ALEXANDRIA, Va. (6/18/13, UPDATED: 4:30 P.M. ET)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.
Under loan participation revisions that were proposed at the agency's December 2011 board meeting, all federally insured credit unions that are originators would need to retain a 10% interest in the loan or pool of loans participated. Federal credit unions are currently required to comply with this requirement, but the NCUA proposal would extend this requirement to state chartered federally insured credit unions as well.
All federally insured credit unions that purchase loan participations would be limited to 25% of their net worth for participations involving one originator. There would be no waiver allowed from this provision.
In addition, the proposal would set a 15% of net worth limit on purchasing credit unions on loans involving one borrower. The rule would allow this requirement to be waived in certain cases, but state chartered credit unions would have to apply to their NCUA Regional Director for approval.
The Credit Union National Association has urged the agency to withdraw the proposal, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.