New NCUA MBL Rule: Board & Mgmt Responsibilities Posted by Association of Vermont Credit Unions on 1:34 PM

CUNA’s compliance staff took a look at NCUA's new member business lending rule, now in effect, to determine expectations of credit union boards and management. Since Vermont defers to NCUA's MBL rule, state chartered credit unions are subject to the new provisions along with federals.

Under the new rule, all Vermont credit unions involved in business lending must have their board review and approve its MBL policy, ensure the lending program is appropriately staffed and understand the nature of risk in the commercial loan portfolio.  NCUA provides some guidance on this:

• The board should review its MBL policy annually, and ensure that its business lending program is staffed with appropriately experienced personnel.
• The board must receive periodic updates from management on the performance of the portfolio.
• Senior management must:
• Understand the credit union’s commercial activities;
• Have a comprehensive understanding of the role of commercial lending in the credit union’s overall business model; and
• Establish risk management processes and controls necessary to safely conduct commercial lending activities.

NCUA's guidance points out that any staff involved in a commercial loan program must have sufficient expertise, and provides a little more detail on expectations for managers that are responsible for commercial lending.

Credit unions must also employ “qualified lending personnel” with experience in the following areas:

• Underwriting and processing for the types of commercial lending in which the credit union is engaged;
• Overseeing and evaluating the performance of a commercial loan portfolio, including rating and quantifying risk through a credit risk rating system; and
• Conducting collection and loss mitigation activities for the types of commercial lending in which the credit union is engaged.

Examiners will evaluate staff experience primarily by focusing on the overall type and relevance for those involved with the commercial loan program, with an emphasis on experience in commercial loan risk management.  Credit unions can meet these requirements by:

• training and developing existing staff;
• hiring experienced professionals;
• using a third party, such as a credit union service organization or third-party contractor.

Additional details can be found in CUNA's CompBlog.