Statements from NASCUS President and CEO Mary Martha Fortney on NCUA's Final Loan Participations Rule
June 20 -Today, the National Credit Union Administration (NCUA) approved its long anticipated final rule on Loan Participations. The final rule, while applying to all federally insured credit unions, does contain some important differences for state-chartered federally insured credit unions. Most significantly, the final rule contains a 5% minimum risk retention for federally insured state-charters while maintaining the higher 10% risk retention for federal credit unions.
While many state regulators shared some of NCUA's concerns regarding the risks associated with loan participations within the credit union system, NCUA's initial proposed rule, published in late 2011, was problematic in several ways. The final rule approved today by the NCUA Board is a marked improvement in several areas, including the more flexible risk retention requirement for federally insured state-charters, and the higher concentration thresholds. The final rule also corrects a discrepancy in NCUA's rules that had required federally insured state-chartered credit unions to seek prior NCUA approval before participating in some loans while NCUA required no such prior approval for federal credit unions. The final rule treats both state and federal credit unions the same eliminating the prior approval requirement for participations that comply with the new final rule.
NASCUS continues to believe that NCUA should defer to state authority wherever possible and should reserve rulemaking for only the most material safety and soundness issues. NASCUS President and CEO Mary Martha Fortney made the following comments regarding the final loan participations rule.
"That today's rulemaking preempts the authority in some states with regard to loan participations is disappointing. However, the final rule demonstrates that NCUA seriously considered the concerns voiced by NASCUS and state regulators and amended the proposal accordingly. We appreciate the dialogue with NCUA, and recognize that the final rule represents a sincere effort to balance dual chartering and the roles of state and federal authority."
NASCUS will continue to work with NCUA on issues related to regulating loan participations to continue to improve both the state and federal regulation of the credit union system. "Regulatory supervision evolves, and loan participations are no different. Through continued dialogue we will continue to explore where flexible approaches may be identified to further improve the innovative environment that has long been a hallmark of state regulation," said Fortney.