MBL rule outlined in latest summary

March 17, 2016 -- Reflective of the 31 pages in the March 14 Federal Register occupied by the new member business/commercial lending final rule adopted by the NCUA Board in February, NASCUS has published a substantial summary of the regulation, focusing on the needs and interests of states.

For example, with regard to state regulation of business lending, the summary notes that the rule states federally insured credit unions in a given state are exempted from compliance with section 723.10 of the rule if the state supervisory authority administers a state commercial and member business loan rule for use by FISCUs in that state, provided the state rule at least covers all the provisions in this part and is no less restrictive. (That conclusion, the summary notes, is based on NCUA’s determination).

Additionally, the summary notes that states that currently have exemptions from NCUA’s MBL rule are grandfathered in under the final rule. Any modification to those rules must be consistent with NCUA’s MBL rule; however, modification of one part of an existing NCUA-approved state rule will not cause other parts of the rule to lose their grandfathered status. 

The summary points out that NCUA will issue supervisory guidance with the new rule before most of it takes effect (at the beginning of 2017). The summary also notes that the guidance (and exam training) will focus on:

  • Overarching principles for managing commercial loan risk;
  • Critical components of commercial loan policies;
  • The credit approval process;
  • Credit risk-rating systems;
  • Structuring of credit packages to properly align members’ needs with financial abilities to repay; and
  • Credit risk management processes for underwriting, ongoing loan administration and risk monitoring.

NASCUS Summary, NCUA Final Rule/ Member Business Loans; Commercial Lending