NCUA reverses on term limit restriction for ECIP funds

The National Credit Union Administration's board revised its subordinate debt rule to allow credit unions to maximize their participation in the Treasury Department’s Emergency Capital Investment Program.

At its September board meeting, the NCUA issued a proposal to exempt secondary capital provided by sources including ECIP from the agency’s pending subordinated debt rule. The Treasury established terms of either 15 or 30 years for ECIP, but the NCUA proposal would have allowed such funds to be used to meet risk-based capital requirements for up to 20 years from the date of issuance. The 20-year cutoff effectively meant that credit unions could only employ the 15-year option with the Treasury funds.

Critics warned that this limitation would hurt credit unions that lend to minority borrowers.

Bill Bynum, CEO of the $411 million-asset Hope Federal Credit Union in Jackson, Mississippi, was among those who wrote to the NCUA to say that only providing the 15-year option would have undermined the intent of Congress that the appropriated funds would help reduce longstanding racial and economic disparities.

At the NCUA board’s meeting Thursday, Chairman Todd Harper said the agency has notified credit unions that they can now choose the 30-year option.

“Credit unions have a statutory mission to meet the credit and savings needs of their members, including, and especially, those of modest means,” Harper said, adding that the rule change will allow credit unions to do just that.

Vice chairman Kyle Hauptman said the move is an example of the NCUA being the kind of agency the board wants it to be.

“We took action, people reached out to us and said they would really appreciate it if we tweaked what we already did, and we amended it,” he said during the meeting. “We’re not going to get everything 100% right all the time. We made changes, and we did it quickly.”

Harper said the board expects to finalize the subordinated debt rule later this year.