Can the NCUA back the effort underway to increase the member business lending cap while at the same time help spot and aid troubled loan portfolios?
John McKechnie, NCUA director of congressional and public affairs, said the regulator supports efforts currently underway in Congress to increase the MBL cap statutorily, in tandem with the gradual, incremental approach that includes additional regulatory safeguards. However, weaknesses in the commercial real estate market have led to increased supervision of MBLs.
"Credit risk has been an area of emphasis for the past few years at the NCUA and remains so. This includes all forms of loan products, including MBLs," McKechnie said. "We are not specifically targeting MBLs. Instead, any credit union showing signs of stress is receiving additional oversight from the NCUA."
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McKechnie said there isn't a specific number of credit union MBL programs currently on the NCUA's radar but "each credit union with advanced levels of supervision are aware of the situation." The regulator will move forward with stepped-up scrutiny based on resources allocation, quarterly analysis and exam results.
Among the glaring red flags is rapid MBL growth or expansion, McKechnie said. The ability to properly underwrite and monitor loans is also critical as is having experienced staff in place to carry out those duties.
"Several of the most troubled credit unions receiving additional degrees of supervision offer member business loans. Each case presents a unique set of facts and circumstances that require a customized supervision approach, so there isn't anything specific structured or developed to focus exclusively on MBLs," McKechnie said.
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