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NCUA Adopts New Era with Finalized MBL Rule
Friday, February 19, 2016 6:50 AM

The February Board meeting of the National Credit Union Administration was held Thursday morning. On the agenda, was the finalization of the Member Business Lending (MBL) rule originally proposed in June 2015 and the quarterly report on the National Credit Union Share Insurance Fund.  

Chairman Debbie Matz introduced the MBL rule announcing, "With this new rule, we will begin a new era, for NCUA as a regulator and for credit unions as business lenders. This new era will be defined by principles-based regulation, not by prescriptive limits on credit unions." 

The board's vote was unanimous. The rule represents a complete overhaul of the NCUA's MBL regulation. Under the set of rules, almost all requirements not in the Federal Credit Union Act (FCUA) are removed from the regulation.

Some key points of the new rule:

  • It creates a category of "commercial" loans for safety and soundness purposes and utilizes the category of MBLs for compliance with the FCUA's limitations on member business lending. For example, the act does not categorize any nonmember participations as MBLs and neither does the proposed rule. However, business loan participations are considered commercial loans for the purposes of safety and soundness.
  • The rule removes all specific requirements that currently require waivers, including the personal guarantee requirement. It exempts some credit unions with less than $250 million in assets from the board of directors and management responsibility requirements and commercial loan policy requirements.

The agency rule also moves to a more principle-based methodology and removes the personal guarantee requirement on MBL loans.

The personal-guarantee provision of the rule will be effective within 60 days of the rule's publication in the Federal Register. The remainder of the rule will take effect on Jan. 1, 2017, giving credit unions time as they work to implement the broad changes.  

CUNA President/CEO Jim Nussle welcomed the new rule, saying, “Expanding credit union member business lending to empower credit unions with greater flexibility and autonomy in offering commercial loans is a major victory for America’s small businesses and job creators."

Nussle thanked the NCUA for removing nearly all requirements on member business lending that are not included in the FCUA and noted, "CUNA worked closely with the agency to ensure the Personal Guarantee waiver would be effective 60 days after publication and we will continue to work with the agency to comment on guidance for the benefit of all credit unions.”

The NCUA received 3,100 comment letters after the MBL changes were published for comment. Banks launched a significant letter-writing attack on the modernization of the credit union MBL rule. 

Results of yesterday's board actions will be available for review on NCUA's website here.