The National Credit Union Administration voted unanimously last week to extend the effective date of its loan participation rule from July 25 to Sept. 23.
NCUA said that while loan participations “strengthen the credit union industry” by allowing the institutions to diversify their portfolios, they also pose “an inherent risk to the National Credit Union Share Insurance Fund due to the interconnectedness between participants.”
NCUA said the board made the decision to extend the effective date after some credit unions expressed concern about their ability to meet the deadline.
Under the new rule, a more flexible concentration limit was established. The rule caps loan participation originations from a single lender to 100 percent of net worth or $5 million, whichever is greater. A federally insured credit union is also able to purchase participation in a loan even if it does not originate the loan type.
The NCUA said it would issue guidance to credit unions before the effective date.