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Revamp of MBL approach urged by CUNA
WASHINGTON (8/26/08)—The Credit Union National Association (CUNA) is recommending a major overhaul in the National Credit Union Administration’s (NCUA’s) regulatory approach to member business lending (MBL). Rather than setting parameters on MBLs that restrict the ability of credit unions to serve businesses, CUNA believes the NCUA has the authority to pare down its rule dramatically to include only those provisions that are directed by the Federal Credit Union Act, leaving those issues such as Loan to Value ratios, equity requirements and other issues to be addressed in credit unions' MBL policies and in guidance from NCUA. As part of its policy to review all existing regulations every three years, the NCUA in May sought comment on how its MBL rules should be revised or clarified. CUNA said in its Aug. 25 comment letter: “The FCU Act contains few provisions that address MBLs. In general, in addition to limits on one borrower, the provisions in the Act that cover MBLs are the total asset limitations and exceptions and the provisions under prompt corrective action that limit new MBLs for undercapitalized credit unions.” “In light of the limited provisions in the Act regarding MBLs, we think NCUA has latitude to develop an improved approach to MBL regulation,” wrote Mary Dunn, CUNA deputy general counsel. The CUNA letter noted that business lending is a generally safe activity for credit unions and an important source of credit for small businesses across the country, especially amid reports that small businesses are having trouble getting a loan from a bank. However, CUNA acknowledged that its proposed revamping of NCUA MBL rules may not be achievable given the agency’s reluctance over the years to encourage MBL growth. Therefore, CUNA agreed that the agency can and should make clarifications to the MBL rule in a number of areas. These include: loan to value ratios, loan participations, waivers, the two-year experience requirements and regulatory restrictions generally as they relate to MBLs in order to improve the rule and facilitate lending to small businesses. CUNA’s letter also takes the opportunity to address the misinformation about member business lending that is contained in comment letters from banking trade groups. Use the resource link below to access the complete CUNA comment letter.

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