The National Credit Union Administration board’s decision to allow low-income, complex, and new credit unions to issue subordinated debt is another sign that the industry is eroding the mission of the institutions, banking lobbyists charged this week.
“This rule is yet another example of the NCUA pushing the envelope and expanding credit union powers well beyond limits justifying the industry’s tax exemption,” Rebeca Romero Rainey, president/CEO of the Independent Community Bankers of America said Thursday.
The NCUA board approved a final rule Thursday allowing credit unions to issue subordinated debt for purposes of regulatory capital treatment.
Bankers blasted that rule when it initially was approved earlier this year and they continued that criticism after the final rule was issued.
The rule undermines credit union’s mutual ownership structure, allows outside investors to “exploit” the credit union tax exemption and will help fuel “runaway “growth of the industry.
Rob Nichols, president/CEO of the American Bankers Association, echoed those sentiments.
“This rule is inconsistent with the chartered mission of credit unions to serve people of modest means and provides no demonstrable requirements credit unions actually serve those in need,” he said.
Nichols added that the NCUA budget shows that the agency lacks the expertise to oversee the sophisticated financial instruments, since the budget calls for hiring outside counsel to implement the rule.
“We will consult with our members before deciding next steps,” Nichols said.
At the time the proposed rule was issued, the ABA seemed to be prepared to challenge the rule in court once the final regulation was issued.