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NCUA Proposes Principle-Based MBL Rule
Tuesday, June 23, 2015 6:50 AM

Last week, the National Credit Union Administration voted 3-0 to propose a member-business loan rule that will provide federally insured credit unions with greater flexibility and reduce regulatory burden for credit unions participating in member business lending (MBL).

Specifically, the proposed rule eliminates detailed collateral criteria and portfolio limits. The general aggregate statutory limit on MBLs in the current rule is the lesser of 1.75 times the credit union’s net worth or 12.25 percent of the credit union’s total assets.

The proposal noted that the MBL limit should not be expressed as an absolute percentage but rather as 1.75 times the applicable net worth requirement for a credit union to be categorized as well-capitalized. The proposal instead focuses on broad yet well-defined principles that clarify regulatory expectations for federally insured credit unions engaged in commercial lending activities.

The proposal rewrites the current rule to:

  • Allow a credit union to make the decision to waive a member from a personal guarantee;
  • Remove loan-to-value limits and remove the waiver process altogether;
  • Lift limits on construction and development loans; and
  • Clarify that participation in loans to non-members do not count against the statutory member business lending cap.

In response to the board action, CUNA President/CEO Jim Nussle said the action seemed like a step in the right direction, and they are reviewing the proposal to assess the real regulatory relief it offers, as well as conducting an economic analysis of the proposed cap calculation change.

NCUA will accept public comments on the proposal for 60 days following publication in the Federal Register.