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What Will CU Business Lending Look Like Under the New MBL Rule?
Tuesday, March 22, 2016 6:35 AM

From Catalyst Corporate

The shackles come off in 2017. The NCUA's new member business lending rule, published in the Federal Register March 14, will give federally insured credit unions greater flexibility and autonomy in providing business loans for their members. While most credit unions believe this newfound freedom will create opportunity to compete more effectively, many are uncertain whether to completely rewrite their business lending policies or stay the course.

"A lot of credit unions with business lending programs in place have the ability to completely change the way they lend," said Larry Middleman, president and CEO of CU Business Group. "But like eating ice cream, too much, too quickly is not always the wisest choice."

The MBL rule was adopted in February, and the majority of its provisions will take effect Jan. 1, 2017, with the exception of the waiver of a personal guarantee requirement, which takes effect May 13, 2016. The new MBL rule replaces the current rule's prescriptive requirements and limitations with broad principles to govern safe and sound commercial lending.

These principles are predicated on NCUA's expectation that credit unions will maintain prudent risk-management practices and sufficient capital in line with the risks associated with their commercial lending activities.

"Credit standards probably won't change much," Middleman said. "Those parameters have already been set by credit unions. MBL legislation does, however, increase prospects for broader, deeper relationships with a credit union's member businesses.”

"Some credit unions take whatever walks in the door and assume it's a commercial lending opportunity," Middleman said. "There are strategies and tactics that can help a credit union identify niches to pursue through targeted marketing. In other words, to grow commercial lending proactively, rather than reactively."

Pursuing specific types of loans and properties within the commercial real estate segment, for example, can increase lending success, Middleman said.

Middleman will address credit unions at Catalyst Corporate's upcoming Accelerating Success Conference on May 6 in a session titled, "Connecting with your Business Members." He will provide insights into what the new rule means to credit unions, suggest opportunities credit unions should be researching and considering, and identify symptoms that can hint that business lending is expanding too fast.

His presentation also will include practical tips for increasing branch involvement in business lending; an overview of online lenders and how they can supplement, rather than compete with, a credit union's lending program; current trends in business services, and statistics that will help credit unions compare their performance to credit union peers and other financial institutions.

Catalyst Corporate is an approved five-star business partner of Credit Union Resources, Inc., a subsidiary of Cornerstone Credit Union League. To learn more, please visit