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April 27, 2016


Ben Bigger

Good article, however, I'm still confused. I still think a credit union's commercial loan policies should be written to limit its commercial loan exposure. This could be done by establishing commercial loans to net worth (even though technically not required under the new regulation).

MBL loans are still limited by current regulation. My fear is credit unions making or buying commercial loans and not understanding concentration risks and not having policies in place to control these risks.

Elizabeth M. Young LaBerge, NAFCU Regulatory Compliance Counsel

New section 723.4(c) will require credit unions to establish internal limitations on commercial loans in relation to net worth. This includes limitations specific to secured, unsecured and guaranteed commercial loans, as well as in specific categories/types of commercial loans and to specific borrowers.

The rule requires credit unions who engage in commercial lending to establish the policies to control these risks, including concentration limits, unless their commercial loan activity and asset size is sufficiently small enough. It is true that the new rule does not require a specific concentration limit to be set, but it does require credit unions to establish policies setting their own limits, which must be reviewed and approved by the board. While NCUA is not setting those limitations for credit unions, they will be reviewing them within the examination context for safety and soundness.

See: https://www.gpo.gov/fdsys/pkg/FR-2016-03-14/pdf/2016-03955.pdf

David Smith

Be sure to read

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