MBL rule adopted; ‘proof will be in the pudding’

Feb. 18, 2016 -- A new “principles-based” rule on member business lending was adopted unanimously Thursday by the NCUA Board, which incorporates major recommendations made by NASCUS. However, as President and CEO Lucy Ito pointed out, what remains to be seen is whether the spirit of the discussion by board members regarding state MBL rules ultimately is implemented by the agency.

In adopting the regulation, the board included two NASCUS recommendations: That the rule delegate to state supervisory authorities (SSAs) authority to administer a state MBL rule that is at least as stringent as NCUA’s rule (essentially adopting ‘Option C’ as spelled out in proposal – which was recommended by most commenters), and; that boards of credit unions offering business loans be required to approve a comprehensive, written commercial loan policy. “Option C” would permit SSAs that currently administer a state MBL rule to preserve their rules in their current format.

During conversation at the board meeting, NCUA Director of the Office of Examination and Supervision Larry Fazio said that, if states with MBL rules that meet the core criteria of the federal MBL rule want to include a “particularly novel approach” outside of federal regulation, NCUA could entertain that approach if the approach applies for all federally insured credit unions.

NASCUS President CEO Lucy Ito noted that, as passed by the board, the spirit of the rule permits state innovation in adopting their own business lending rules. “But the proof is in the pudding,” she added. “Our concern is that the ultimate interpretation of the rule stays consistent with the intention expressed at the table today during the NCUA Board’s discussion.”

She said, however, that allowing states to adopt their own state-specific MBL rules in the future is a key provision that NASCUS sought in the final rule, as was the provision requiring credit union boards to approve a comprehensive, written commercial loan policy.

During the deliberations, the impact of the new rule on state commercial lending regulations was a prominent topic. Additionally, NASCUS’ comment letter on the proposal was referenced by all three board members.

The final rule takes effect 60 days after publication in the Federal Register.

NCUA final rule, member business lending
NASCUS Aug. 31 MBL comment letter
Lucy Ito statement on final rule