Question: How often should our Commercial Loan Policy be reviewed by the Board of Directors?
Answer: This is actually addressed both within the rules and within the NCUA Examiner's Guide. Both indicate that the policy must be reviewed at least once a year and updated when warranted. However, it should be reviewed more frequently if there is a material change in the commercial lending program or related organizational structure or any material change in portfolio performance or economic conditions.
Question: What are the new experience requirements for staff involved in commercial lending?
Answer: There are separate requirements for Senior Management staff who oversee the commercial lending function and lending personnel.
According to the Examiner's Guide, it is essential that senior management have a comprehensive understanding of the credit union's commercial lending activities and the ability to adequately oversee the management of the risks associated with those activities. They must ensure the credit union implements appropriate risk management processes to measure, monitor and control risks. Staff involved in the commercial loan program must have sufficient expertise in assessing and managing the risks associated with the type of commercial lending in which the credit union is engaged. Their skills should be commensurate with the position and level of responsibility.
Managers responsible for a credit union's commercial lending program should have demonstrated experience in:
- Overseeing commercial credit risk assessment and underwriting;
- Managing and administering a credit risk rating system;
- Managing a commercial loan portfolio and being held accountable for the risk in that portfolio; and
- Managing commercial lenders and other risk managers.
Qualified Lending Personnel
The NCUA examiners will primarily focus on the overall type and relevance of staff experience for those individuals involved in the commercial loan program, with an emphasis on experience in commercial loan risk management (do you see a trend here?).
The credit union's staff should have:
- Experience directly related to the specific types of commercial lending in which the credit union is engaged;
- Demonstrated experience in conducting commercial credit analysis and evaluating the risk of a borrowing relationship using a credit risk rating system;
- Demonstrated experience in underwriting, processing, and conducting workout activities for the types of commercial lending in which the credit union is engaged; and
- Knowledge of the legal documentation necessary to protect the credit union from legal liability, and all relevant law and regulation impacting commercial lending activities.