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June 20, 2013 – The NCUA Board is poised to act on a final rule on loan participations today that NAFCU expects will include some improvements from a late 2011 proposal that the association urged be withdrawn.

The proposed rule was written to make NCUA's rule on loan participations more restrictive and to extend it to federally insured, state-chartered credit unions as well. NAFCU supported having all insured credit unions subject to the same rule on loan participations, but it had serious concerns about the proposed increases in concentration limits and limits on waivers.

Under the proposed rule, a federally insured credit union's purchase of loan participations from a single originator could not, in the aggregate, exceed 25 percent of the credit union's net worth; no waiver would be available. Purchases involving one borrower or a group of associated borrowers would be capped at 15 percent of the credit union's net worth; a waiver from this limit would be possible.

NAFCU President and CEO Fred Becker, in an official comment letter, called these limits arbitrary and Draconian and said they overstate the risk associated with loan participations. NCUA "has failed to assign adequate weight to the significant benefits loan participations afford to credit unions," Becker said.

The loan participation rule is the first item up for action in today's open board meeting. A member business loan rule waiver request from Illinois' supervisory authority follows.