NCUA looking to beef up MBL expertise

Nov. 19, 2009 – NCUA’s 2010 budget, slated for agency board action today, is expected to include funding to ensure that each region has the expertise it needs to ensure effective examinations of credit union member business lending activities, NCUA Board Member Gigi Hyland said Wednesday.

In an agency webinar offering regulators’ perspective on such lending, Hyland said she’d like to see an MBL specialist in each region and to see new examiners benefit from the experience of more experienced ones who have examined member business lending.

The MBL webinar provide participants with a look at key regulatory requirements, a comparison of how state regulators review MBL activity with how NCUA addresses it. Speakers, including Linda Jekel, a Washington state credit union regulator, noted that in the six states that have received waivers from NCUA rules to implement their own, the state rules closely track NCUA’s.

Of the credit unions participating in Wednesday’s webinar, 81 percent responded that they are already involved in member business lending; 16.9 percent are not but are interested in becoming involved. A small 1.9 percent said they only engage in MBL participations.

Asked whether they employ some kind of credit risk rating system specifically for assessing each member business loan, 76.8 percent said they do, and 9.7 percent do not. Linda Vick, in NCUA’s Region IV office, said NCUA does not prescribe the use of any one risk rating system but said each credit union involving in business lending should use one. She said commercial credit risk rating systems offer a good approach.

Hyland said that while credit unions should consider member business lending, they should go slow in building an MBL program. “You have to do it right,” she said. “You have to know what you’re getting into, and you have to go slowly.”

Linda Vick, a problem case officer in NCUA’s Region IV office, said credit unions that launch an MBL program and build it quickly are often already encountering problems by the time NCUA examiners have an opportunity to review their operations. The risks posed by MBL activity are much different from the risks seen in consumer lending, she said.

MBL best practices, such as ensuring program staff (including executives) have expertise in commercial lending, were discussed by Erika Eastep, an MBL program officer in the NCUA Office of Examination and Insurance.

Wednesday’s webinar will soon be archived on NCUA’s Web site (www.ncua.gov).