Removing Barriers Blog

CUNA Submits Comment Letter on NCUA MBL Proposal
Posted August 25, 2015 by CUNA Advocacy

On June 18, 2015, the NCUA Board issued a proposed member business loans (MBL) rule designed to give credit unions greater flexibility and autonomy in offering commercial loans.  After thorough analysis and consultation with its members, CUNA today filed a comment letter with NCUA that supports the general direction of the rule, but stresses that there is still room for improvement. A brief summary of CUNA’s comments are as follows.

CUNA supports:

  • The change from the current prescriptive approach to a more principle-based methodology;

  • The new definitions including the newly created definition of commercial loan that helps delineate those loans subject to the MBL cap and commercial loans that invoke the safety and soundness provisions.  CUNA expresses reservation on the requirement of the credit-risk rating system that may not be appropriate or necessary in a commercial loan policy;
  • The exemption for credit unions that hold a de minimis number and amount of “commercial loans,” but believes the small creditor exemption could be improved to allow all credit unions, regardless of asset size, to take advantage of the exemption for de minimis MBL portfolios;
  • Giving State Supervisory Authorities (SSA) maximum flexibility for purposes of maintaining existing state regulatory schemes.  CUNA is further concerned that the rule does not contemplate necessary training and resources needed for SSAs to properly implement the proposed rule;
  • The presentation of the MBL cap as a multiple (1.75 times) of net worth which is in better conformity with the statutory language for the MBL cap.  (Note: This is NOT an increase in the cap nor is it an “end around” Congress)

The letter also stressed that NCUA should:

  • Release and permit comment on the supervisory guidance prior to the issuance of the final rule. The absence of supervisory guidance creates uncertainty that makes it impossible to fully assess the proposed rule’s potential impact on credit unions;
  • Detail the minimum requirements that are acceptable for establishing a safe and sound member business lending program;
  • Go much further than this proposal to remove barriers to credit union small business lending.  In particular, NCUA should revisit its interpretation of the exemption for those credit unions with a “history of primarily making” or “chartered for the purpose of making” member business loans;

  • Provide consistent training and guidance to the examiners as part of the implementation of this rule since the rule will require more thorough examination of loans and policies by examiners; and
  • Leave a waiver in place for its single borrower limit.
 

CUNA supports the overhaul of NCUA’s current MBL regulation to the extent that it shifts from a prescriptive regulation that contains many detailed requirements to a principle-based regulation that gives more flexibility in the construction and operation of an MBL or commercial program.  However, the rule can, and should, go further.