NCUA approved the final MBL rule (Part 723 (12 C.F.R. §723) at the agency’s February 2016 open Board meeting. The final rule is substantially similar to the 2015 proposed MBL rule. One significant change is that the final MBL rule eliminates the personal guarantee requirement. The rule became effective January 1, 2017, but the elimination of the personal guarantee requirement became effective 60 days after publication in the Federal Register.
So, what does this victory mean for covered credit unions?
It’s time to rebuild your MBL policy! The new rule offers credit unions greater operational flexibility when it comes to business lending. Credit unions can now comfortably move to finalize policies, procedures, and implement staff training without fear of the lawsuit hanging over the agency and credit unions’ heads. According to CUNA’s economics and statistics department, 2,260 credit unions offer MBLs, and the balance of total outstanding MBLs is about $60 billion, up from $39 billion in 2010. Meaning, there is a great deal of untapped opportunity here for credit unions who want to additionally serve their members and at the same time grow their business loan portfolio. The new rule eliminates most of the current rule’s prescriptive limitations, replacing them with what NCUA calls a “broad, principles-based regulatory approach.” The new MBL regulation primarily contains requirements specifically stated in the Federal Credit Union Act. The agency cautions credit unions to also exercise greater policy oversight, which they can do by examining the supervisory guidance the NCUA released November 2016.
Affirms that non-member loan participations do not count against the statutory member-business lending cap.
Want more information about the final MBL rule? Click here for CUNA’s Summary, or contact myself, Nicola Foggie, at nfoggie@njcul.org or call 1-800-792-8861, ext. 112.