WASHINGTON (6/20/13, UPDATED 11:08 a.m. ET)--The National Credit Union Administration's final approved rule on loan participations implemented a number of changes sought by the Credit Union National Association and is now a much more workable framework for credit unions to utilize loan participations, said CUNA President/CEO Bill Cheney.
The NCUA this morning approved a final rule on loan participations with a limit on loans from one originator of 100% of a credit union's net worth. This is up from the proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower.
The NCUA also approved a grandfather provision so that credit unions pushed over the limit by new rule can move their loans into line: such credit unions would not have to sell loans immediately to come into compliance.
"Loan participations are an important tool for credit unions and are an example of how credit unions cooperate together to better serve members," said Bill Cheney after the open board meeting this morning.
"The original proposal had strict limitations that would have limited the ability of credit unions to utilize participations. We are pleased to see that NCUA has taken into consideration the majority of CUNA's recommendations and worked with the system to make significant improvements in the final rule," he said.
The rule will go into effect 30 days after its publication in the Federal Register.
During consideration of the rule this morning, NCUA Chair Debbie Matz emphasized that the rule focuses on purchasers, not originators. It is meant to protect the credit union system without discouraging credit union loan participations, she added.
CUNA raised serious concerns about the proposal when it was issued in December 2011, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.
A proposed Illinois Member Business Loan rule was the only other item on the open board meeting agenda. See News Now Friday for more information. Supervisory activity considerations will be considered during the closed board meeting.