Senators Rand Paul (R-Ky.), Sheldon Whitehouse (D-R.I.) and Jack Reed (D-R.I.) introduced legislation Thursday that would raise the member business lending cap. S. 2028, which is similar to legislation introduced by former Sen. Mark Udall (D-Colo.), would increase the MBL cap to 27.5% of assets from the current cap of 12.25%.

Representatives Ed Royce (R-Calif.) and Greg Meeks (D-N.Y.) introduced a bill in the House earlier this year that would also raise the MBL cap.

It is unclear how the NCUA's proposed MBL rule would affect the bill. If finalized as currently written, the NCUA's MBL reform would replace the regulatory cap calculation currently based on a percentage of assets with a percentage of net worth.

The Federal Credit Union Act limits credit unions to an aggregate MBL limit of the lesser of 1.75 times a credit union's net worth or 12.25% of total assets. Credit unions that engage in business lending must also be classified as well capitalized.

Currently, well-capitalized credit unions must maintain 7% net worth. However, when the NCUA's risk-based capital rule is finalized, it could complicate MBL cap computation as it relates to the statutory requirement.

“Thus the MBL limit should not be expressed as an absolute percentage but rather as 1.75 times the applicable net worth requirement for a credit union to be categorized as well-capitalized,” the NCUA wrote in the MBL proposal.

The NCUA added that1.75 times net worth better incorporates the statutory language than 12.25% of total assets.

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Regulatory & Compliance