Member Business Loans Guidance Added to Examiners Guide

Dear Board of Directors and Chief Executive Officer:

NCUA’s revised Part 723, Member Business Loans; Commercial Lending becomes effective on January 1, 2017. The new rule reflects a principles-based approach to regulation, and is designed to provide greater flexibility to credit unions to meet the needs of their members through prudent risk-management practices. NCUA emphasizes that credit unions that engage in commercial lending activities need to have the people, processes, and policies in place to ensure the safety and soundness of their operations.

Guidance that elaborates on the principles of sound commercial lending reflected in revised Part 723, along with those addressing the statutory cap on member business loans, has been incorporated into the new online Examiner’s Guide.¹ This material will help credit unions understand NCUA’s supervisory expectations for sound commercial risk-management practices.

I encourage all credit unions involved in or contemplating commercial lending to review this material and to contact your regional office or state supervisory authority if you have any questions on this subject.