NCUA’s revised member business lending (MBL) rule has been in effect for more than 6 months now, and according to the agency, it has received a number of questions about the rule and its implementation. In this quarter’s NCUA Report, the agency tackled some of the most frequently asked questions.
Chief among those questions is: What are NCUA’s expectations under the new MBL and commercial loan rule?
The answer: NCUA expects credit unions to offer commercial loans in a safe and sound manner and structured appropriately for the member’s needs and within the member’s financial abilities.
The new rule requires active oversight by senior managers and the board, but also extends flexibility to credit unions to establish policies and program controls instead of prescriptive regulatory requirements.
The rule now takes a more principles-based approach to managing a commercial loan program and allows management to tailor appropriate risk-management practices to suit their individual circumstances.
Per NCUA, credit unions should adhere to active risk-management principles for sound lending, which includes a well-developed program with appropriate monitoring and controls, and audit and oversight.
Credit unions should perform a comprehensive risk assessment and assign an initial credit risk rating at the inception of a loan.
This should be re-evaluated after the loan closes through regular contact with the borrower and regular reviews of the borrower’s financial condition.
Other questions include (more detailed answers can be found in the FAQ document itself):