WASHINGTON—NAFCU, CUNA and NASCUS are closely examining NCUA’s proposed rule on member business lending to determine what regulatory relief the rule delivers, how it could help CUs provide more loans to small businesses, and what more can be done.
The NCUA board today unanimously approved a proposal for new rules governing MBL. Key changes are:
- Each credit union has the freedom to “prudently” write its own business loan policy without prescriptive regulatory limits.
- CUs can make the decision to waive a member from a personal guarantee, eliminating the current waiver process.
- LTV limits are removed.
- All “unnecessary” limits on construction and development loans are lifted.
- The rule clarifies that participation interests in loans to non-members do not count against the statutory member business lending cap.
- The 15% of net worth limit on loans to one borrower now increases to 25% if the additional 10% is supported by readily marketable collateral.
“NAFCU has long advocated for MBL reform, and we appreciate NCUA’s efforts to remove prescriptive underwriting criteria and personal guarantee requirements,” said Alicia Nealon, director of regulatory affairs. “While we welcome many aspects of this proposal, NAFCU is concerned with the agency’s initial estimates of how much NCUA will spend to implement the rule.”
NCUA explained it will provide training to its entire field team to support the new rule.
“We support necessary and thorough examiner training, but we urge NCUA to keep it within the agency’s current budget and look for all cost savings opportunities,” said Nealon.
Nealon said NAFCU will be surveying its members about their perspectives and insights on the proposal, as well as pressing for a broader change in the MBL rules that would allow an exemption from the MBL cap for more credit unions.
CUNA President and CEO Jim Nussle said NCUA’s changes are “a step in the right direction. CUNA is reviewing NCUA’s proposed principle-based rule and working with our members to assess the real regulatory relief this proposal offers, as well as conducting an economic analysis of the proposed cap calculation change.”
Adding that CUNA appreciates NCUA’s interest in making changes to MBL, Nussle said more can be done.
“Which is why we’ll be seeking further action on behalf of our 100 million members,” Nussle said. “If credit unions were not constricted by the arbitrary MBL cap, they would have the ability to lend over $14 billion more to small businesses, boosting the economy and helping small business owners create over 152,000 jobs in just one year. NCUA’s action proves that the regulator wants more flexibility in MBL. It’s time for Congress to take action; CUNA and our state credit union associations will continue to work diligently on behalf of our members to seek further MBL change.”
NACUS President and CEO Lucy Ito recognizes that a goal of streamlining rules and providing flexibility to credit unions is generally good.
“But, of course, the details of the proposal will have to be scrutinized for a complete picture,” Ito said. “NASCUS applauds the proposed rule's recognition of existing state-specific rules and the options for addressing states' authority going forward. We will likely recommend that NCUA still defer to state-specific rules – and insist that, as guidance is developed for state credit unions to follow in eventual implementation, state regulators participate in its creation, a method consistent with a ‘principles-based’ approach to regulation. States must have a meaningful ability to tailor business lending rules specific to their communities.”