ICBA expressed strong opposition to a National Credit Union Administration proposed rule that would allow the largest and most complex credit unions to issue subordinated debt as an alternative form of capital.
Under the proposed rule, which ICBA called on the NCUA to withdraw, the subordinated debt instruments would count toward qualifying credit unions’ risk-based net-worth requirement. The NCUA said 2,618 low-income credit unions are currently permitted to issue subordinated debt, and the proposal would add an additional 285 complex and new credit unions representing $730 billion in assets.
The NCUA voted 3-0 to propose the plan after introducing an advance notice of proposed rulemaking nearly three years ago. In a 2017 comment letter, ICBA said the plan would put the financial system and taxpayers at increased risk merely to expand the activities of credit unions beyond the limits justified by their tax exemption.