Letter to Credit Unions No.: 16-CU-11
MBL Guidance Added to Examiner’s Guide
November 2016

NCUA issued LTCU 16-CU=11 to inform federally insured credit unions (FICUs) that the long awaited guidance for NCUA’s revised Part 723, Member Business Loans; Commercial Lending has been issued as part of an amended Examiner’s Guide. The new rule becomes effective on January 1, 2017. The rule applies to all FICUs except those state credit unions in states with NCUA approved state member business lending rules.

NCUA’s commercial loan rule requires covered FICUs to establish the parameters of their own commercial lending portfolios rather than adhere to predetermined regulatory limits. The guidance in the NCUA Examiner’s Guide focuses the supervisory review of a credit union’s commercial lending program on whether:

  • A credit union’s board of directors understand the risks and provide sufficient oversight to the commercial lending program
  • Credit union management and staff have appropriate experience, expertise, and resources
  • The credit union’s commercial loan policy is adequate
  • Credit risk ratings assigned by the credit union are consistent and reliable
  • The credit union’s commercial loan risk management is comprehensive and ongoing

NCUA’s guidance provides credit unions the following resources: 14-CU-06, Taxi Medallion Lending (April 2014); 13-CU-03, Supervisory Guidance on Troubled Debt Restructuring (April 2013); 10-CU-23, Best Practices in Real Estate Appraisals (December 2010); 10-CU-07, Commercial Real Estate Loan Workouts (June 2010); 10-CU-03, Concentration Risk (March 2010); 10-CU-02, Current Risks in Business Lending and Sound Risk Management Practices (January 2010); 03-CU-01, Loan Charge-off Guidance (January 2003); 13-2, Examiner Review of Loan Workouts, Nonaccruals and Regulatory Reporting of Troubled Debt Restructured Loans (March 2013); NCUA IRPS 2002-3, Allowance For Loan and Lease Losses Methodologies and Documentation for Federally-Insured Credit Unions; NCUA Accounting Bulletin 06-01 (December 2006); the FFIEC’s Policy Statement on Prudent Commercial Real Estate Loan Workout (October 30, 2009);  the FDIC’s FIL-22-2008, Managing Commercial Real Estate Concentrations in a Challenging Environment (March 17, 2008); Interagency guidance, Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, Federal Register, Vol. 71, No. 238 (December 12, 2006); the OCC’s Comptroller’s Handbook on Rating Credit Risk (April 2001), Comptroller’s Handbook on Loan Portfolio Management (April 1998), and Accounts Receivable and Inventory Financing. NCUA also references the Federal Reserve’s SR 98-25 

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