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ALEXANDRIA, Va. (April 22, 2020) – The National Credit Union Administration Board unanimously approved today, by notation vote, an interim final rule (opens new window) that amends the agency’s capital adequacy and member business loans and commercial lending regulations following the creation of the Small Business Administration’s Paycheck Protection Program.

“The Paycheck Protection Program supports small businesses across the country and is a critical component of our nation’s response to the COVID-19 pandemic,” NCUA Chairman Rodney E. Hood said. “These regulatory changes ensure that credit unions can participate in the program without worrying about the potential for increased regulatory burdens or capital requirements. They will also help credit unions support the financial and credit needs of businesses and entrepreneurs in their communities.”

The Coronavirus Aid, Relief, and Economic Security Act created the SBA’s Paycheck Protection Program to help certain businesses affected by the COVID-19 pandemic. The CARES Act requires that PPP loans receive a zero-percent risk weighting under the NCUA’s risk-based capital requirements. To reflect this statutory requirement, the interim final rule amends the NCUA’s capital adequacy regulation so that covered PPP loans receive a zero-percent risk weight in the agency’s risk-based net worth requirements.

Additionally, under the interim final rule, if a loan is pledged as collateral for a non-recourse loan provided through the Federal Reserve System’s PPP Lending Facility, the covered loan can be excluded from a credit union’s calculation of total assets for the purposes of calculating its net worth ratio. This ensures that credit unions can neutralize the regulatory capital effects of PPP loans pledged to the facility.

The interim final rule also makes a conforming change to the definition of a commercial loan in the NCUA’s member business loans and commercial lending rule. Under the rule, PPP loans are excluded from the definition of a commercial loan because the unique nature of these loans mitigates the need for enhanced commercial underwriting.

The interim final rule is effective upon publication in the Federal Register and there is a 30-day comment period.