To obtain a waiver, a federal credit union must submit a request to the assigned Regional Director.  A state chartered federally insured credit union must submit the request to its state supervisory authority (SSA). If the SSA approves the request, the state regulator will forward the request to the corresponding NCUA Director. A waiver is not effective until it is approved by NCUA.  

Steps to effectively manage risk in MBL portfolios

Submitted by sevans on Tue, 12/02/2014 - 3:29pm

Managing Risks in MBL Portfolios:

  • Increase or maintain strong net worth level
  • Ensure Allowance for Loan and Leases Losses (ALLL) are adequately funded
  • Manage business loan portfolios closely
  • Maintain updated financial and analytical information
  • Strengthen the loan workout infrastructure 

MBL risk management processes NCUA reviews

Submitted by sevans on Tue, 12/02/2014 - 3:28pm

An effective risk management process involves the following key elements:

  • Board and Management Oversight
  • Portfolio Management
  • Credit Risk Review Function
  • Management Information Systems (MIS)
  • Market Analysis
  • Credit Underwriting Standards
  • Portfolio Stress Testing and Sensitivity Analysis 

Risks in Business Lending:

Business Lending Concentration Risks:

The credit risk assessment should identify potential concentrations by stratifying the portfolio into segments that have common risk characteristics or sensitivities to economic, financial, or business developments.


Business Loan Participation Risks

Informational bullet points in reference to MBL waivers

Submitted by sevans on Tue, 12/02/2014 - 3:23pm

 This guidance provides additional clarity for the waiver process and will assist examiners in determining the need and qualifications of both the borrower and credit union when waivers are requested. In particular, the guidance:

• Defines the two general types of MBL waivers; an individual loan waiver and a blanket waiver.

• Establishes the specific financial attributes a credit union should exhibit along with the risk management processes a credit union needs to have to qualify for a waiver.

This supervisory letter provides interpretive guidance for MBL waivers subject to Part 723 of NCUA’s Rules and Regulations. Part 723 establishes a framework to manage the overall risk associated with business lending. The risks associated with each business borrower are unique; therefore the rule allows for waivers of certain regulatory provisions in order to give credit unions the necessary flexibility to meet the needs of the members they serve.

MBLs under $50,000 are not considered a MBL by NCUA

Submitted by sevans on Tue, 12/02/2014 - 3:18pm

 Under §701.21(h)(1)(i)(C), a loan, otherwise meeting the definition of a member business loan, is not considered a business loan if the loan amount, when added to other business loans of a borrower, is less than $50,000. A federal credit union's participation interest in a business loan does not have to satisfy the member business loan requirements if the participation loan amount, when added to other business loans of the borrower, is less than $50,000.