CUNA members seek information on MBL treatment of PPP loans

April 17, 2020

CUNA and its members seek additional guidance on how Paycheck Protection Program (PPP) loans work in conjunction with NCUA’s member business lending requirements, CUNA wrote to NCUA Chairman Rodney Hood Friday. PPP is a Small Business Administration program aimed at providing loans to small businesses impacted by the coronavirus disease (COVID-19) pandemic.

“We have recently heard from credit unions that they have concerns about how PPP loans work in conjunction with NCUA’s member business lending requirements,” the letter reads. “Furthermore, our members seek guidance on the impact of the Federal Reserve Board’s April 6, 2020 announcement of a Paycheck Protection Program Lending Facility (PPPL facility) to provide term financing backed by PPP loans and whether additional NCUA rulemaking is necessary to fully utilize this facility.”

The specific questions CUNA member have:

  • What is the impact of PPP loans on credit unions’ risk-based net worth calculation that is required by 12 CFR § 702.106? Section 1102 of the CARES Act requires banking organizations to apply a zero percent risk weight to PPP loans for purposes of the banking organization’s risk-based capital requirements.
  • To facilitate the use of the Federal Reserve Board’s PPPL Facility, does NCUA need to adopt a rule or guidance to allow credit unions to neutralize the regulatory capital effects of loans pledged to the PPPL Facility?