WEBVTT

NOTE
This file was generated by Descript 

00:00:00.460 --> 00:00:02.309
Samantha: Hello, this is Samantha Shares.

00:00:02.869 --> 00:00:07.320
This episode covers N C U A's proposed
changes to the Limits on Loans to

00:00:07.400 --> 00:00:09.149
Other Credit Unions regulation.

00:00:09.892 --> 00:00:12.452
The following is an audio
version of that document.

00:00:13.042 --> 00:00:16.232
This podcast is educational
and is not legal advice.

00:00:16.762 --> 00:00:20.732
We are sponsored by Credit Union
Exam Solutions Incorporated, whose

00:00:20.732 --> 00:00:23.812
team has over two hundred and
forty years of National Credit

00:00:23.812 --> 00:00:25.692
Union Administration experience.

00:00:26.242 --> 00:00:29.852
We assist our clients with N C
U A so they save time and money.

00:00:30.322 --> 00:00:34.422
If you are worried about a recent,
upcoming, or in process N C U A

00:00:34.422 --> 00:00:38.692
examination, reach out to learn how they
can assist at Mark Treichel dot com.

00:00:39.152 --> 00:00:43.492
Also check out our other podcast called
With Flying Colors where we provide tips

00:00:43.492 --> 00:00:46.052
on how to achieve success with N C U A.

00:00:46.807 --> 00:00:47.957
And now the proposal.

00:00:48.672 --> 00:00:53.152
The N C U A Board seeks comment on a
proposed rule to remove the regulations

00:00:53.152 --> 00:00:57.182
related to approval and policies on
making loans to other credit unions.

00:00:57.632 --> 00:01:01.202
While this provision would no longer
be codified in regulation, Federal

00:01:01.202 --> 00:01:04.992
Credit Unions would remain subject
to statutory requirements related

00:01:04.992 --> 00:01:06.872
to making loans to credit unions.

00:01:07.392 --> 00:01:11.002
Federally insured state-chartered
credit unions would remain subject

00:01:11.002 --> 00:01:15.022
to any other applicable N C U
A or state law or regulation.

00:01:15.777 --> 00:01:19.247
The Board explains that, on February
twenty-third, two thousand twenty-one,

00:01:19.497 --> 00:01:23.257
it published a final rule amending
various parts of the N C U A’s

00:01:23.257 --> 00:01:27.397
regulations to permit low-income
designated credit unions, complex

00:01:27.397 --> 00:01:32.027
credit unions, and new credit unions
to issue subordinated debt for purposes

00:01:32.027 --> 00:01:33.787
of regulatory capital treatment.

00:01:34.417 --> 00:01:38.667
Among other changes, that final rule
established section seven zero one point

00:01:38.667 --> 00:01:43.157
two five, governing loans by Federal
Credit Unions to other credit unions.

00:01:43.828 --> 00:01:47.238
The regulation establishes an
aggregate limit on such loans of

00:01:47.238 --> 00:01:50.868
twenty-five percent of the lending
Federal Credit Union’s paid-in and

00:01:50.898 --> 00:01:52.838
unimpaired capital and surplus.

00:01:53.368 --> 00:01:56.968
It also sets limits for loans to
a single credit union borrower.

00:01:57.418 --> 00:02:01.508
The regulation sets forth specific
eligibility requirements and aggregate

00:02:01.508 --> 00:02:04.998
limits for Federal Credit Unions
that invest in the subordinated

00:02:04.998 --> 00:02:06.578
debt of other credit unions.

00:02:06.848 --> 00:02:10.788
The requirements of section seven zero
one point two five are made applicable

00:02:10.788 --> 00:02:14.078
to federally insured state-chartered
credit unions through section

00:02:14.078 --> 00:02:16.258
seven four one point two two seven.

00:02:16.698 --> 00:02:20.048
Federal Credit Unions and federally
insured state-chartered credit

00:02:20.048 --> 00:02:24.138
unions are collectively referred to
as federally insured credit unions.

00:02:24.866 --> 00:02:28.896
In addition to the limits discussed,
section seven zero one point two five

00:02:28.896 --> 00:02:32.656
imposes documentation requirements
on Federal Credit Union boards of

00:02:32.656 --> 00:02:37.036
directors, and through section seven
four one point two two seven, on

00:02:37.036 --> 00:02:40.296
federally insured state-chartered
credit union boards as well.

00:02:40.856 --> 00:02:44.446
Paragraph b of section seven zero
one point two five requires the

00:02:44.446 --> 00:02:48.306
board of directors to approve all
loans to other credit unions and

00:02:48.306 --> 00:02:52.146
to establish written policies for
managing the associated credit risk.

00:02:52.456 --> 00:02:56.086
These policies must specify limits
on the aggregate principal amount of

00:02:56.086 --> 00:02:59.976
loans the federally insured credit
union can make to all other credit

00:02:59.976 --> 00:03:02.396
unions and to any single credit union.

00:03:02.916 --> 00:03:06.806
Such limits may not exceed the generally
applicable limits established in

00:03:06.806 --> 00:03:09.156
section seven zero one point two five.

00:03:09.891 --> 00:03:13.271
The Board is issuing this proposed
rule pursuant to its authority

00:03:13.321 --> 00:03:15.191
under the Federal Credit Union Act.

00:03:15.761 --> 00:03:19.611
Under the Act, the N C U A is the
chartering and supervisory authority

00:03:19.611 --> 00:03:23.141
for Federal Credit Unions and the
federal supervisory authority for

00:03:23.141 --> 00:03:25.051
federally insured credit unions.

00:03:25.601 --> 00:03:29.331
The Act grants the N C U A broad
authority to issue regulations

00:03:29.331 --> 00:03:33.471
governing both Federal Credit Unions
and federally insured credit unions.

00:03:34.169 --> 00:03:38.969
The Board proposes to remove paragraph b
of section seven zero one point two five.

00:03:39.479 --> 00:03:42.639
Upon reconsideration, the Board
believes that the regulation is

00:03:42.699 --> 00:03:44.969
unnecessary and overly prescriptive.

00:03:45.499 --> 00:03:49.239
The Federal Credit Union Act already
requires a Federal Credit Union’s

00:03:49.239 --> 00:03:52.759
board of directors to approve
all loans to other credit unions.

00:03:53.279 --> 00:03:57.609
Accordingly, for Federal Credit Unions,
paragraph b of section seven zero one

00:03:57.609 --> 00:04:01.919
point two five is largely redundant
of an existing statutory requirement.

00:04:02.718 --> 00:04:06.478
The Board further states that federally
insured credit union boards are in

00:04:06.478 --> 00:04:10.588
the best position to determine whether
formal approval policies are necessary

00:04:10.588 --> 00:04:14.838
for such loans, consistent with the
number, size, and risks associated with

00:04:14.838 --> 00:04:16.908
the credit union’s lending practices.

00:04:17.348 --> 00:04:20.508
Removing this regulation would
provide federally insured credit

00:04:20.508 --> 00:04:22.488
unions with greater flexibility.

00:04:23.233 --> 00:04:27.143
The Board emphasizes that, while the
proposed rule would no longer require

00:04:27.143 --> 00:04:31.173
federally insured credit union boards
to adopt written policies regarding

00:04:31.213 --> 00:04:35.183
aggregate limits on loans to other
credit unions, federally insured

00:04:35.183 --> 00:04:39.043
credit unions would remain subject to
the limits and other requirements set

00:04:39.043 --> 00:04:43.203
forth in the remaining provisions of
section seven zero one point two five.

00:04:43.743 --> 00:04:47.323
If the proposed rule is adopted,
federally insured state-chartered

00:04:47.323 --> 00:04:51.283
credit unions would refer to state law
to determine whether their boards must

00:04:51.283 --> 00:04:53.483
approve loans to other credit unions.

00:04:54.150 --> 00:04:57.250
The Board also explains that
the proposed rule is expected

00:04:57.250 --> 00:04:59.020
to be deregulatory in nature.

00:04:59.610 --> 00:05:03.350
The proposal would remove documentation
and policy requirements that may

00:05:03.350 --> 00:05:07.890
impose economic costs on federally
insured credit unions, while retaining

00:05:07.890 --> 00:05:10.370
statutory and regulatory lending limits.

00:05:11.083 --> 00:05:15.453
For the reasons stated in the preamble,
the N C U A Board proposes to amend

00:05:15.453 --> 00:05:17.923
twelve C F R part seven zero one.

00:05:18.423 --> 00:05:21.863
Section seven zero one point two
five would be amended by removing

00:05:21.863 --> 00:05:25.743
paragraph b and redesignating
paragraph c as paragraph b.

00:05:26.449 --> 00:05:28.569
This concludes the proposed regulation.

00:05:29.029 --> 00:05:33.189
If your credit union could use assistance
with your exam, reach out to Mark Treichel

00:05:33.189 --> 00:05:35.709
on LinkedIn or at Mark Treichel dot com.

00:05:36.349 --> 00:05:38.969
This is Samantha Shares, and
we thank you for listening.