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Compliance Monitor eyes NCUA's MBL rule
The April edition of NAFCU's Compliance Monitor, sent to member credit unions this week, takes an in-depth look at NCUA's changes to its member-business lending regulation.
"The new rule fundamentally changes the manner in which NCUA approaches commercial lending, from both a regulatory and supervisory perspective," wrote NAFCU's Pamela Yu, special counsel for Compliance and Research. "The agency's new MBL and commercial lending rule provides a federally-insured credit union with substantial autonomy in providing commercial and business loans to serve its members, heralding a new 'grown up' era for credit union business lending."
Yu noted in the article that the NCUA's new rule is a more flexible, principles-based regulatory approach, which means that "a credit union will be expected to truly understand its own lending objectives and risk tolerances, do its own due diligence, and be accountable for its own business lending decisions."
She described the two distinct definitions of "commercial loans" and "member business loans," noting that not all "MBLs are commercial loans and not all commercial loans are MBLs." She wrote that the distinct definitions are to clearly delineate between loans subject to the statutory MBL cap and those subject to the safety and soundness policy and infrastructure requirements. Yu also went into what safe and sound commercial lending looks like in terms of a credit union's board involvement, lending requirements and policies.
She added that the NCUA's supervisory expectations over credit union commercial lending activities will change. "A credit union accustomed to managing its portfolio to strict regulatory parameters will need to adapt to exercising more autonomy in its due diligence and risk management processes for administering, underwriting and servicing its commercial loans," she wrote. "Examiners, too, will need to adjust to evaluating diverse individual credit union lending policies under a principles-based rule."
This month's Compliance Monitor also includes a Compliance Forum, with questions and answers relating to the E-SIGN Act and flood insurance disclosures.
Next week is NAFCU's Spring Regulatory Compliance School in Arlington, Va. NAFCU is also offering a Fall Regulatory Compliance School, Oct. 9-13, in San Diego, Calif.; registration is open now. For up-to-the-minute information on the conference, follow the #ComplianceSchool hashtag on Twitter.
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