A final rule that updates and clarifies federal rules on credit union loan participations, shifting the regulatory framework from a prescriptive structure to a principles-based system, is slated to take effect Oct. 30, according to a recent Federal Register notice.
The National Credit Union Administration (NCUA) said the final rule “provides flexibility for federally insured credit unions to take advantage of advanced technologies and opportunities offered by the financial technology sector.”
The Federal Register notice, published Friday, reflects the rule adopted by the NCUA Board Sept. 21. Titled Financial Innovation – Loan Participation, Eligible Obligations, and Notes of Liquidating Credit Unions, the final rule revises Parts 701 and 714 of the NCUA rules and regulations. It reflects amendments “largely as proposed and with a few changes,” according to the notice.
The agency said the rule codifies several long-standing supervisory guidance letters on third-party due diligence, indirect lending, and loan participations. Modified from a prescriptive structure to a “principles-based” system, the final rule replaces previous limits with policy, due diligence, and risk-management requirements that can be tailored to match each credit union’s risk levels and activities, it said.