government or one of its subdivisions U.S. Government, under an application approved before January 1, 2022, irrespective of the date of issuance. The proposed change would benefit eligible low-income credit unions LICUs that are either participating in the U.S. Department of the Treasurys Treasury Emergency Capital Investment Program ECIP or other programs administered by the U.S.
Government that can be used to fund secondary capital, if they do not receive the funds for such programs by December 31, 2021. The Board also proposes to extend the expiration of regulatory capital treatment for these issuances to the later of 20 years from the date of issuance or January 1, 2042.
DATES: Comments must be received on or before October 28, 2021.
ADDRESSES: You may submit written comments, identified by RIN 3133
AF38, by any of the following methods Please send comments by one method only:
Federal eRulemaking Portal: http
www.regulations.gov. Follow the instructions for submitting comments on Docket NCUA 20210127.
Fax: 703 5186319. Include Your NameComments on Proposed SUMMARY:

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Rule: Subordinated Debt 2021 in the transmittal.
Mail: Address to Melane ConyersAusbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 223143428.
Hand Delivery/Courier: Same as mail address.
Public Inspection: You may view all public comments on the Federal eRulemaking Portal at http
www.regulations.gov, as submitted, except for those we cannot post for technical reasons. The NCUA will not edit or remove any identifying or contact information from the public comments submitted. Due to social distancing measures in effect, the usual opportunity to inspect paper copies of comments in the NCUAs law library is not currently available. After social distancing measures are relaxed, visitors may make an appointment to review paper copies by calling 703 5186540
or emailing OGCMail@ncua.gov.
FOR FURTHER INFORMATION CONTACT:
Justin M. Anderson, Senior Staff Attorney, Office of General Counsel, 1775 Duke Street, Alexandria, VA
223143428. Justin Anderson also can be reached at 703 5186540.
SUPPLEMENTARY INFORMATION:
I. Background A. Subordinated Debt Rule At its December 2020 meeting, the Board issued a final Subordinated Debt rule the final rule permitting LICUs, Complex Credit Unions, and New Credit Unions to issue Subordinated Debt for purposes of Regulatory Capital treatment.1 Relevant to this proposal, the final rule grandfathered secondary capital issued before January 1, 2022, and allowed such secondary capital to receive regulatory capital treatment until January 1, 2042 20 years from the effective date of the final rule.2 The grandfathering provision of the final rule allowed LICUs with grandfathered secondary capital to continue to be subject to the requirements of 701.34b, c, and d recodified in the final rule as 702.414, rather than the requirements of the final rule.3 The final rule also includes a provision stating that any issuances of secondary
capital not completed by January 1, 2022, are, as of January 1, 2022, subject to the requirements applicable to Subordinated Debt in the final rule.4
This provision would nullify any approved secondary capital application if the associated issuance was not completed before January 1, 2022. Any LICU in this situation would be required to reapply under the final rule if such LICU sought to proceed with its planned secondary capital issuance.
B. Emergency Capital Investment Program Subsequent to the issuance of the final rule, Congress passed the Consolidated Appropriations Act, 2021.5 The CAA, among other things, created the ECIP. Under ECIP, Congress appropriated funds and directed Treasury to make investments in eligible institutions to support their efforts to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially in low-income and underserved communities. 6 The definition of eligible institutions includes federally insured credit unions that are minority depository institutions or community development financial institutions, provided such credit unions are not in troubled condition or subject to any formal enforcement actions related to unsafe or unsound lending practices.7
Under the terms developed by Treasury, investments in eligible credit unions will be in the form of subordinated debt. Treasury also aligned its investments in LICUs with the Federal Credit Union Act and the NCUAs regulations to allow eligible LICUs to apply to the NCUA for secondary capital treatment for these investments.
Treasury opened the ECIP application process on March 4, 2021, with an application deadline of May 7, 2021.
Treasury has subsequently extended this deadline multiple times, with the most recent deadline, as of the date of this proposal, being September 1, 2021.
As of September 17, 2021, 44 LICUs have received approval from the NCUA
to issue secondary capital under the 4 Id.

at 11083.

5 Consolidated
1 86

FR 11060 Feb. 23, 2021.
2 Id. at 11074.
3 Id. at 11074.

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Appropriations Act, 2021, Public Law 116260 H.R. 133, Dec. 27, 2020.
6 Id. codified at 12 U.S.C. 4703a et seq.
7 12 U.S.C. 4703aa2.

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