The National Credit Union Administration (NCUA) Board finalized a new rule allowing certain credit unions to issue subordinated debt to boost their regulatory capital. This rule primarily affects low-income designated credit unions, complex credit unions, and new credit unions. The final rule outlines several requirements such as amending the definition of "Accredited Investor," setting disclosure guidelines, and reviewing credit unions' applications to issue subordinated debt. Additionally, it includes changes aiming to safeguard both the credit unions and the National Credit Union Share Insurance Fund (NCUSIF) from increased financial risk.
Simple Explanation
Imagine if a special group of piggy banks could borrow extra pennies from big kids to help them grow stronger and safer, but there are lots of rules to make sure everything stays fair and safe. That's what some credit unions (like special banks) are now allowed to do with grown-up money, but they need to follow these rules for everything to be okay.