Removing Barriers Blog

NCUA Finalizes Member Business Lending Proposal
Posted February 18, 2016 by CUNA Advocacy

At today's Board meeting, NCUA issued a Final Rule amending Part 723 related to Member Business Loans.  The NCUA also received a report on the National Credit Union Share Insurance Fund (Quarterly Report).

Final Rule, Part 723, Member Business Loans


The Board voted 3-0 to amend its member business loan (MBL) rule to provide federally insured credit unions with greater flexibility and individual autonomy in safely and soundly providing business loan services to their members. The final rule modernizes the regulatory requirements that govern credit union business lending activities by replacing the current rule’s prescriptive requirements and limitations—such as collateral and security requirements, equity requirements, and loan limits—with a principles-based regulatory approach.  The amendments also eliminate the current MBL waiver requirements.  Highlights of the proposal include the following:

• 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;

• Removes all specific requirements that currently require waivers, including the personal guarantee requirement.  The personal guarantee requirement becomes effective 60 days after publication in the Federal Register; 

• Exempts some credit unions with less than $250 million in assets from the board of director and management responsibility requirements and commercial loan policy requirements.

• Becomes effective on January 1, 2017, (other than the personal guarantee provisions)

• Grandfathers certain existing state MBL regimes while allowing other states to adopt their own MBL rule or statute subject to certain criteria and NCUA approval.

National Credit Union Share Insurance Fund Quarterly Report
Rendell L. Jones, Chief Financial Officer presented the Quarterly Report on the National Credit Union Share Insurance Fund.  Jones reported for the Quarter Ending December 31, 2015 Actual Net income of $21.1 million and a year-to-date (ending December 31, 2015) of $61.3 million with the ending reserve balance of $164.9 million.  The NCUSIF Equity Ratio ended at 1.29% with the number of problem credit unions CAMEL Code 4/5 declining to 220 representing 0.80 percent of CAMEL 4/5 shares to Total Insured Shares.  The number of credit union failures for 2015 was reported at 16.