IFR PPP Lending Facility and Loans Sign by NCUA Board

7535-01-U
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 702 and 723
RIN 3133-AF16
Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck
Protection Program Loans
AGENCY:

National Credit Union Administration (NCUA).

ACTION:

Interim final rule.

SUMMARY: The NCUA Board (Board) is issuing this interim final rule to make a conforming
amendment to its capital adequacy regulation following the enactment of the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act). The CARES Act authorizes the Small
Business Administration to create a loan guarantee program, the Paycheck Protection Program
(PPP), 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 the statutory requirement, the interim final rule amends the
NCUA’s capital adequacy regulation to provide that covered PPP loans receive a zero percent
risk weight. The interim final rule also provides that if the covered loan is pledged as collateral
for a non-recourse loan that is provided as part of the Board of Governors of the Federal Reserve
System’s (FRB) 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. The interim final rule

also makes a conforming amendment to the definition of commercial loan in the NCUA’s
member business loans and commercial lending rule. The Board has found good cause to issue
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the interim final rule without advance notice-and-comment procedures and with an immediate
effective date.

DATES: This rule is effective on [INSERT DATE OF PUBLICATION IN THE FEDERAL
REGISTER]. Comments, as discussed below, must be received on or before [INSERT DATE 30
DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER].

ADDRESSES: You may submit written comments, identified by RIN 3133-AF16, by any of the
following methods (Please send comments by one method only):

•

Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for
submitting comments.

•

Fax: (703) 518-6319. Include “[Your Name]—Comments on Interim Final Rule:
Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck
Protection Program Loans” in the transmittal.

•

Mail: Address to Gerard Poliquin, Secretary of the Board, National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428.

•

Hand Delivery/Courier: Same as mail address.

PUBLIC INSPECTION: You may view all public comments on the Federal eRulemaking
Portal at http://www.regulations.gov as submitted, except for those we cannot post for technical
reasons. The NCUA will not edit or remove any identifying or contact information from the
public comments submitted. Due to social distancing measures in effect through at least April
30, 2020, the usual opportunity to inspect paper copies of comments in the NCUA’s law library
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is not currently available. After social distancing measures are relaxed, visitors may make an
appointment to review paper copies by calling (703) 518-6540 or e-mailing
[email protected].

FOR FURTHER INFORMATION, CONTACT: Amanda Parkhill, Supervisory CUE
(Policy); or Rachel Ackmann, Senior Staff Attorney, Office of General Counsel, 1775 Duke
Street, Alexandria, VA 22314-3428. Amanda Parkhill can also be reached at (703) 518-6385,
and Rachel Ackmann can be reached at (703) 548-2601.

SUPPLEMENTARY INFORMATION

I.

Background and Legal Authority
a. The NCUA’s Risk-Based Capital Requirements

The Credit Union Membership Access Act (CUMAA) requires the NCUA to formulate a
risk-based net worth (RBNW) requirement to apply to complex credit unions.1 Part 702 of the

12 U.S.C. 1790d(d). Only complex credit unions are subject to the NCUA’s risk-based net worth requirement.
See 12 U.S.C. 1790d(d)(1) and 12 CFR 702.103. The FCU Act grants the Board a broad mandate to issue
regulations governing both FCUs and, more generally, all FICUs. For example, section 120 of the FCU Act is a
general grant of regulatory authority and authorizes the Board to prescribe rules and regulations for the
administration of the Act. 12 U.S.C. 1766(a).
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NCUA’s regulations implement the risk-based net worth requirement.2 Under current § 702.103
of the NCUA’s regulations, a credit union is defined as “complex” if “[i]ts quarter-end total
assets exceed fifty million dollars ($50,000,000); and . . . [i]ts [RBNW] requirement . . . exceeds
six percent (6%).”3 Current § 702.104 of the NCUA’s regulations defines eight risk portfolios of
complex credit union assets, liabilities, or contingent liabilities.4 The eight risk portfolios are
long-term real estate loans, member business loans (MBL) outstanding, investments, low-risk
assets, average-risk assets, loans sold with recourse, unused MBL commitments, and allowance.
Current § 702.106 sets forth the specific risk-weightings that are applied to the assets, liabilities,
or contingent liabilities of each risk portfolio.5 A credit union’s RBNW requirement is the sum
of the eight risk portfolios times the applicable risk-weighting.6 The RBNW requirement for
credit unions meeting the definition of “complex” was first applied on the basis of data in the
Call Report reflecting activity in the first quarter of 2001.7

b. The NCUA’s MBL and Commercial Lending Rule

12 CFR pt. 702. On January 1, 2022, the NCUA’s capital requirements will be substantially amended when the
NCUA’s risk-based capital rules become effective. See, 84 FR 68781 (Dec. 17, 2019). This interim final rule only
amends the NCUA’s current risk-based net worth rules and does not amend the NCUA’s risk-based capital rules
(“2015 Final Rule”), which will be addressed when they become effective. Generally, the NCUA uses the term
“risk-based net worth requirement” to reference the statutory requirement for the Board to design a capital standard
that accounts for variations in the risk profile of complex credit unions and the current risk-based framework in part
702. In contrast, the NCUA generally uses the term “risk-based capital” to refer to the specific standards established
in the 2015 Final Rule. The term “risk-based capital requirement,” however, is used in the CARES Act and refers to
both the risk-based net worth and the risk-based capital requirements. The Board notes that the term “risk-based
capital” is also used by the other banking agencies and the international banking community when referring to the
types of risk-based requirements that are addressed in the 2015 Final Rule.
3
12 CFR 702.103. For the definition of total assets, see 12 CFR 702.2(k).
4
12 CFR 702.104.
5
12 CFR 702.106.
6
Id.
7
65 FR 44950 (July 20, 2000).
2

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Among other things, CUMAA limited the aggregate amount of MBLs that a credit union
may make to the lesser of 1.75 times the net worth of the credit union or 1.75 times the minimum
net worth required under the Federal Credit Union Act (FCU Act) for a credit union to be well
capitalized.8 The statutory MBL limit is incorporated in part 723 of NCUA’s regulations.9 Part
723 also defines MBLs and commercial loans, establishes minimum safety and soundness
standards, and implements various other requirements regarding MBLs and commercial loans.
The Board has not significantly amended part 723 since 2016.10

c. The Coronavirus Aid, Relief, and Economic Security (CARES Act)

On March 27, 2020, President Trump signed the CARES Act into law.11 The law is
designed to provide aid to the U.S. economy in the midst of the COVID-19 pandemic. The
CARES Act authorizes the Small Business Administration (SBA) to create a loan guarantee
program, the Paycheck Protection Program (PPP), to help certain affected businesses meet
payroll needs and utilities (including employee salaries, sick leave, other paid leave, and health
insurance expenses) as a result of the COVID-19 pandemic. Provided credit union lenders
comply with the applicable lender obligations set forth in the SBA’s interim final rule, the SBA
will fully guarantee loans issued under the PPP. Most federally insured credit unions are eligible

12 U.S.C. 1757a; Public Law 105-219, 112 Stat. 913 (1998).
12 CFR pt. 723.
10
81 FR 13530 (Mar. 14, 2016).
11
Public Law 116-136 (Mar. 27, 2020).
8
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to make PPP loans to members.12 Under the CARES Act, PPP loans must receive a zero percent
risk weighting under the NCUA’s risk-based capital requirements.13

II. The Interim Final Rule
a. Risk Weighting of PPP Loans

To reflect the statutory requirement that PPP loans receive a zero percent risk weight, the
interim final rule amends the NCUA’s risk-based net worth rules. Specifically, the interim final
rule explicitly provides that PPP loans are low-risk assets. Low-risk assets are currently defined
as cash on hand (e.g., coin and currency, including vault, ATM and teller cash), the National
Credit Union Share Insurance Fund (NCUSIF) deposit, and debt instruments unconditionally
guaranteed by the NCUA.14 Under § 702.106(d), low-risk assets receive a zero percent risk
weight.15 Under the interim final rule, low-risk assets are defined as cash on hand (e.g., coin and
currency, including vault, ATM and teller cash), the NCUSIF deposit, debt instruments
unconditionally guaranteed by the NCUA; and loans issued under the SBA’s Paycheck
Protection Program (15 U.S.C. 636(a)(36)). Therefore, the interim final rule provides that PPP
loans receive a zero percent risk weight under the NCUA’s risk-based capital rules as required
by the CARES Act.

Credit unions that are currently permitted to make loans under the SBA’s 7(a) program are automatically
approved to make PPP loans. Federally insured credit unions that are not current SBA 7(a) lenders, can receive
approval by submitting an application to the SBA, unless they are currently designated as being in troubled
condition or are subject to a formal enforcement action that addresses unsafe and unsound lending practices. Nondepository financing providers, such as credit union service organizations, may qualify as a PPP lender subject to the
requirements listed in the interim final rule.
13
Supra note 11, at §1102(a)(2).
14
12 CFR 702.104(d).
15
12 CFR 702.106(d).
12

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b. Definition of Total Assets for the Purposes of Calculating the Net Worth Ratio
To provide liquidity to small business lenders and the broader credit markets, to help
stabilize the financial system, and to provide economic relief to small businesses nationwide, the
FRB authorized each of the Federal Reserve Banks to participate in the Paycheck Protection
Program Lending Facility (PPPL Facility), pursuant to section 13(3) of the Federal Reserve
Act.16 Under the PPPL Facility, each of the Federal Reserve Banks will extend non-recourse
loans to eligible financial institutions to fund PPP loans. Under the PPPL Facility, only PPP
loans that are guaranteed by the SBA with respect to both principal and interest and that are
originated by an eligible institution may be pledged as collateral to the Federal Reserve Banks.
Participation in the PPPL Facility will affect a credit union’s balance sheet because, as a function
of participating in the PPPL Facility, the credit union must originate and hold PPP covered loans
(that is, assets that are eligible collateral pledged to the Federal Reserve Banks) on its balance
sheet.
As a result, credit unions that participate in the PPPL Facility could potentially be subject to
increased regulatory capital requirements (due to the increase in total assets from originating and
holding PPP loans). To facilitate use of the PPPL Facility, the interim final rule allows credit
unions to neutralize the regulatory capital effects of PPP loans pledged to the Facility.17
Additionally, the Board believes that the regulatory capital requirements for certain PPP loans,
those PPP loans pledged to a Federal Reserve Bank as part of the PPPL Facility, do not reflect
the substantial protections from risk provided to credit unions by the PPPL Facility. Because of

12 U.S.C. 343(3).
The Office of the Comptroller of the Currency, the FRB, and the Federal Deposit Insurance Corporation (together,
the other banking agencies) adopted a similar interim final rule to allow banking organizations to neutralize the
regulatory capital effects of participating in the PPPL Facility. See, 85 FR 20387 (Apr. 13, 2020).
16
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the non-recourse nature of the FRB’s extension of credit to the credit union, the credit union is
not exposed to credit or market risk from the pledged PPP covered loans. Therefore, the Board
believes that it is appropriate to exclude pledged PPP loans from regulatory capital. Specifically,
the interim final rule excludes PPP loans pledged as collateral to the PPPL Facility from the
definition of total assets in § 702.2 for purposes of calculating a credit union’s net worth ratio.18
c.

Definition of Commercial Loan

The interim final rule also clarifies that PPP loans would not constitute commercial loans
under Part 723 of the NCUA’s regulations. Generally commercial loans are defined as any loan,
line of credit, or letter of credit (including any unfunded commitments), and any interest a credit
union obtains in such loans made by another lender, to individuals, sole proprietorships,
partnerships, corporations, or other business enterprises for commercial, industrial, agricultural,
or professional purposes, but not for personal expenditure purposes.19 The current definition also
provides various exclusions. The interim final rule amends the commercial loan definition to
add PPP loans issued under the CARES Act as an exclusion from the definition of commercial
loan in § 723.2. While other federally guaranteed loans may still be considered commercial
loans under the regulation, the unique nature of PPP loans mitigates the need for enhanced

18
The Board has broad authority to define the term “total assets.” While 12 U.S.C. 1790d defines “net worth” – the
numerator for determining the net worth ratio – it does not define the term “total assets,” which comprises the
denominator of the equation. However, the Board has elected to define the term in part 702. In addition to the
Board’s broad authority to define the term “total assets,” the Board finds that given the unique and unprecedented
nature of the COVID-19 pandemic, encouraging use of the PPP Facility by excluding pledged PPP loans from total
assets would further the purpose of § 1790d. Pledged covered PPP loans present less risk and would potentially
facilitate resolving the problems of credit unions at the least possible long-term cost to the NCUSIF compared to
non-pledged covered PPP loans.
19
12 CFR 723.2.

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commercial underwriting of these loans. The SBA’s interim final rule specifically limits each
lender’s underwriting obligation under the PPP to the items noted in the rule.20 Additionally,
lenders will be held harmless for any borrower’s failure to comply with PPP criteria and, in
addition to the 100 percent guarantee, PPP loans may qualify for loan forgiveness.
III. Clarification Regarding Eligible Recipients of PPP Loans

In general, the SBA has restrictions on who can receive SBA business loans.21 The SBA,
however, recognizes that, unlike other SBA loan programs, PPP Loans are uniform for all
borrowers, and the standard underwriting process does not apply because no creditworthiness
assessment is required for PPP Loans. The SBA also recognizes that many directors and equity
holders of lenders making PPP Loans are owners of unrelated businesses. Therefore, the SBA
has determined that certain of its prohibitions regarding eligible borrowers for SBA loans are not
applicable.22 In general, it appears that a credit union director may obtain a PPP Loan from the
credit union on whose board the director serves, provided that the related business follows the
same process as any similarly situated member or account holder of the credit union and the
director is not an officer or key employee of the credit union.23 This change to the SBA’s
regulations, however, does not affect the FCU Act, the NCUA’s rules on insider lending, or any
relevant provision of a credit union’s bylaws.

See, https://www.sba.gov/document/policy-guidance--ppp-interim-final-rule.
See e.g., 13 CFR 120.110 and 120.140.
22
85 FR 21747 (Apr. 20, 2020).
23
Officers and key employees of the credit union may obtain a PPP Loan from a different lender, but not from the
credit union with which they are associated.
20
21

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Under the FCU Act, a loan, or aggregate of loans, to a director or member of the supervisory or
credit committee of the credit union making the loan which exceeds $20,000 (plus any applicable
pledged shares) must be approved by the board of directors.24 Similarly, loans to other members
for which directors or members of the supervisory or credit committee act as guarantor or
endorser must be approved by the board of directors when such loans, standing alone or when
added to any outstanding loan or loans of the guarantor or endorser, exceeds $20,000.25 The
NCUA’s regulations implement these restrictions under part 701, which explains how balances
are calculated for purposes of these provisions and sets forth loan approval requirements.26 The
SBA’s interim final rules and the CARES Act do not provide any authority to set these statutory
restrictions aside, and the FCU Act contains no authority for the Board to provide an exception.27
Therefore, as discussed above, current NCUA provisions governing loans to insiders are
applicable to PPP Loans.

IV. Regulatory Procedures
A. Administrative Procedure Act

The Board is issuing this interim final rule without prior notice and the opportunity for
public comment and the delayed effective date ordinarily prescribed by the Administrative

12 U.S.C. 1757(5)(A)(iv).
12 U.S.C. 1757(5)(A)(v).
26
12 C.F.R. 701.21(d).
27
Cf. 12 U.S.C. 375b(9)(D)(ii) (authority for FRB to grant an exception to a similar restriction for member banks for
extensions of credit that pose “minimal risk”).
24
25

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Procedure Act (APA). Pursuant to the APA, general notice and the opportunity for public
comment are not required with respect to a rulemaking when an “agency for good cause finds
(and incorporates the finding and a brief statement of reasons therefor in the rules issued) that
notice and public procedure thereon are impracticable, unnecessary, or contrary to the public
interest.”28  The Board believes that the public interest is best served by implementing the interim
final rule immediately upon publication in the Federal Register. The Board notes that the
COVID-19 crisis is unprecedented. It is rapidly changing and difficult to anticipate how the
disruptions caused by the crisis will manifest themselves within the financial system and how
individual credit unions may be impacted. Because of the widespread impact of a pandemic and
the speed with which business and economic disruptions have transmitted throughout the United
States, the Board believes it has good cause to determine that ordinary notice and public
procedure are impracticable and that moving expeditiously in the form of an interim final rule is
in the best interests of the public and the credit unions that serve that public.

The Board also believes that notice-and-comment procedures are unnecessary for this
interim final rule as it principally implements a statutory requirement and the Board has no
discretion in providing the zero risk weight for PPP loans. Furthermore, the Board believes
notice-and-comment procedures are impractical because credit unions have already begun to
offer PPP loans to members affected by COVID-19.29 Credit unions need clarity and certainty
on the applicable treatment of PPP loans both in regards to the risk weighting and whether the
loans qualify as commercial loans under the NCUA’s MBL and commercial lending rule. For

5 U.S.C. 553(b)(3)(B).
Financial institutions could begin offering PPP loans April 3, 2020. See, https://www.sba.com/funding-abusiness/government-small-business-loans/ppp/.

28
29

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these reasons, the Board finds that there is good cause consistent with the public interest to issue
the interim final rule without advance notice and the opportunity to comment.30

The APA also requires a 30-day delayed effective date, except for (1) substantive rules
which grant or recognize an exemption or relieve a restriction; (2) interpretative rules and
statements of policy; or (3) as otherwise provided by the agency for good cause.31 For the
reasons stated above, the Board finds good cause to issue the rule with an immediate effective
date. This rule would also be excepted from the delayed effective date requirement because it
relieves a restriction that would otherwise apply.

While the Board believes that there is good cause to issue the rule without advance notice
and comment and with an immediate effective date, the Board is interested in the views of the
public and requests comment.

B. Congressional Review Act

For purposes of the Congressional Review Act, the OMB makes a determination as to
whether a final rule constitutes a “major” rule. If a rule is deemed a “major rule” by the Office

30
. 5 U.S.C. 553(b)(B); 553(d)(3). For the same reasons, the Board is not providing the usual 60-day comment
period before finalizing this rule. See NCUA Interpretive Ruling and Policy Statement (IRPS) 87-2, as amended by
IRPS 03-2 and IRPS 15-1. 80 FR 57512 (Sept. 24, 2015), available at
https://www.ncua.gov/files/publications/irps/IRPS1987-2.pdf.
31
5 U.S.C. 553(d).

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of Management and Budget (OMB), the Congressional Review Act generally provides that the
rule may not take effect until at least 60 days following its publication.

The Congressional Review Act defines a “major rule” as any rule that the Administrator
of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely
to result in (A) an annual effect on the economy of $100,000,000 or more; (B) a major increase
in costs or prices for consumers, individual industries, Federal, State, or local government
agencies or geographic regions, or (C) significant adverse effects on competition, employment,
investment, productivity, innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export markets.32

For the same reasons set forth above, the Board is adopting the interim final rule without
the delayed effective date generally prescribed under the Congressional Review Act. The
delayed effective date required by the Congressional Review Act does not apply to any rule for
which an agency for good cause finds (and incorporates the finding and a brief statement of
reasons therefor in the rule issued) that notice and public procedure thereon are impracticable,

32

5 U.S.C. 804(2).

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unnecessary, or contrary to the public interest.33 As discussed above, the Board has concluded
there is good cause to issue the interim final rule without notice-and-comment procedures.

As required by the Congressional Review Act, the Board will submit the interim final
rule and other appropriate reports to Congress and the Government Accountability Office for
review.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency
by rule creates a new paperwork burden on regulated entities or modifies an existing burden (44
U.S.C. 3507(d)). For purposes of the PRA, a paperwork burden may take the form of a
reporting, recordkeeping, or a third-party disclosure requirement, referred to as an information
collection. The NCUA may not conduct or sponsor, and the respondent is not required to
respond to, an information collection unless it displays a valid OMB control number.
To capture activity related to the PPP, beginning with the June reporting cycle by credit
unions, the NCUA will add four accounts to the quarterly Call Report (NCUA 5300) to identify
the number and amount of PPP loans, the amount of PPP loans pledged as collateral to secure
Federal Reserve System’s PPP Lending Facility, and the amount of FRB PPP Lending Facility
loans. The changes to the Call Report will assist NCUA in off-site monitoring and supervision
of credit unions while minimizing the burden during on-site examinations.

33

5 U.S.C. 808.

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These changes will not alter the current estimate of four hours per response necessary to
review the instructions and complete the form. The amount of data elements added are minimal
and will not impact the total burden. The Office of Management Budget (OMB) has approved
this change under a “non-substantive change” request to the information collection requirements
approved under OMB control number 3133-0004.

D. Executive Order 13132

Executive Order 13132 encourages independent regulatory agencies to consider the
impact of their actions on state and local interests. The NCUA, an independent regulatory
agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order to adhere
to fundamental federalism principles.

This interim final rule does not have substantial direct effects on the states, on the
relationship between the national government and the states, or on the distribution of power and
responsibilities among the various levels of government. The NCUA has therefore determined
that this rule does not constitute a policy that has federalism implications for purposes of the
executive order.

E. Assessment of Federal Regulations and Policies on Families

The NCUA has determined that this rule will not affect family well-being within the
meaning of § 654 of the Treasury and General Government Appropriations Act, 1999, Pub. L.
105-277, 112 Stat. 2681 (1998).

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F. Regulatory Flexibility Act (RFA)

The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a
proposed rule or a final rule pursuant to the APA34 or another law, the agency must prepare a
regulatory flexibility analysis that meets the requirements of the RFA and publish such analysis
in the Federal Register.35 Specifically, the RFA normally requires agencies to describe the
impact of a rulemaking on small entities by providing a regulatory impact analysis. For purposes
of the RFA, the Board considers credit unions with assets less than $100 million to be small
entities.36

As discussed previously, consistent with the APA,37 the Board has determined for good
cause that general notice and opportunity for public comment is unnecessary, and therefore the
Board is not issuing a notice of proposed rulemaking. Rules that are exempt from notice and
comment procedures are also exempt from the RFA requirements, including conducting a
regulatory flexibility analysis, when among other things the agency for good cause finds that
notice and public procedure are impracticable, unnecessary, or contrary to the public interest.
Accordingly, the Board has concluded that the RFA’s requirements relating to initial and final
regulatory flexibility analysis do not apply.

5 U.S.C. 553(b).
5 U.S.C. 603, 604.
36
NCUA Interpretive Ruling and Policy Statement 15–1. 80 FR 57512 (Sept. 24, 2015).
37
5 U.S.C. 553(b)(3)(B).
34
35

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Nevertheless, the Board seeks comment on whether, and the extent to which, the interim
final rule would affect a significant number of small entities.

List of Subjects in 12 CFR Part 702
Capital, Credit unions, Reporting and recordkeeping requirements.

List of Subjects in 12 CFR Part 723
Credit, Credit unions, Member business loans, Commercial lending, Reporting and
recordkeeping requirements.

By the NCUA Board on April 22, 2020.

_____________________
Gerard Poliquin
Secretary of the Board

For the reasons discussed above, the NCUA Board amends parts 702 and 723 of chapter VII of
title 12 of the Code of Federal Regulations to read as follows:

PART 702 – CAPITAL ADEQUACY

1. The authority for part 702 continues to read as follows:

Authority: 12 U.S.C. 1766(a), 1790d.

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2. Revise section 702.2(k) to add subparagraph (3) to read as follows:
§ 702.2 Definitions.
*

*

*

*

(k) *

*

*

(1) *

*

*

(2) *

*

*

*

(3) Notwithstanding subparagraph (1) of this paragraph (k), a credit union may exclude loans
pledged as collateral for a non-recourse loan that is provided as part of the Paycheck Protection
Program Lending Facility, announced by the Federal Reserve Board on April 7, 2020, from the
calculation of total assets for the purpose of calculating its net worth ratio. For the purpose of
this provision, a credit union’s liability under the Facility must be reduced by the principal
amount of the loans pledged as collateral for funds advanced under the Facility.

*

*

*

*

*

3. Revise § 702.104(d) to read as follows:

§ 702.104 Risk portfolios defined.

*

*

*

*

*
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(d) Low-risk assets. Cash on hand (e.g., coin and currency, including vault, ATM and teller
cash), the NCUSIF deposit, debt instruments unconditionally guaranteed by the National Credit
Union Administration; and covered loans issued under the Small Business Administration’s
Paycheck Protection Program, 15 U.S.C. 636(a)(36).

*

*

*

*

*

PART 723 – MEMBER BUSINESS LOANS; COMMERCIAL LENDING

4. The authority for part 723 continues to read as follows:

Authority: 12 U.S.C. 1756, 1757, 1757a, 1766, 1785, 1789.

5. Revise the definition of “commercial loan” in § 723.2 to read as follows:
§ 723.2 Definitions.

*

*

*

*

*

Commercial loan means any loan, line of credit, or letter of credit (including any unfunded
commitments), and any interest a credit union obtains in such loans made by another lender, to
individuals, sole proprietorships, partnerships, corporations, or other business enterprises for
commercial, industrial, agricultural, or professional purposes, but not for personal expenditure
purposes. Excluded from this definition are loans made by a corporate credit union; loans made
by a federally insured credit union to another federally insured credit union; loans made by a
federally insured credit union to a credit union service organization; loans secured by a 1- to 4–
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family residential property (whether or not it is the borrower's primary residence); loans fully
secured by shares in the credit union making the extension of credit or deposits in other financial
institutions; loans secured by a vehicle manufactured for household use; and loans that would
otherwise meet the definition of commercial loan and which, when the aggregate outstanding
balances plus unfunded commitments less any portion secured by shares in the credit union to a
borrower or an associated borrower, are equal to less than $50,000. The definition of
commercial loan also excludes covered loans issued under the Small Business Administration’s
Paycheck Protection Program, 15 U.S.C. 636(a)(36).

*

*

*

*

*

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