WASHINGTON – In the four since NCUA implemented a 12.25%-of-total assets cap on member business loans, as required by the Credit Union Membership Access Act (H.R. 1151), credit unions have managed to find ways to offer member business loan services to members. Still, the MBL cap continues to not only influence CUs' service offering but also surfaces in related regulatory issues. "The fact that there even is a cap has a chilling effect on credit unions even thinking about getting in to member business lending, it makes them reluctant to get in to offering the service," says Mary Dunn, CUNA's senior VP/ associate general counsel for regulatory advocacy. She questioned how likely a credit union would be to invest time and money hiring and training someone to handle MBL activity knowing the CU will have to stop making the loans once it hits the MBL cap. "And how likely will someone be to accept a position managing MBLs if they know the activity will have to stop if the CU bumps up against the cap?" Dunn asked. There's also the related issue, said Dunn, of NCUA's treatment of member business loans in the assessment of risk-based net worth. NCUA didn't ask for comments to this part of its proposal on prompt corrective action, but CUNA included its opinion on the issue in its Aug. 5-comment letter to NCUA on the agency's proposal to revise the PCA rules. CUNA recommended to NCUA that the agency increase the threshold for MBLs, consistent with NCUA's risk assessment for long-term mortgage loans. CUNA wrote: "Since the proposal of the risk-based requirements, CUNA has maintained that the MBL threshold for calculating RBNW is still artificially low and is based primarily on the arbitrary cap for credit union member business lending of 12.25% in the Federal Credit Union Act. Rather than use this approach, which a number of credit unions think is not consistent with the risks associated with MBLs, we urge the agency to utilize the 25% threshold for mortgage loans, which is more appropriate for the level of risk involved." Speaking with Credit Union Times Dunn said, "Nothing under PCA requires NCUA to use 12.25% for the threshold of MBL risk." So why did the agency use that number? "To be consistent with the cap figure," she opined. Dunn added that, "Consistency doesn't just mean pricing good, it means getting the right number. If a credit union structures its MBL program to manage risk appropriately, there's no reason the credit union shouldn't be able to do that without going above the cap figure." CUNA Senior VP of Communications Mark Wolff said CUNA plans to take up the issue of lifting the 12.25%-of-assets MBL cap with Capitol Hill policymakers "at the appropriate time. There's no appetite in Congress now to change the rules. We want to be sure Congress understands what member business loans are about and realize that they're not just like commercial loans." -

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