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NCUA’s Proposed Rule on MBL and Continued RBC Interest on Capitol Hill

Mon, Jun 22, 2015

Columbia, Maryland

Member-Business Lending (MBL)

Last Thursday, the NCUA released a proposed MBL rule (click here to read) that moves to a principles-based approach and as such could be a positive step in providing some measure of regulatory relief for credit unions.  NCUA’s proposed rule would remove the guarantee requirement, eliminate the need for waivers, remove loan participations against the MBL cap and remove the loan-to-value limits. Currently, more than 1,000 credit unions are at or near the arbitrary MBL cap put in place in 1998.  

Among the restrictions removed or modified by the proposed rule are:

  • The requirement for a personal guarantee;
  • The 80% limit on loan-to-value ratios;
  • The limit on unsecured MBLs;
  • The requirement that staff have two years of direct experience;
  • Detailed limits on construction and development loans;
  • The restrictive definition of “associated borrower;” and
  • The 15% of net worth limit on loans to one borrower, which will now increase to 25% if the additional 10% is supported by readily marketable collateral.

The advocacy team as well as CUNA will be reviewing NCUA’s proposed principle-based rule in more detail and requests member input moving forward to better understand how these rules affect your credit union.  CUNA will also be conducting a more in depth economic analysis of the proposed cap calculation change.

But as always, more can and should be done. As CUNA’s CEO Jim Nussle, recently said, “If credit unions weren’t constricted by the arbitrary MBL cap, they would have the ability to lend more than $14 billion to small businesses…and helping small business owners create more than 152,000 jobs in just one year.”  We need to keep the pressure on the NCUA, in the halls of Congress and provide constructive feedback on the NCUA’s proposed MBL rule.

Risk-Based Capital (RBC)

On Capitol Hill, in what can rightfully be seen as a shot across NCUA’s bow, House Appropriations Committee member Ander Crenshaw (R-FL) added language related to RBC into the Fiscal Year 2016 Financial Services and General Government Appropriations Bill

  • “Risk-Based Capital Rule. – The Committee is aware that the agency has released a revised risk-based capital proposal and that there were a large number of comments received.  Consistent with safety and soundness and before finalizing the rule, the Committee encourages NCUA to give careful consideration to the comments, including those related to risk weights, to ensure credit is readily available to consumers, family farms, and small businesses to support job creation.”

The language if adopted could have the effect of slowing down the NCUA’s final RBC regs as the agency continues to consider additional changes in light of the ‘second round’ in which the agency received over 2,000 stakeholder comments.

Even more pointedly, a bill just introduced in the House calls for an outright delay to NCUA's proposed risk-based capital rule.  Introduced by Rep. Stephen Fincher (R-Tenn.), Rep. Bill Posey (R-Fla.), and Denny Heck (D-Wash.), the bill calls for a nine-month "stop and study" period to determine whether NCUA has the legal authority to set tiered risk-based thresholds, assess risk-weights for CUs relative to other financial institutions, review the impact on lending and more.

The Approps Bill language and new "stop and study" bill at the very least keeps the NCUA’s regulatory approach under Congressional scrutiny and proves the old adage “It’s not over, until it’s over.”

For additional Information: Glen Cooney - VP, Advocacy and Legislative Affairs, 443-325-0775,